You are the judge
Oil price down to $85 thanks to shale oil ?
Shale oil, Oil shale, shale gas, Gas-To-Liquids, liquid plays…. there seems to be great confusion when referring to unconventional oil and gas terminology including at least but not last from the journal Nature (see picture below). Unconventional gas, like shale gas has disrupted the natural gas sector in the last few years and it seems unconventional oil could be the next reason for oil price to go down (see video above). It is therefore important to know which resources we are talking about when addressing unconventional oil and gas issues. We will humbly take the role of judge, jury and executioner when it comes to the terms to be used in the unconventional oil and gas sector (with some help from Schlumberger, Total and other stakeholders). Indeed, DNV is involved in the unconventional gas and unconventional oil sectors and speaking the same language among stakeholders is crucial.
Caute (“be cautious” Spinoza)
We can do this because the only truth in the Oil&Gas sector is that unfortunately nothing is certain… there is no perfect definition of unconventional gas nor there is one for unconventional oil. In addition, over time, as economic and technological conditions evolve, what was considered unconventional can migrate into the conventional category and new unconventional categories may even appear. It is to note that from a legal perspective (permitting), there is no distinction between conventional and unconventional hydrocarbons and the difference between gaseous and liquid products does not even matter as they are usually addressed as “hydrocarbons”. In France or China shale gas is defined as a type of mineral resource. Below are what is mostly considered unconventional gas and unconventional oil.
- Shale gas
- Coalbed Methane (CBM) aka coalbed gas, coal mine methane (CMM) or coal seam gas (CSG)
“Somehow Unconventional” Gas:
- Tight gas is considered conventional in some regions like China
- Biogas is considered as unconventional gas by GL Noble Denton and Synthetic Natural Gas (SNG) from biomass could also be considered unconventional gas
- Gas hydrates (aka Methane clathrate, methane hydrate, hydromethane, methane ice, fire ice or natural gas hydrate) is considered an unconventional gas resource by Statoil
“Not your Grandma’s” gas:
- Sour gas
- Arctic gas: the Arctic is not an oil region, it is a gas region with natural gas representing >75% of these remaining untaped hydrocarbon reserves
- Deepwater gas (>900 meters depth) and Ultra-deepwater gas (>2100 m) exploration activities are allowing access to new gas reserves
Historically natural gas has been a by-product of oil production so for oil producers, everything that is not liquid at ambient temperature and pressure is considered “natural gas”. This is methane, Natural Gas Liquids (NGLs), helium, CO2, hydrogen etc. However demand for natural gas has increased and the emergence of natural gas champions operating globally has made natural gas a valuable commodity traded worldwide. Moreover the development and use of new natural gas extraction techniques like horizontal drilling and hydraulic fracturing has allowed to tape into new natural gas resources like shale gas making oil and NGLs the by-products this time. In the US, because of low gas prices, these by-products have actually became an important source of revenues and the increase in oil/liquid production from shale gas projects is now impacting the US domestic oil production (se picture below). In many cases horizontal drilling and hydraulic fracturing are only applied to the wet windows of shale plays in order to produce oil/NGLs since drilling for gas is not worth it anymore.
This shale oil (aka tight oil, or Light Tight Oil LTO) is part of the unconventional oil family
- Oil sands (aka tar sands)
- Oil shale
- Extra Heavy Oil (aka Heavy crude oil)
- Tight Oil (aka Light Tight Oil, LTO, shale oil)
Not conventional Oil:
The International Energy Agency (IEA) has a very peculiar definition of unconventional oil where it includes both different types of oil formations as well as processes that can produce liquids from alternative feedstocks (GTL, CTL see picture below). This classification adds process-related confusion where people confuse processes with fuels to the already existing confusion between, natural gas formations and locations.
To summarize, shale oil IS NOT oil shale and GTL is a process, not a resource or a fuel. One could think about a definition of unconventional oil and gas based on risk expenditures or RISKEX™. Indeed, unconventional and conventional oil and gas projects differ principally in risk exposure (e.g. use of new vs. proven technology) so by using a RISKEX™ based approach and treating risk explicitly they could be put on the same scale and more easily compared.