Schlumberger Ltd. CEO Andrew Gould last week repeated an old adage and added something new to it, telling an industry audience in New Orleans, “if you want to find oil, you have to drill. And if you want to produce unconventional gases or oils, it is even truer.”
Gould, who spoke at the Howard Weil Energy Conference, said his company is helping to lead the way in unlocking unconventional resources around the world. A big customer draw is Schlumberger’s ability to remain ahead of the pack technology-wise, which is driving the company.
“In addition to new exploration drilling technologies, drilling to help recover unconventional gases and unconventional oils requires technologies for better extraction, lower cost and a smaller environmental footprint,” he said. “The dramatic change in the North American well count from vertical to horizontal over a very short period of time demonstrates the extent to which this change is already under way.”
The Houston-based oilfield services giant also is working to improve extraction techniques for shale reserves already in production.
“Prolonging their exploitation and increasing their recovery represents a significant opportunity, and it is here that increased drilling intensity is likely to make the biggest difference in the short to medium term,” Gould told the audience.
Conventional resources are becoming increasingly complemented by unconventional ones around the world, but to unlock the resources requires “massive projects of long duration that require huge amounts of capital,” he said. “If there is a characteristic in the oil exploration and development projects to be executed in the future, both for deep offshore and complex unconventional oils, it is that they will become more difficult and more expensive to execute.”
North America’s “shale gas revolution required technology, market forces and entrepreneurship to make its production economic,” the Schlumberger chief noted. “And while today’s combination of horizontal wells and hydraulic fracturing has made certain shales economic, technology will have to move much further to systematically extract full value from every shale as current methods are both wasteful and expensive.”
Still to be determined is the ability to economically unlock shale reserves outside North America. Gould is not optimistic about overseas shale projects in the short term.
“In the rest of the world, where knowledge of shales is vastly inferior to that of the U.S., countries and companies are actively searching to understand the prospectivity of their own deposits,” he said. However, “much remains to be done before we can be assured that the rest of the world’s shales are as prospective as those of the United States.”
For “shale gas in particular,” Schlumberger’s management is convinced for now that the “brute force approach established in North America will not be practical overseas, either from a financial or an operational standpoint.” Schlumberger COO Paal Kibsgaard made similar remarks in February (see Shale Daily, Feb. 28).
Gould told the audience that the “fundamentals” for oil and gas remain unchanged, but new opportunities have arisen because of “technology or changed circumstances.” The macro environment for oil and has evolved, he noted, but the “theme” of finding and developing hydrocarbons remains as valid today as it ever was. World events, he added, would impact which fuel source is dominant.
“A reassessment of the energy mix following the nuclear accident in Japan is likely to confirm higher demand growth for natural gas,” said the CEO. “Absent a second economic shock and a further drop in demand, the industry will face an increasingly harder task of turning resources into reserves, and reserves into production…”
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