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WOR 3 Marine Resources – Opportunities and Risks | 2014

Sating our energy hunger

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Fracking – opportunities and risks

In 2011, the world’s natural gas reserves and resources totalled around 772 trillion cubic metres. This figure is around 230 times higher than the amount of gas con-sumed globally in 2011. Resources account for the major share, amounting to 577 trillion cubic metres, with unconventional natural gas resources comprising around 60 per cent of the total natural gas resource base. One example is coalbed methane, also known as coal seam gas (CSG), a form of natural gas extracted from coal beds. CSG extraction using unconventional technologies is already under way in a number of countries, notably Australia. The US’s extensive shale gas deposits – another major unconventional resource – are attracting particular interest at present. Shale gas is a form of natural gas that is trapped in layers of almost impermeable rock. Although the rock is porous, enabling it to store natural gas, the pores are isolated from each other and, unlike conventional deposits, are not connected to each other by “necks”, or connecting channels. The extraction of shale gas began in the US some years ago, using a technique which relies on the creation of artificial fissures in rock formations containing gas. A mixture of water and chemical agents is pumped into the target formation at high pressure. This comparatively new method of extracting natural gas from shale is known as hydraulic fracturing, or “fracking”. Fracking has unleashed something of a shale gas revolution in the USA – such that the US is likely to become completely independent of natural gas imports over the next few years. According to current estimates, the US has almost 14 trillion cubic metres of shale gas resources. Globally, the recoverable shale gas potential amounts to around 157 trillion cubic metres. However, our knowledge of the extent to which shale gas deposits exist worldwide is still patchy, putting a question mark over these estimated figures. What’s more, fracking is a highly controversial technology, with critics fearing that the chemical agents used in fracking could leach out and contaminate groundwater.

The future of offshore oil and gas production

Today, most oil and gas extraction still takes place on-shore. Nonetheless, a considerable amount of gas and oil is already produced offshore. Offshore oil extraction currently accounts for 37 per cent of global production. At present, 28 per cent of global gas production takes place offshore – and this is increasing. Coal mining does not currently take place offshore. For many years, offshore natural gas and oil production was restricted to shallow waters such as the North Sea or coastal areas around the US. However, as many older deposits have become exhausted, companies have increasingly moved into deeper waters. Three separate depth categories are defined:
  • shallow water production at water depths of less than 400 metres;
  • deepwater production at depths up to around 1500 metres, and
  • ultra-deepwater production at depths greater than 1500 metres.
With the latest high-resolution geophysical exploration technology, scientists are now able to detect oil and gas deposits in the seabed and other geological strata to a depth of 12 kilometres. As a consequence, many major new deposits have been discovered or newly surveyed in recent years. According to recent studies, 481 larger fields were found in deep and ultra-deep waters between 2007 and 2012. They account for more than 50 per cent of the newly discovered larger offshore fields, i.e. fields with an estimated minimum 170 billion barrels of recover-able reserves, corresponding to around 23,800 million tonnes of oil equivalent (Mtoe). The deepwater and ultra-deepwater sectors are thus becoming ever more important. It is also interesting that the newly discover-ed offshore fields are generally around 10 times larger than newly discovered onshore fields, which makes deepwater and ultra-deepwater production an attractive prospect despite the higher costs. Globally, oil and gas extraction at water depths greater than 400 metres is currently limited in scale, amounting to just 7 per cent of production. This is partly because only 38 per cent of the proven deepwater and ultra-deepwater fields are currently in production. Most of these fields are still undergoing detailed surveying, while initial test drilling has already taken place in some cases. Many experts agree that deepwater and ultra-deepwater fields are the last bastion of oil production. Many of the once high-yielding fields onshore and in shallow waters are almost exhausted, so there is virtually no alternative to deepwater and ultra-deepwater production now and over the coming years. But is oil production in these water depths viable? That ultimately depends on oil prices. Generally speaking, the deeper the water, the higher the extraction costs. The offshore oil industry extracts oil mainly from conventional sources. If oil prices continue to rise significantly over the coming decades, however, exploiting unconventional deposits, such as shale oil, offshore may well become an increasingly attractive proposition. But this is still a long way off.
1.12 > A glance at the volumes of offshore oil and gas fields newly discovered between 2007 and 2012 clearly shows that the bulk of the resource is located at depths of more than 400 metres.

1.13 > The deeper the water, the higher the costs: in 2012, one day of drilling in ultra-deep water, i.e. at depths greater than 1500 metres, cost around four times more than drilling in shallow water.
fig. 1.12 > A glance at the volumes of offshore oil and gas fields newly discovered between 2007 and 2012 clearly shows that the bulk of the resource is located at depths of more than 400 metres. © IHS; fig. 1.13 > The deeper the water, the higher the costs: in 2012, one day of drilling in ultra-deep water, i.e. at depths greater than 1500 metres, cost around four times more than drilling in shallow water. © IHS

Promising maritime regions

A number of significant deposits have been discovered offshore since 2007. The Santos Basin off the coast of Brazil, for example, holds several major oil and gas fields with as much as one billion tonnes of oil and a billion cubic metres of natural gas, located under a massive pre-salt layer several thousands of metres under the sea floor. Deposits on this scale could potentially cover total world demand for gas and oil for many months. Despite geophysical surveys of the sea floor, these deposits remained undetected for a very long time because the salt layers caused perturbation in the signals from the measuring devices. Using more advanced technology, the deposits were finally detected a few years ago.
1.14 >In recent years, the most significant discoveries of gas and oil fields in water depths greater than 400 metres were made in the South Atlantic and off the coast of West Africa.
fig. 1.14 >In recent years, the most significant discoveries of gas and oil fields in water depths greater than 400 metres were made in the South Atlantic and off the coast of West Africa. © IHS
On the other side of the Atlantic, in the Kwanza Basin off the Angolan coast, oil fields have been discovered beneath a 2000-metre thick pre-salt layer. In the Black Sea and the Caspian Sea, new oil and gas fields at depths greater than 400 metres have also been discovered in recent years. Extraction has already begun in some cases, with countries such as Iran, Romania and Russia now engaged in deepwater production. Important new oil fields were also discovered in the Gulf of Mexico and off the coast of Ghana and French Guiana. Spurred on by these findings, there are now plans to search for further deposits in similar geological formations off the coast of two neighbouring countries, Suriname and Brazil. Today, the deep and ultra-deep waters in the Gulf of Mexico and in the Atlantic off South America and West Africa are regarded as the most promising regions for oil exploration. Between 2007 and 2012, major gas fields were discovered off the coast of Mozambique and Tanzania and in the Mediterranean close to Israel and Cyprus. Both fields are so abundant that they will revolutionise the supply of gas in these regions: Israel, for example, has the potential to become completely independent of gas imports from its Arab neighbours for the foreseeable future.

The Arctic region – a special case

As the Arctic sea ice melts as a result of climate change, hopes are growing among Arctic nations of tapping the oil and natural gas deposits in the northern polar re-gions. Current scientific studies suggest that there are indeed substantial deposits in this region. It is estimated that about 30 per cent of undiscovered gas and 13 per cent of undiscovered oil can be found in the ma-rine areas north of the Arctic Circle. The substantial gas deposits are thought to be located mainly in Russian waters. As yet, no one can say whether or when extraction will begin in the Arctic, especially as various legal questions have still to be clarified. Over recent years, a conflict has erupted among Arctic nations over territo-rial claims to the Arctic seabed. The Arctic nations expect to derive substantial revenues from these natural resources, but will have to be patient. Complicating matters, extraction in these regions is not economically viable at present: exploration alone will require expensive and complex ice-breaking operations. Textende
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