Unlocking potential

Forecasters have long predicted that energy demand would outstrip supply, and despite major economic upheavals, that prediction still holds true. The recent global financial crisis has had an impact on demand in advanced economies, where growth remains uncertain; however, the developing economies have continuing strong growth. Shell’s assessment of the energy scene, published in its updated scenarios Signals & Signposts, is that factors such as China’s aggressive motorway building programme and rising prosperity are key to strong demand growth, and that demand will remain strong in the Middle East and in other developing countries.

Many countries that use coal as an energy source for electricity generation, even where it is in combination with carbon capture and storage, will need an alternative fuel if they are to meet their emission reduction targets. In the short term, using more natural gas for power generation could make the largest contribution in the move towards lower-carbon fuels. It emits 50–70% less carbon dioxide than coal when burned to generate electricity.

Supplies of natural gas have increased through the development of unconventional sources. The production of gas from tight and shale sources has grown dramatically in the USA and has prompted interest in other parts of the world, including China, Australia and South Africa. According to the International Energy Agency (IEA), about 12% of global gas output is now from unconventional resources, mostly in North America.

Melvyn Giles, Global Theme Leader Unconventional Gas, Shell Exploration and Production, says that natural gas recovered from unconventional sources will be essential to plug the supply gap. "This is gas that is available in large quantities, burns cleaner than coal and can be turned into a range of products, including motor fuel and feedstocks for power generation," he says. "It is a huge energy resource that is fairly widespread globally and one that could be extremely useful, at least in the short term, for addressing the energy challenge."

Tight and shale gas are difficult to extract. Such gas could be held in minute pore spaces in impermeable (tight) rock or, in the case of shale gas, it could be adsorbed onto organic matter within dense rock.

Often the gas will not flow freely into a well or it flows much slower than from normal gas reservoirs. The amount of gas that is recoverable from each of these gas wells might be lower than operators are accustomed to from normal gas wells, but the overall volume of available gas in the reservoir can be much higher than in conventional gas reservoirs because of the greater lateral extent of the reservoirs.

The three main types of gas from unconventional sources are shale gas, which is found in shale deposits; tight gas, which is found in impermeable rock formations; and coal-bed methane. Another energy source is light tight oil, which is produced from oil shales. Shell has been exploring for tight gas resources since the 1950s, but has only pursued shale gas and coal-bed methane more recently.

The organisation currently operates fields in several countries, including Australia, China, Germany and North America. In 2010, Shell boosted its portfolio with the acquisition of East Resources, whose sites included the extensive Marcellus shale in the north-eastern USA.

The key technologies in the production of tight and shale gas are hydraulic fracturing and horizontal drilling. Hydraulic fracturing involves pumping fluids into the well to make fractures in the rock that allow the gas to flow. This frees the trapped gas, which can then flow into the wellbore for collection at surface. The process takes place many kilometres underground and at pressures high enough to create the fractures.

The fracturing fluids consist mainly of water containing a small percentage of chemical additives. These chemicals can help to, for instance, prevent scale build-up. Sand or ceramic proppant particles are also pumped in with the fracturing fluid to keep the fractures open.

Horizontal drilling enables the exposure of significantly more pay zone to the well. For this, wells are drilled in different directions from a central location to penetrate the reservoir vertically or horizontally, depending on the reservoir geometry and thickness.

Both of these technologies have been in operation for some time. Hydraulic fracturing was developed in the 1940s and horizontal drilling during the early 1980s. However, it was combination of the two that made the recovery of unconventional gas economic, says Giles. "The breakthrough came when multi-stage hydraulic fracturing was combined with horizontal wells during the development of the Barnett shale formation in Texas."

Giles adds that a strong focus of Shell’s research and development work is on minimising the potential environmental impact of extracting the gas. "Our research teams are working on a broad range of engineering solutions, from well designs through to how to hydraulically fracture the reservoirs without using water.

"We are committed to protecting water supplies and to finding ways to develop the technology so as to provide the energy the world needs while minimising the environmental impact of its production," Giles continues. Shell lines its wells with multiple steel layers and cements them in place from the surface to below the level of drinking water supplies.

These barriers help to contain the fracturing fluid and, in combination with the depth at which fracturing occurs, prevent the fluid from mingling with potable water close to the surface.

In some cases, however, additional technology is necessary to clean the gas to remove harmful environmental species. Some US shale formations contain varying amounts of hydrogen sulphide that must be removed from the produced gas. "Shell Global Solutions has gas-treating and sulphur-recovery technologies that can offer significant value in gas and oil shale developments," says John Peyton, Gas and Liquid Treating Regional Licensing Manager, Shell Exploration and Production.

For example, Sulfinol®-X, a process for removing all the contaminants from gas in one process unit, will soon be in use at a US oil shale production facility to remove carbon dioxide, carbonyl sulphide, hydrogen sulphide and mercaptans. Both THIOPAQ O&G and SulFerox®, direct sulphur-recovery processes well suited for gas containing low to medium sulphur levels, may be good fits for shale formation gas production.

An environmentally friendly process using naturally occurring bacteria, THIOPAQ O&G, is used at eight plants worldwide to remove hydrogen sulphide from high- and low-pressure natural gas streams. Seven new plants will soon be in operation. SulFerox too is widely applied: in more than 40 plants since its introduction in 1989.

The success of tight gas production in the USA has given the country greater energy security. It was previously thought that the USA would become a big importer of liquefied natural gas (LNG), but its growing tight and shale gas production has led to a sharp drop in its need to import gas. According to the IEA, this slump in US demand for LNG had a significant impact on the global gas markets. The USA suddenly no longer needed to buy LNG at a time when ample supplies were arriving on the market, which led to a gas glut.

Giles says, "The huge quantities of LNG that the USA was meant to need were never required. Now, the industry is talking about turning the LNG regasification plants into LNG export terminals, which will have a further impact on global markets."

The IEA has predicted that the production of gas from unconventional sources will increase from 12 to 19% of gas global output between 2008 and 2035, and says that current estimates suggest there are 385 trillion cubic metres of recoverable gas from these sources. This should last about 130 years, based on current rates of gas consumption, and help to plug the supply gap.

^{Sulfinol and SulFerox are Shell trademarks.}