Shale revolution

Large-scale industrial production of shale gas was started by Devon Energy in the United States in the early 2000s , which is in the Russian Burnett field in Texas in 2002 for the first time applied a combination of directional drilling with extended horizontal sections and multi-stage hydraulic fracturing ^[6]

In the late 2000s and early 2010s, the following shale gas and shale oil fields in the USA were actively developed: Marcellus, Haynesville, Eagle Ford, Bakken , Woodford, Fayetteville, Barnett, Antrim ^{[7] [8] [9]} ( the three largest mining sites are the Perm basin , the Eagle Ford and Bakken formations).

Shale gas production in the United States increased from 54 billion cubic meters in 2007 to 319 billion cubic meters in 2013 (for comparison, all Russian natural gas exports in 2013 amounted to about 230 billion cubic meters) ^[10] .

In 2009, the United States overtook Russia in terms of natural gas production ^[11] . For some time in 2012, gas in the United States was significantly cheaper than in Russia, which has the world's largest proven reserves of traditional natural gas ^[12] . In 2016, the total gas production (traditional and shale) in the USA amounted to 751 billion m³, in Russia - 642 billion m³ ^[13] .

See also : en: Shale gas in the United States

oil

Light oil production from low-permeability reservoirs ( Light Tight Oil ), using the same technologies as for shale gas, increased from small values ​​in 2007 to 2.3 million barrels per day in 2013 ^[10] , and at the beginning of 2014 exceeded 3.5 million barrels per day, accounting for approximately 4.3% of the global production of all types of oil ^[14] (for comparison, the daily production of the world's largest oil exporters, Russia and Saudi Arabia, is approximately 10 million barrels each ^[10] ) .

By mid-2018, the United States reached a level of shale oil production of 6.2 million barrels per day (total production - 11 million barrels per day). At the same time, according to The Wall Street Journal , the total loss of 50 companies engaged in the production process in the country exceeded $ 2 billion in the second quarter alone. ^[15]

In 2011, the EIA estimated technically recoverable shale gas reserves (shale gas deposits) in Europe at 605 Tcf (trillion cubic feet) ^[16] , which is about one tenth of the global shale gas potential. In 2013, the EIA updated its estimates, according to new data, European reserves can be 885 Tcf, the largest of them are in Russia, Poland, France, Ukraine. According to Ernst & Young, the potential cost of shale gas production in Europe is higher than in the US; In addition, Europe has developed the infrastructure of gas pipelines and LNG , with which shale projects will have to compete. There is a lack of equipment (for example, in Europe in 2005-2013 at the same time less than 60 surface oil and gas rigs operated simultaneously, and in the USA there are more than 2 thousand of them) and labor resources, which impede the development of shale drilling in this region. For 2013, shale gas exploration is most actively carried out in Poland (about a hundred licenses in 2013). In general, Ernst & Young analysts say that the development of gas production from shale in Europe will not take on the same revolutionary character as in the USA, but will develop along the evolutionary path; the transformation of the region’s energy market because of them is unlikely ^[17] .

According to EIA estimates from 2011, China has 1275 trillion cubic meters of technically recoverable shale gas reserves. feet, which exceeds the total reserves of this gas in the United States (862 Tcf) and Canada (388 Tcf) ^[16] . Shale projects in China have been developing since 2012, but their development is slow, for 2014 only 54 blocks with 400 wells are being developed (130 of them with inclined horizontal sections). There are doubts about the possibility of China repeating the shale revolution ^[18] : the state’s declared goals for shale gas production in 2020 are reduced (to about 1% of the country's current energy requirements) ^[19] , the cost of developing shale is high (including because of that Chinese gas shales occur at great depths, often in mountainous areas) ^[20] .

The most important result of the shale revolution was the fall in natural gas prices. For example, gas import prices for the European Union in 2014 decreased by August by 20% ^[22] . Gas prices in the USA fell especially strongly: in 2008, for US industry, natural gas was sold at an average of $ 9.65 per thousand cubic feet ($ 341 per thousand cubic meters), in 2012 - at $ 3.88 per thousand cubic feet ( 137 $ per thousand m³ ). ^[23] . From 2009 to 2014, natural gas prices for individual consumers in the United States fell from $ 12.14 to $ 10.97 per thousand cubic feet , for commercial consumers - from $ 10.06 to $ 8.90, for industry - rose from 5, 33 to $ 5.5 per thousand ft³ . ^[24] . That is, in 2014, for the US industry, natural gas was sold at an average of $ 194 per thousand m³ ($ 5.5 per thousand ft³).

Another consequence was a slight decrease in natural gas production in certain areas. In August 2012, the Russian Gazprom and its partners announced the suspension of the development of the world's largest Shtokman field , from where it was supposed to send liquefied gas to the United States ^[12] .

The third consequence was a gradual reduction in US purchases of oil abroad. If in 2005 the United States imported 10.1 million barrels per day, in 2014 - only 7.4 million barrels per day ^[25] . In 2010–2013, US oil purchases reduced in Venezuela by 33.5%, in Nigeria by 76.4%, in Mexico by 26.1% ^[25] . But during this period, oil purchases in Saudi Arabia and Kuwait were increased ^[25] .

David Crane, president of NRG Energy, said that “ shale gas has effectively killed new coal projects and is beginning to crack down on nuclear power ” . However, according to a researcher at the Institute of the State Council of the People’s Republic of China, Sun Yunxiang, shale gas can hardly compete with traditional natural gas and will play a small role only in some regions, but cannot replace traditional natural gas on a global scale ^[26] .

Among the factors that positively affect the prospects for shale gas production are: proximity of fields to markets; significant reserves; the interest of the authorities of several countries in reducing their dependence on imports of fuel and energy resources ^{[27] [28]} . At the same time, shale gas has many shortcomings that negatively affect the prospects for its production. Among these disadvantages:

• relatively high cost ^[29] ;
• high variability of the parameters and the need for various processing before transferring gas to the transport system ^[30] or mixing with higher-quality gas;
• high water demand during well development, up to 4-5 million gallons each ^[31] ;
• fast (within 1 year) well exhaustion;
• low level of proved reserves in the general structure of reserves;
• significant environmental risks during mining ^{[26] [27]} ;
• low gas or oil recovery factor (ORF) compared with traditional production methods ^{[32] [33]} .

A number of experts believe that shale gas is much more expensive than mining companies claim ^[34] . According to experts, the real costs of producing shale gas amount to 212–283 US dollars per 1,000 cubic meters ^{[34] [35] [36]} . Some experts believe that companies producing shale gas artificially lower its cost ^[37] .

Shale gas production is probably unsafe from an environmental point of view ^[38] . In particular, Greenpeace takes a negative position in the production of shale gas and oil, declaring the danger of fracking ^[39] .

Some experts point out that the production rate of the wells is small, which forces producers to drill new wells constantly due to the rapid depletion of the resources of already developed fields ^[38] .

Even supporters of the shale revolution usually recognize the impossibility of copying the American example in other countries (except Canada ) in the foreseeable future, since the rest of the world simply does not have American financial and technical resources for large-scale drilling and equally favorable natural conditions. Leonardo Maugeri points out that, for example, in 2012, 45,468 wells were drilled in the USA for oil and gas production, and 3,921 wells were drilled in the rest of the world (except Canada ) ^[40] .

The Post Carbon Institute criticizes the forecasts of the state EIA agency for the country 's main shale formations, shows a systematic overestimation of both the level of hydrocarbon production and reserves, as well as the impossibility of maintaining the predicted EIA levels in the future. Due to such over-optimistic expectations, an incorrect energy policy can be adopted, which will lead to a strong shock after the end of the shale boom ^[41] .

In September 2017, New York hosted a meeting of the 12 most influential players in the US shale industry, who had to admit that all this time they deliberately underestimated the cost of producing shale oil and gas in their reports, and in fact their companies suffered constant losses, having spent as a result 280 billion dollars more than they received from their shale operations ^{[42] [43]} .

Capital Costs

Arthur Berman, a critic of the shale revolution, points to a 38% annual decline in shale oil production in existing wells in the region of the Bakken formation , which leads to the fact that the vast majority of production (68% in the first half of 2012) falls on the wells, drilled in the previous year and a half ^[44] ; maintaining the production level only from Bakken shales requires drilling an “astronomical” number of wells (about 1,500 a year) with enormous capital costs ($ 17-18 billion a year ). According to Berman ^[45] , high oil prices support the meaningfulness of its production from shale, but for the production of shale gas, its prices should increase one and a half times ($ 6 instead of $ 4 at the beginning of 2014 ^[46] ). As Berman noted, after oil prices in the USA in 2015 reach $ 46, oil producers in Texas receive only $ 30 per barrel; at this level, oil production at the Bakken formation is unprofitable in 99% of cases ^[47] .

According to the authors of the study “ Eng. The other tale of shale ”, the capital costs of the 35 companies they analyzed amounted to $ 50 per barrel, while revenue per barrel was only $ 51.5. Cash flow in all these companies was negative in almost every quarter. The authors of the report note that although negative cash flow in the economy is not necessarily a problem, justifying it requires a high level of return on investment , which oil and gas producers from shale did not demonstrate at the beginning of the 21st century ^[48] .

According to Richard Heinberg In 2012, annual capital expenditures of $ 42 billion produced only 33 billion shale gas, putting mining companies in a difficult financial situation ^[49] .

• Unconventional oil

• Asjylyn Loder. Shakeout Threatens Shale Patch as Frackers Go for Broke . // Bloomberg, May 27, 2014. (eng.)
• Amrita Sen, Virendra Chauhan, Maarten van Mourik. The other tale of shale . // Energy Aspects, October 16, 2013. (eng.)
• The first 5 years of the “shale revolution”: what do we now know for sure? // Information and analytical review of the Institute of Economics and Economics, RAS , November 2012
• The “Shale Revolution” in the USA: Internal and Global Changes in the Energy Markets // INEI RAS, HSE Economic Journal, 2013. V. 17. No. 3. P. 487–511
• Paul Stevens, The 'Shale Gas Revolution': Developments and Changes // Chatham House, EERG BP 2012/04
• US Energy Information Administration. Drilling Productivity Report . August 2015.

• The Chinese shale revolution threatens the “ Power of Siberia ” // NG, Aug 18, 2017
• Attack on America: the shale revolution drowned // Gazeta.Ru , October 6, 2017
• US Oil Production: IEA Forecast for 2021-2024 [2] // RIA, March 2019