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Shale wells have shorter operating lives than conventional oil wells

7th June 2013

By: Schalk Burger

Creamer Media Senior Deputy Editor

  

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Shale, or ‘tight’ oil, wells have significantly shorter productive lives than those of conventional crude oil wells, with a sharp decline in production rates during their first few years, says Association for the Study of Peak Oil South Africa chairperson Dr Jeremy Wakeford.

Further, production rates from shale oil wells in North Dakota and Texas have been shown to decline by 80% to 90% within two years, according to independent Canadian geologist David Hughes.

Hughes says shale oil production in the US is likely to peak by around 2017 and decline steadily thereafter – in contrast with more optimistic forecasts by the International Energy Agency (IEA).

While the US’s shale oil may help to alleviate the global energy crunch in the short term, it cannot replace crude oil products in South Africa over the long term, adds Wakeford.

“Shale oil reserves have led to a change in US oil fortunes. However, the oil companies are exploiting relatively easily accessible and larger shale reservoirs first, which means that, over time, they will have to continue increasing the number of active drilling rigs in operation just to keep production flat as they extract oil from more marginal deposits.”

In the near term, onshore conventional gas fields, such as those in Mozambique, hold more promise for South Africa’s energy market than unproven shale gas reserves. Offshore gas reserves in neighbouring countries will probably be more economically viable if exported to international markets in the form of liquefied natural gas (LNG), and South Africa will have to compete for LNG with the likes of China and India, Wakeford notes.

Shale gas and shale oil extraction is often capital and energy intensive. The global average for conventional oil deposits is 15 to 18 barrels of oil liberated for each barrel of oil-equivalent energy invested. These yields are set to decrease further as easily exploitable reserves dwindle.

Energy return on investment (EROI) ratios for unconventional oil and gas are typically much lower than those for conventional reserves. For example, research suggests that the EROI for Canadian tar sands is about five barrels of oil delivered for each barrel of oil-equivalent energy invested.

“This is much lower than historical highs of 100 barrels liberated for each barrel invested in the 1930s, which also highlights the depletion of easily exploitable oil reserves and more marginal reserves being tapped,” says Wakeford.

The Organisation for Economic Coopera- tion and Development and the IEA also have doubts about shale gas, saying increased production would make sense only if it replaces highly polluting coal, but it is definitely not the optimum path, says IEA chief economist Dr Fatih Birol.

The IEA’s ‘2011 World Energy Outlook’ report found that using hydraulic fracturing in unconventional gas production has raised serious environmental concerns and tested existing regulatory regimes.

“Based on available data, the IEA estimates that shale gas produced to proper standards of environmental responsibility has slightly higher well-to-burner emissions than those of conventional gas, with the combustion of gas being the dominant source of emissions.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

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