Unconventional Oil and Gas
It’s with great pleasure and intellectual curiosity that SIU Paris has welcomed Dr. Charlez on its premises this week to hear his presentation on the shale and oil gas debate. Dr. Philippe Charlez is Unconventional Resources Development Director at Total Group.
Staff and faculty members were present, and so were the Master students from our International Business and International Relations programs. In fact, after a brief introduction on the chemical and biological origins of shale resources, Dr. Charlez’s presentation focused mainly on two perspectives: the business implications of this “revolution” and its geo-political consequences.
Here is his critical point of view on some major issues at stake in this matter.
What are shale oil and gas?
The rock in which hydrocarbons form is called the source rock. Depending on the permeability of the rock, oil and gas tend to escape towards the surface until another low-permeability layer traps them in a reservoir. Oil and gas extracted from a reservoir are the so-called conventional resources, because extraction has traditionally (although not originally…) exploited this nuggets. Unconventional resources (shale), on the other hand, are extracted directly from the source rock.
You mentioned that unconventional resources, in the USA, have been known even before Colonel Drake‘s first well (1895). So why have they become prominent on the global scene only over the past 10 years?
Partly the oil price peaking at around 150 USD in 2008, helps explaining the need for the US to find an alternative to its imports of resources (almost multiplied by 5 in the run of the last 35 years). However, this is only part of the story…
You mentioned four pillars…
Yes, US energy dependency alone cannot explain this revolution. More relevant factors are: an extremely accurate knowledge of their subsurface, strong political support to oil and gas culture, favorable legislation (subsurface belongs to land owner – not to the State), and almost monopoly on equipment by oil and gas company, which leads to a very open, competitive and therefore efficient market.
What consequences are to be expected on a global scale?
Over the next fifteen years, the US should continue to increase their oil and gas production, and although they will never be sufficient in terms of petroleum, this means that in 2035 US imports from the Gulf will represent no more than 15% (compared with 64% in 2000), while India and China will follow a reversed trend, from 14% to 75%.
Secondly, the organization of natural gas import/export will change: US will go from being a big importer to a serious competitor to the Russian Gazprom on the European market; Gazprom will therefore turn to India and China who are planning to move from coal to gas.
Finally, this will lead coal prices to plummet, encouraging certain European countries to reopen coal-fired power stations, especially as they want to move away from nuclear power. All this will surely have an impact on the possibility to reach greenhouse gases targets set by the European Union.