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Saudis Need Shale to Solve Gas Dilemma

Petroleum Intelligence Weekly
Saudi Aramco Chief Executive Khalid al-Falih raised eyebrows in Montreal earlier this month when he mentioned that shale gas would be part of the kingdom’s future energy mix. Saudi insiders say the existence of shale — which could add hundreds of trillions of cubic feet to its already large gas reserves — was identified decades ago, but its development will be more challenging than for similar unconventional resources in the US and Europe. Aramco’s upcoming exploration program will target “deep offshore, sour gas, shale gas and tight gas reservoirs in addition to conventional onshore gas,” al-Falih said. Large volumes of undiscovered gas in Saudi Arabia were flagged in a 2000 study by the US Geological Survey. …

The surprise is not that Saudi Arabia has vast unconventional resources, but rather that the kingdom needs to start thinking about them so soon. Aramco’s conventional gas exploration program has added significantly to its nonassociated gas reserves, but has not kept pace with the country’s surging domestic gas demand. …

A quick look at Aramco’s slate of upcoming gas projects — offshore, and increasingly sour — shows that the company is running out of easy options. …
(27 September 2010)
Suggested by an contributor TC who writes: “Very interesting article, do not recall seeing this published in peak energy sites yet.” -BA

Trillions necessary to maintain Russia’s oil production

Evgeniya Chaykovskaya, RIA Novosti
Keeping up Russia’s oil output will cost 9 trillion roubles ($292 billion), according to Vladimir Putin.

The prime minister called for that level of investment over the next decade to maintain crude oil production levels at 500 million tons a year.

And he admitted that tax regimes needed to be reformed before new reserves can be exploited fully in the vital resource sector.

An agreement on developing Russia’s oil sector was reached in Samara on Thursday and anticipates a small increase of 2.2 per cent in oil production until 2020, Vedomosti reported.

The new figure of 505 million tons a year will largely be met by existing production regions, according to energy minister Sergei Shmatko.

But come 2020 further growth will only be possible through new deposits and technologies, Putin warned, raising the spectre of peak oil production in the mid-term future.

However, the investment necessary is the industry is to keep up with the current production levels is more than 8.6 trillion roubles, Putin said, admitting that the tax regime had to be changed.
(29 October 2010)

Musings: Curtain Being Pulled Back from The Oz of Gas Shales

G. Allen Brooks, Parks Paton Hoepfl & Brown via Rigzone
… The technical success in tapping natural gas shale formations has turned the perception of the role of gas in the future energy supply of the United States on its head. Where natural gas was once thought to be too valuable to be burned under boilers powering electric generation facilities, gas is now so ubiquitous that we are considering not only burning it in every energy market but also exporting it to world energy markets in the form of liquefied natural gas (LNG). The gas shale revolution has changed the American energy market, which can now be summed up as “from fasting to feasting.” But is that view certain?

Therein lays the heart of Mr. Dizard’s argument in his column. He postulates that there is a serious disagreement among industry participants over the shape of the decline curve for these gas shale resources. The differing views lead to sharply divergent conclusions about the volume of gas that can come from these shale basins, which not only determines their economic attractiveness but also how long our economy can count on the supplies being available.

The technical argument revolves around the shape of the production decline curve that projects how long, and at what level, we can expect gas shale wells, and by implication the entire gas shale play, to produce. When you do the math – volume multiplied by time – you arrive at an estimate of the economic ultimate recovery (EUR) of the well. There are two schools of thought about the shape of the decline curve …

[One school expects] gas shale wells to produce at a reasonably high rate, and therefore a low cost, over a long period of time.

[The second school says the] gap in estimates is wide enough to drive a fleet of trucks through. And that gap becomes a problem because the risk of failure is great, but it is largely being ignored by energy companies, investors, utilities and energy policy makers who are rushing to throw money at gas shale plays. By ignoring the risk of the optimists being wrong, all these groups are essentially transferring the risk of failure to the general public.

… Mr. Dizard pointed out that the U.S., Europe and now China are all making huge investments in natural gas-fired power plants to replace coal-fired plants. He wonders what will happen to these investments if the conventional view of how much natural gas we have proves to be over-stated.
(26 October 2010)

The use of quantitative indicators for analyzing energy security
David Karlsson, University of Uppsala

Is energy in Sweden secure?
(diploma thesis)

The global energy consumption is increasing rapidly and will likely continue to do so for many years to come. At the same time the world’s fossil energy resources, today supplying more than 80% of this demand, are in depletion. This means we face the risk of having a shortage in the global energy supply within just a few years. Countries have lately become more aware of this problematic situation, and have come to realize the importance of energy security and securing their supply of energy.

The aim of this thesis is to study energy security from a Swedish perspective. This has been done by comparing the main different energy forms used regarding certain security aspects. The thesis as well presents methods to be used for quantitative comparison of various energy alternatives or suppliers in the energy mix, which could be applied to any jurisdiction.

A division into three main energy services has been done because of their different characteristics; transport, space and water heating, and electricity. Some of the main results from this study are construction of energy security indices for the alternative energy sources used within these services. Also some recommendations for a more secure energy supply are presented and discussed in the thesis, and outlook for the future Swedish energy requirements in 2020.
(Juni 2010)
Recommended by Jonathan Callahan in a comment at The Oil Drum. He writes:

I would encourage everyone to read through David Karlsson’s Diploma Thesis — “Is energy in Sweden secure?”.

This work was done in Kjell Aleklett’s Global Energy Systems Group at the University of Uppsala. I believe that the structure of this document would provide an excellent blueprint for analysis at almost any level of government with it’s emphasis on the 4 A’s (Availability, Accessibility, Affordability, Acceptability) and 4 R’s (Review, Reduce, Replace, Restrict). This document also contains tools that policy makers can actually use such as a decision making matrix. In short, this approach is one that will make sense to policy makers while staying close the the scientific, data-driven analysis preferred by the ASPO/TOD types.

As a last enticement to get you to read this document I’ll include a few lines from the Closure section:

The thesis has shown some quantitative measures that can be used to compare different jurisdictions, fuels or suppliers in terms of their energy security. Together with data on energy use and requirements these results can provide information important to evaluate if energy supply can be regarded as secure, and show ways to improve energy security by reducing or replacing insecure types of fuels with more secure ones.