Shale Oil: A New Age of Oil Abundance?

Prof. Mark Sephton & Fivos Spathopoulos

(Imperial College London)

Unconventional no longer

What is a petroleum system? • Definition

– A petroleum system encompasses a pod of active source rock and all genetically related oil and gas accumulations.

Elements – Source rock – Reservoir rock – Seal rock – Overburden rock

• Conventional system – Elements are separate

• Unconventional system – Number of Elements can be the

same – E.g. shale source and reservoir

http://petroleumsupport.com

How long unconventional?

• Unconventional is a time specific term • Over the next 20 years, shale gas is

destined to grow from 15% of US gas production to roughly 50% of production.

• Eventually unconventional may become conventional?

What is the influence of technology?

• 1970s - The Huron Shale. United States government and Gas Research Institute initiated the Eastern Gas Shales Project, a set of dozens of public-private hydro-fracturing, and horizontal drilling pilot projects.

• 1977 - Department of Energy pioneered massive hydraulic fracturing in tight sandstone formations.

• 1997 - The Barnett Shale. Mitchell Energy developed the hydraulic fracturing technique known as "slickwater fracturing" that made shale gas extraction economical.

• 2002 - Horizontal drilling in the Barnett Shale began .

• 2012 - represents over 30% Texas’s total gas production and over 15,000 wells.

Slick water fracturing : involves adding chemicals to water to increase the fluid flow. Twice as fast as normal.

What is in a typical fracking fluid? Component/Additive

Type Example Compound(s) Purpose Percent (vol)

Volume (gal)

Water Deliver proppant 90 2,700,000

Proppant Silica, quartz sand Keep fractures open to allow gas flow out 9.51 285,300

Acid Hydrochloric acid Dissolve minerals, initiate cracks in the rock 0.123 3,690

Friction reducer Polyacrylamide, mineral oil Minimize friction between fluid and the pipe 0.088 2,640

Surfactant Isopropanol Increase the viscosity of the fluid 0.085 2,550

Potassium chloride Create a brine carrier fluid 0.06 1,800

Gelling agent Guar gum, hydroxyethyl cellulose Thicken the fluid to suspend the proppant 0.056 1,680

Scale inhibitor Ethylene glycol Prevent scale deposits in the pipe 0.043 1,290

pH adjusting agent Sodium or potassium carbonate Maintain the effectiveness of other components 0.011 330

Breaker Ammonium persulfate Allow delayed breakdown of the gel 0.01 300

Crosslinker Borate salts Maintain fluid viscosity as temperature increases 0.007 210

Iron control Citric acid Prevent precipitation of metal oxides 0.004 120

Corrosion inhibitor N, n-dimethyl formamide Prevent pipe corrosion 0.002 60

Biocide Glutaraldehyde Eliminate bacteria 0.001 30

Where is shale found?

• Numerous shales occur throughout the world • A number of significant shales are in Europe • Unconventional hydrocarbons in shales are of interest to

many nations

http://www.eia.gov/analysis/studies/worldshalegas/

What is the potential of u/c hydrocarbons in shales?

• Figure shows the technically recoverable shale gas resource and the fraction which has already been produced in the US.

• Only between one and three percent has been produced.

• The size of the remaining resource illustrated the future importance of shale gas.

• New and developing plays are omitted.

US Shale Gas Technically Recoverable Resources and

Cumulative Production

What is the connection between shale gas and shale oil?

• Late 2000s • Barnett success led to tight reservoir

production elsewhere • Bakken tight oil reservoir gave

encouraging signs • Operators of Texas Eagle Ford play

(which began as a shale gas play in dry gas window) began drilling into wet gas window and finally oil window, successfully.

• Most other shale gas plays have potential oil and wet gas windows

• The production of shale oil has increased dramatically since 2009

How do economics affect shale oil ?

• Shale gas production is commercial at gas prices in excess of $4 per million BTU (although preferably should approach $8 per million BTU)

• The Henry Hub US benchmark dropped below $4 in mid-2011 and shale gas production is now not commercial

• Because of high oil prices shale oil currently has better economics, encouraging oil production

What is a good shale oil/gas target?

• Shales that host economic quantities of gas and oil have a number of common properties.

• Rich in organic material 0.5% to 25% – total organic carbon

• Mature petroleum source rocks – Shale oil - thermogenic oil window, where

high heat and pressure have converted kerogen to petroleum

– Shale gas - thermogenic gas window, where high heat and pressure have converted petroleum to natural gas

• Correct rock type – Sufficiently brittle and rigid enough to

maintain open fractures.

Shale Oil needs Shale

Where are organic rich shales today?

• Coastal margin sediments – Over 90% organic carbon

• High productivity – 6% organic carbon

• Anoxic environments – 1% organic carbon

• In the past – Anoxic environments more

important

Anoxia Productivity

Coastal margins

What is the effect of the water column?

• Surface organic matter descends • During its passage to the deep ocean,

marine organic matter decomposes in the water column, releasing CO2.

– 90 % recycled in surface waters – 9 % recycled in deeper waters

• Around 1% of this organic matter reaches the sea-bed intact.

• Once incorporated in the sediment, degradation continues

– Aerobic and anaerobic organisms • 0.1% of the original surface water

organic matter preserved. • Can be enhanced

– High primary productivity – Accelerated sinking rates – Rapid burial

• Low energy, low oxygen environments

– Several types exist

100 %

10 %

1 %

90 % recycled in surface waters

9 % recycled in deeper waters

0.9 % recycled on sea bed 0.1 % buried

organic matter produced by photosynthesis

OMZ

How does sea level affect shales?

• Transgressions – Oxygen minimum

zone covers shelf • Proximity to land

– High nutrient supply – High productivity

• High sea level – Widespread shale

deposition

shelf

shelf

anoxia

anoxia

high sea level

low sea level

Transgressive

Regressive swamp

How are shales distributed through time?

• Distribution – uneven

• Favourable conditions – transgressions – warm climate – anoxia

• Periods – Tertiary – Early Cretaceous – Late Jurassic – Late Carboniferous – Late Devonian – Silurian

Klemme & Ulmishek 1991

more recent

Maturity

How does maturity affect oil and gas generation?

• As Black Shale is buried, it is heated (usually at 30°C km-1).

• Organic matter is first changed by the increase in temperature into kerogen, which is a solid form of hydrocarbons.

• The oil window is an interval in the subsurface where liquid is generated and expelled from the source rocks.

• The oil window is often found in the 75-150°C interval (approx. 2-4 km depth).

• The gas window is found in the 100-220°C interval (4-6 km depth).

• Above 220°C the gas is destroyed

How does maturity influence compound size?

• Alkane mixtures with depth – variable distribution

• source and maturity

• Green River Shale, Colorado • Shallow

– C17 mode • algal source

– Odd C29, C31 & C33 • land plant source

• Deep – C23 mode

• algal source – Odd molecules lost

• maturation

60°- 80° C

110°-130° C

Shale-oil extraction by

hydraulic fracking

Shale-gas extraction by

hydraulic fracking

Oil extraction by artificial pyrolysis (in-situ or after mining)

OIL

WIN

DOW

GA

S W

INDO

W

OIL

GAS

Burial

How does maturity influence unconventional petroleum?

• “Immature” “black” shale on the surface or in shallow depths, where T°< 60°-80°C, so no petroleum is generated naturally.

• Rock can represents an oil shale target.

• Oil generation & expulsion to

conventional traps. • Residual shale represents shale oil

reservoir.

• Gas generation from maturity & cracking and expulsion to conventional traps.

• Residual gas represents shale gas reservoir.

Where do mature shales exist?

Eagle Ford Shale Oil Play

Eagle Ford shale

• Deposition – Deposited in Upper Cretaceous between

~92 and 88 Ma – Marine transgression – Sea level depths about 100 m – Deposited about 20-50 km from the shore. – Lower section of the Eagle Ford consists of

organic-rich, pyritic, and fossiliferous marine shales

– Marks the the deepest water during Eagle Ford deposition

• Field setting – Crops out near the town of Eagle Ford,

Texas – Dips steadily south to over 4,500m deep in

the East

Eagle Ford shale maturity

• The Eagle Ford play produces oil, condensate, gas and finally drier gas as drilling proceeds down dip (to the bottom right).

• The various petroleum types are a direct response to maturity.

Oil

Wet gas

Dry gas Dep

th &

mat

urity

Eagle Ford play

• Eagle Ford Shale – Could be the sixth largest U.S. oilfield ever

discovered and the largest in forty years – shale 76m thick over a 40 by 80 km area – Originally known as a source rock, for the

Austin Chalk and other oil and gas bearing zones in South Texas

• Production – Advances in horizontal drilling technology

and hydraulic fracturing made economic production possible

– Operators realised they could recover liquids

– Oil production has increased 40 fold in a few years

– In 2010, EOG resources estimated the oil reserves in the Eagle Ford Shale at more than a trillion barrels.

– Now other initially shale gas plays are being assessed for oil – positive data

Rock type and fracturing

• Geology can aid production • The Eagle Ford shale has a

carbonate content up to 70% calcite

• Makes it very brittle and easily fractured during stimulation

• Effectively fractured rocks result in impressive production figures of both oil and gas

Bakken Shale Oil Play

The Bakken Formation

• Distribution – Underlies parts of Montana, North

Dakota, and Saskatchewan. – The formation is entirely in the

subsurface, and has no surface outcrop.

– Oil was first discovered within the Bakken in 1951

– Historically, efforts to produce the Bakken have encountered difficulties

The Bakken Formation

• Deposition – Late Devonian to Early Carboniferous

(360 Ma) – Three Forks Formation consists of

shallow marine to terrestrial sediments

– Lower Bakken shale deposited in shallow marine anoxic conditions.

– Middle Bakken variable rocks associated with drop in sea level and influx of sedimentary material into near-shore environments.

– Upper Bakken shale member deposited in resumed anoxic conditions

– Overlying Lodgepole Formation was deposited in oxidizing conditions

Anglo & Buatois 2012

The Bakken Formation

• Occupies about 520,000 km2 of the subsurface of the Williston Basin • The Bakken is 46 m thick in NW North Dakota and it thins to the SE • Upper and lower members consist of hard, siliceous, black organic-rich shales which form

effective seals for the middle member • The middle member comprises five variable lithologies, from siltstones to fine-grained

sandstone and limestone, all with low permeability and porosity • It is the temporary switch to oxygen-rich conditions that produced the shale-silt-shale

sandwich in the Bakken formation

Bakken maturity

• Rapid subsidence in the Cretaceous took the Bakken shales into the oil window

• Bakken shales are mature • Oil has been generated relatively recently

– 310 Myr after source rock deposition

Nordeng & LeFever 2008

Charging the Bakken reservoir

• The middle Bakken dolomite member is the principal oil reservoir (at ~3.2 km depth)

• Once the Bakken organic-rich shales are in the oil window, they try to expel oil to all directions

• They are sealed from above and below by tight limestones so they expel the oil towards the more porous dolomite

• Porosities in the Bakken dolomites average about 5%, and permeabilities are very low, averaging 0.04 millidarcies.

• However, the presence of horizontal fractures makes the dolomites an excellent candidate for horizontal drilling

• Overpressure generated by the oil may produce micro-fractures thereby enhancing their permeability

Tight limestone

Source rock

Porous rocks

Source rock

Tight limestone

Upper Bakken (oil source)

Middle Bakken (oil reservoir)

Lower Bakken (oil source)

Bakken production

• Early drilling and completion techniques made the Bakken uneconomic

• Horizontal drilling and hydraulic fracturing boosted well production in 2008

• In April 2008, the USGS report estimated the amount of technically recoverable oil at 3.0 to 4.3 billion barrels

• By the end of 2010 oil production rates had reached 458,000 barrels (72,800 m3) per day outstripping the capacity to ship oil out of the Bakken

• Various other estimates place the total reserves, recoverable and non-recoverable with today's technology, at up to 24 billion barrels.

Effects of Organic Source

Organic matter in sediments

Types of organic matter in sediments

Total rock

minerals

kerogen (insoluble)

asphaltenes & resins

Total organic matter

Bitumen (soluble)

aromatic hydrocarbons aliphatic hydrocarbons

Hydrocarbons (H & C) Mol. Wt. < 600 au

C,H,S & N molecules Mol. Wt. > 500 au

Analytical methods • Bitumen (soluble)

- solvent extraction - fractionation

• Kerogen (insoluble) - pyrolysis (thermal degradation) - chemical degradation - spectroscopic techniques - IR, UV, NMR

Kerogen Types

• Type I kerogens – Lacustrine organic matter – High H/C (> 1.5), Low O/C (< 0.1)

• Type II kerogens – Marine organic matter – High H/C (~0.1), Low O/C (~0.1)

• Type III kerogens – Land organic matter – Low H/C (<0.1), High O/C (<0.3)

• Type IV kerogens – No petroleum potential

Kerogen structure

Oil prone Gas prone

• Kerogen chemistry – Composed of biopolymers – Aliphatic or aromatic – Proportions determine “kerogen type”

• Kerogen type – Type I = long aliphatic chains – Type II = medium aliphatic chains – Type III = aromatic rings, short chains

Kerogen type and petroleum

OIL WAX NONE

Type I Type II Type III Type IV

Kerogen type and shale oil

• Type I – Produces ‘waxy’ crude – Flow assurance is the critical issue – Risk of the crude oil solidifying in

flow equipment, for example when exposed to low temperatures in the oceans.

– The technology to solve these problems exists

– Chemical additives, down-hole pumps, heated pipelines

• Type II – Produces normal crude – Flow problems are absent – Relative simplicity is economically

attractive

OIL WAX

Type I Type II

Kerogen types in the UK

• Type I kerogens (lacustrine) – E.g. Midland Valley,

Carboniferous • Type II kerogens (marine)

– E.g. South England & Yorkshire , Jurassic

• Type III kerogens (coal swamp) – E.g. Pennines, North West &

North East, Carboniferous • The UK has a large amount of the

most favourable shale oil source rock starting material

• However, the correct maturity is also needed – must be in oil window

Type I

Type III

Type II

www.bgs.ac.uk

UK shale oil

• Where there is oil there has been a mature shale

• Barring further maturation that has cracked or even destroyed the oil a residual oil should be present

• Oil seeps and wells are good indicators of mature shale

Conventional wells drilled in the UK for oil (●) and gas (●) (Harvey & Gray 2012).

The role of shale-oil in future energy predictions

Can shale-oil change the “Peak Oil” curve?

• « By around 2020, the United States is projected to become the largest global oil producer » and overtake Saudi Arabia. "The result is a continued fall in U.S. oil imports (currently at 20% of its needs) to the extent that North America becomes a net oil exporter around 2030.

• This shift will be driven primarily by the faster-than-expected deve-lopment of hydrocarbon resources locked in shale and other tight rocks that have just started to be produced by a new combination of two technologies: hydraulic fra-cturing and horizontal drilling. • US oil production is predicted to peak in 2020 at 11.1 MMBbl/day, up from 8.1 MMBbl/day in 2011.

The news: The US will overtake Saudi Arabia’s oil output by around 2020! (IEA, World Energy Outlook, 12 Nov. 2012)

The IEA's conclusions are partly supported by OPEC, which acknowledged for the first time in early November 2012 that shale oil would significantly diminish its share of the U.S. market.

Production of crude oil & liquids, MMBbl/day

US Saudi Arabia Russia

1990 2011 2015 2020 2025

FORECASTS OF OIL DEPLETION IN THE

WORLD:

The “HUBBERT 1956 CURVE”

(or “Peak Oil”)

versus the

“USGS 2000 CURVE”

Extra reserves needed

Hubbert Peak Graph showing that oil production has peaked in non-OPEC and non-FSU countries

2000 2010

40

35

30

25

20

15

10

5

0

MM

Bbl

/day

The production of some countries follows the

Hubbert Curve.

Canada, however, has modified the curve due

to the addition of oil sands production

Hubbert “peak oil” curve

Peak oil curve in the United States: modification from 2010 onwards

Production of shale-oil could mitigate the reduction in US oil production by producing millions of barrels per day for many years.

From: American Shale Oil, LLC (AMSO)

The exponential increase in Texas crude oil production over the last two years is largely the result of the large increase in oil production from the Eagle Ford Formation in Texas, discovered in 2008. Eagle Ford crude production has more than doubled over the last year, from 120 532 bbl/day in July 2011 to more than 310 000 bbl/day in July 2012.

From: American Enterprise Institute website

Monthly oil production in Texas, January 1988-July 2012

70

60

50

40

30

Mill

ions

of b

arre

ls

World oil depletion per Major Producer

Reserves: 1.25 trillion barrels

Depletion: 23.3 billion barrels/year Source: National Geographic, issue 6, 2004

Shale-oil production in the US, from selected plays

US oil production including the Green River Oil Shales (retort) (IEA)

2038

Historical and projected U.S. oil & gas production MMBoe/day

Source: IEA World Energy Outlook 2012

Unconventional gas

Conventional gas

Unconventional oil

Conventional oil

Peak Oil line modified line?

Future oil price projections (from International Energy Outlook reports)

Since 2009, the price forecasts are lower, but always higher than $100/Bbl.

$US

/bar

rel

Historic

2000 projection

2005 projection

2007 projection

2009 projection

2010 projection

2011 projection

2012 projection

“Easy”, cheap fossil fuel energy

Transition: expensive fossil fuels

Affordable “Green” energy (including energy for

transportation)

20-50 years?

Early 2000s

This time gap can only be filled by expensive and controversial conventional exploration in remaining remote areas of the globe

(e.g. Arctic?) plus shale-gas, shale-oil, pyrolysed oil, coalbed methane, oil sands, gas hydrates (?). Horizontal fracking has

long been and is still used in “enhanced petroleum recovery” to drain old, conventional oil/gas fields.

Political decisions on the management of remaining energy sources and viable renewable ones.

This period can provide enough time for R & D of cheap, “green” energy

sources, allowing a smooth transition to the “era of renewables”.

Without shale oil

From: “Peak of the Oil Age” by K. Aleklett, M. Höök, K. Jakobsson, M. Lardelli, S. Snowden, B. Söderbergh Energy Policy, Volume 38, Issue 3, March 2010, Pages 1398-1414

CONCLUSION

• Shale-oil can only help the situation towards a renewable energy world, whenever that comes. It is not an infinite fuel and it is expensive.

• Shale-oil could give a few extra decades of fossil fuel, in the future and soften the collapse of the “Hubbert” curve.

• Even the “optimistic” USGS curve drops in the future.

• Shale-extracted products could give the “breathing space” needed during the current, transitional period, when conventional, cheap petroleum is nearing its end. Unless another renewable & affordable transportation fuel is developed, fossil fuels will still be the most energy-efficient option.

• Current conventional exploration is focused on ultra-deep, expensive and dangerous drilling (US Gulf of Mexico, Angola, Brazil), politically-troubled areas (Iraq, Libya) or, remote and sensitive areas (Arctic).

• A long (100-years-plus) future for fossil fuels may only be envisaged if (i) natural gas replaces oil in transportation and other energy needs; and, (ii) if the technology allows the exploitation of the massive methane reserves (gas hydrates) under the oceans.

• Shale-extracted exploration & production is now a strongly political and social issue. The geological and engineering problems have mostly been solved.

CONCLUSIONS FROM IEA’s WORLD ENERGY OUTLOOK, 12 Nov. 2012

• Policy makers face critical choices in reconciling energy, environmental &

economic objectives

•Changing outlook for energy production and use may redefine global

economic & geopolitical balances

•As climate change slips off policy radar, the “lock-in” point moves closer

and the costs of inaction rise

•The gains promised by energy efficiency are within reach and are essential

to underpin a more secure and sustainable energy system