Europe's Shale: Too Soon To Write Off

In the aftermath of recent gloomy press reports about shale-gas wells in Poland, it is tempting to conclude that unconventional resources will never be developed there. However, a recent European shale-gas workshop held in Vienna, Austria, by the Society of Petroleum Engineers and European Association of Geoscientists and Engineers provided reasons for optimism. Most of the hurdles can be overcome by technology and a different approach to development.

Much has been said about the geology—that the gas isn’t present in sufficient quantities, and the wells can’t be fractured. But only 25 shale exploration wells have been drilled in all of Europe since 2005. This is far too few wells to make an assessment of the shale potential. The European shales tend to be older, deeper, with different mineralogy, and more affected by tectonic activity than North American shales. Once they are better understood, it is likely that operators will develop technologies to unlock the production potential of these formations.

It has been reported that some of the wells in Poland could not be fractured. In at least two of these wells, the operator was unable to frac them because the surface casing couldn’t withstand the pressure needed to break the formation—in other words, the company underestimated the pressure it would take to fracture the formation. As more data is obtained, companies should be able to design effective fracture treatments for these formations.

Costs and environmental impacts are also cited as impediments to shale development in Europe. Costs are currently about three times higher in Europe than in the U.S. But natural gas prices are also higher in Europe at about $10 per million Btu, using Gazprom prices. Costs will come down as more wells are drilled. Service companies see no reason that costs should be significantly higher in Europe once development is under way. They also see no problem in getting the necessary equipment in place. Manpower is more of an issue than equipment, but efforts are already being made to train people by, for example, sending Polish frac crews to the U.S. for on-the-job training.

The potential environmental impacts of shale drilling are well known: water usage, emissions, possible leaking of fracture fluids into groundwater supplies (rare, but it has occurred), and handling of produced water. These risks are greatly reduced when industry best practices are followed.

Average farm sizes in Europe are about 40 acres, potentially increasing environmental impacts of shale drilling in countries such as Poland, where much land use remains agricultural.

There are some impacts that cannot be eliminated entirely—that is traffic, noise and the surface footprint. A typical multi-well drilling pad in the U.S. occupies five to 10 acres. The average size of a farm in Europe is about 40 acres, and many are smaller. Thus, a well pad could occupy a significant part of a farmer’s land.

The key to shale drilling under these circumstances is to use technology to determine optimum locations before the development phase. High population density, narrow roads and intolerance for traffic, noise and excessive land usage will necessitate a measured approach to shale development.

This is in contrast to the trial-and-error approach used in North America, where large numbers of wells have been drilled, many of them low-rate and marginal. With data collection and application of the latest geoscience and engineering technologies, it should be possible to drill fewer but higher rate wells to create a commercial shale-gas play. With fewer wells, there will be less footprint.

This measured, data-driven approach is possible in Europe because the concessions are larger and are awarded for a longer time period. The operators don’t have as much time pressure to drill large numbers of wells to hold leases.

This development approach may benefit unconventional resources all over the world. Though it is true that European companies have benefited from the North American experience, the knowledge gained by the geoscience and engineering that will be done in Europe could in turn mitigate some of the problems in North America, in particular the number of poor wells still being drilled. Such learning across country and continental boundaries will benefit the entire industry.