SHALES GIVE RISE TO ENTHUSIASTIC PROPOSALS

For the moment scientific institutions and experts of every possible rank throughout the world are arguing about whether there has been a "shale revolution" or not and to what extent it does in principle threaten the producers of "traditional" types of fuel, among them countries like the USA where shale oil and gas deposits have been prospected, where there has been the general wave of initiative in this sphere, and about the expediency of prospecting for shale fuel deposits; even in our country they have begun to think about Azerbaijani deposits.

Breakthrough or flop

Judging by the statistics published in the media, 87 per cent of total human energy consumption is as before accounted for by the hydrocarbon "threesome" (oil, gas, and coal). In spite of all the efforts to diversify the forms of energy used, "nuclear", hydropower and renewable resources only form the remaining 13 per cent. But oil and gas production costs keep going up, which is not to the liking of the countries forced to purchase them, on the one hand, and on the other hand, it makes them seriously worried about how long the reserves of "traditional" fuel will last.  

Against the backdrop of the controversy surrounding the "shale revolution", this could not have come at a better time. The fact is that the world's resources of shale oil and gas really do hold enormous potential.  In the recently published report by the US Energy Information Administration (EIA) it is noted that the biggest technically accessible resources of shale oil (75bn barrels) are in Russia, China, Argentina and Algeria, countries that have the biggest reserves of shale gas (Russia comes ninth in this list).

Geologists have long known that the deposits of shale fuels contained large quantities of oil and gas, but developing them has only become possible of late due to the development of fracking technology and horizontal drilling. This has been extensively used for the first time in the USA, causing the concept of "shale revolution" to appear.

Despite the fact that many countries have larger amounts of mineral resources than the USA, the wide-scale and rapid "shale revolution" is not expected to happen everywhere in the near future. The technology used in the USA is not suitable for all deposits owing to the geological differences. The necessary technological surveys of deposits have not been conducted in many countries. In some of them, for example China, private companies are restricted from access to the development of natural resources.

It is highly unlikely that shale gas will be produced on a large scale in Europe for at least the next two decades. Firstly, there is considerable public resistance to it, ensuing from the desire to protect the environment. Secondly, Europe is still in the early stages of surveying and developing shale deposits and the issue of the presence and volumes of industrial reserves remains an open question. Besides this, the drilling industry is still not sufficiently developed in the EU and the normative and legal basis for regulating gas production will most likely be stricter than in the United States.

Besides this, the USA has large extra energy generation capacities, using natural gas, which has seriously made the change-over from coal to gas much easier. In countries like China where the demand for energy is growing rapidly, there are hardly any extra capacities and the growth of natural gas production can merely slow down the rise in coal-fired energy production, but not put an end to that production. 

According to researchers, the drawbacks of shale gas extraction are the high costs and its unsuitability for transportation over long distances, the fact that the deposits will be swiftly exhausted, the low level of proven reserves in the overall structure and the considerable risks to the environment during extraction. In particular there is the threat of contaminating the Earth's surface and the ground waters which are the source of drinking water for the population.

In either event, the "shale breakthrough" as Russian experts have called this process, has put off the threat of energy resources running out for 20-30 years. In their view, even if the most optimistic shale fuel forecasts turn out to be true, its production will not cause the price of oil to collapse by more than five dollars per barrel and those of gas by more than 50-60 dollars per thousand cubic metres. Although it is also regarded as the "shale flop", this will occur if new extraction projects become drastically more expensive, the volume of reserves turns out to be incorrect, cheap technologies are not approved by the regulator, and countries introduce strict environmental controls on the extraction of hydrocarbons, one after the other.

According to the estimates of the International Energy Agency (IEA) published recently, the shale boom, which has led to changes in the US petroleum industry will go beyond the bounds of North America before the end of the decade, i.e. earlier than expected. Thanks to this, the USA will become the world's major oil producer by 2020, they note at the IEA, According to the latest report where the situation on the oil market over the last five years is analysed, the IEA forecast that oil extraction from low-penetrable rocks outside the USA will comprise 650,000 barrels per day from the overall volume of oil available by 2019. That is only a small share compared with the production of shale oil in the USA, which will probably reach 5m barrels per day by 2019.

Moreover, the oil-producing countries, which previously dominated the oil market for long time, will move into second position, since insufficient investment and political instability in many of these countries present a threat to a growth in supplies.

"Although Organisation of Oil Exporting Countries (OPEC) remains one of the main suppliers of oil to the market, it is becoming increasingly difficult for it to boost its capacities, IEA Executive Director Maria van der Hoeven noted.

The Azerbaijani alternative

Naturally, it is too early for Azerbaijan to talk about the exhaustion of its oil reserves, and especially of natural gas reserves. But nevertheless, a hypothetical question does arise - do we have shale deposits and how realistic would it be to extract shale fuel on the republic's territory? For, in spite of the fairly favourable forecasts regarding volumes of "traditional" fuel, work on developing alternative sources of energy, even nuclear power, is being conducted in the country, Why not go for the shale variant too?

Referring to the estimates of Azerbaijani scientists, the media report that Azerbaijan has approximately 600m tonnes of shale fuels and 200m tonnes of natural bitumen. They exceed other world samples in their quality and are on the surface of the Earth, which means it would not cost very much to extract them. The first vice president of SOCAR [State Oil Company of Azerbaijan Republic] for Geology, Geophysics and Field Development, Xosbaxt Yusifzada, stated earlier that there are roughly 50 shale oil deposits in Samaxi, Qobustan, in the Kura lowlands and other regions of the country. "The high price of oil has heightened world interest in developing alternative sources of hydrocarbon raw materials, in particular natural bitumen and shale fuels. Such companies as ExxonMobil and Total are showing interest in developing them," X. Yusifzada noted. He expressed the hope that the use of modern technologies would make the development of these deposits worthwhile.

We note that back in July 2011 SOCAR and ConocoPhillips Exploration Azerbaijan Ltd signed a prospecting agreement on preliminary prospecting activity on the dry land in Azerbaijan, The aim of the project was to discover promising new oil and gas deposits on dry land and render assistance in carrying out prospecting work in the future, as well as exercising a positive influence over the socio-economic development of the regions. Exactly a year later, in July 2012, SOCAR and Statoil signed an agreement on assessing the geological and geophysical data on the shallow water areas of the north-west Abseron peninsula, within the framework of which Statoil was obliged re-assess the geological and geophysical data already available, using modern technology.

SOCAR, together with the foreign companies, has conducted prospecting of the Mesozoic deposits on dry land in Azerbaijan. Thus, together with ConocoPhillips, seismic soundings were carried out on the slopes of the Greater Caucasus Mountains. SOCAR's geology and geophysics administration and the Norwegian company Statoil processed and interpreted data from the seismic sounding on the north-western part of the Abseron peninsula. The total area of territory prospected was 14,000 sq km. "The discovery of oil in the Mesozoic deposits is of great importance to us for stabilising oil production, X. Yusifzada stressed.

Although there are no exact data on the results of these surveys, X. Yusifzada's recent announcement eloquently points out that the prospecting had not been in vain. SOCAR plans to begin producing shale gas on the country's territory very soon. Such companies as ConocoPhillips, Statoil and others have already applied to us to start working jointly in this sphere. At the moment, we are assessing all the offers that have come in" one of the country's most senior geologists said.

Although all these projects are still in the rudimentary stage, the foreign media, seizing upon X. Yusifzada's statement, managed to report Azerbaijan's own "shale revolution". Well, the country's involvement in the latest technologies for extracting new forms of fuel is naturally something to be proud of. But we will only be able to judge of the scale and "the extent to which it is revolutionary" after we have carefully assessed the reserves we have and the expediency of developing them. So, we will have to wait for an announcement about all the results of the prospecting before we draw the final conclusions.