Will shale gas move offshore?

Baker Hughes Hydraulic Fracturing Stimulation Vessel

This April, the U.S. Geological Survey released its estimation of about 5600 tcf undiscovered natural gas resources lying outside the US. In the same time the British Geological Survey was quoted for estimations of UK offshore reserves of shale gas that could exceed 1000 tcf. Indeed, shale gas formations do not know borders nor shores (see map). If the distribution of offshore/onshore shale gas is 50/50 there may be more than 6000 tcf of additional offshore shale gas resources worldwide. These numbers are subject to speculations but the debate has been launched: will shale gas move offshore like conventional Oil&Gas did in the past?

Escape from New York

There are indeed many advantages for shale gas for moving offshore:

1. Offshore allow to escape from the “Not In My Back Yard issue”. As seen recently in the state of New York or France – which shale gas reserves by the way are estimated to be the second largest in Europe and with maybe the best shale gas geology in the world - if local opposition is strong, it may be impossible to even explore for shale gas. This is not a French exception or typical to shale gas and the same thing happened for gold in Switzerland.
2. Gas leak, which has been identified as a major concern in the onshore shale gas value chain does not present the same risk level offshore.
3. Seismic data acquisition offshore may be easier than some onshore areas with complex topography.
4. Induced seismicity is not a showstopper offshore (see picture below)

Earthquakes of magnitude 3 or above in the Norwegian North Sea area in the last 30 years (Source: WolframAlpha)

Now when it comes to available technology for offshore shale gas Exploration & Production, we may have to wait some years before we can see the lean manufacturing oriented “gas fabric” shale gas machine working offshore. “Historically, it has taken at least 25 years for any new energy type to conquer 1% of the global market” says Peter Vosel Shell’s CEO so it could take years before we see a “drill, frac, produce” designed shale gas vessel operating. Moreover the problem of storing the gas and transporting it to the market may turn out to be tricky, though small scale LNG, small GTL and new natural gas conversion technologies (see video below) are emerging….or by the time offshore shale gas vessels are sailing there may be offshore gas pipelines already in the area.

Gas To Ethylene process

For a Few Dollars More

At the end, money may have the last word. The cost of production (COP) of shale gas offshore may be multiple times higher than what it is today onshore. Assuming an onshore shale gas COP of $2/MBTU and being 5 times more expensive to move offshore, this would lead to an offshore shale gas COP of $10/MBTU. This is in the range of some Arctic or Deepwater natural gas COP.

Will shale gas stay onshore when everybody is moving offshore (oil, gas, wind, etc) ? We should have the answer soon enough.