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Breitling Energy CEO Chris Faulkner Featured in January 2014 Issue of Oil & Gas Middle East

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Oil & Gas Middle East is a monthly magazine that goes into depth about the latest major industry news. Features provide important background information, focusing on market reviews, and technical information, and objective profiles. In this issue, Faulkner along with Ada Perniceni, principal, Middle East at global analyst firm AT Kearney discuss whether fracking is in the future for the Middle East.

 

 

 

 

The water problem

One of the major problems with accessing shale gas reserves through fracking across the Middle East region, is the massive volumes of fresh water needed to frack that just are not available in these desert regions, and while there are methods being investigated that use less water, they are still very much in the research phase and may not be able to be used at the depths required here in the region.

“The major challenge here is water; fracking utilizing water may not be applicable here in the region, and so they may have to find a technology that works. The US has a lot of cheap water, so we have no catalyst to drive innovation around replacement of water,” explains Chris Faulkner, CEO, Breitling Energy Companies. ‘The use of water, the flow back of water and the disposal of that water and the amount we use in the US has not hindered our progress, but the Middle East is very poor with water and you have to use fresh water not salt water, so you cannot just suck it out of the sea.”

According to AT Kearney, there are large technological advances that need to be made in the fracking space before it be-comes a reality in the region. One of those technological advances may involve the use of desalination to provide the 1.9 billion litres of water that is needed to frack the average well. While desalination is expensive, according to Breitling Energy, it is a possibility.

“You can use desalinated water, but you have to do it in very large quantities, each one of these wells, at the rate we are doing them, take 2.3 billion litres of water per well. That is for 30 frack stages, which no one here will do for a while, but at the end of the day these are very expensive processes without any of those things added in. For us, we have been able to reduce the drilling time form 90 days to 27 days for wells that are 3,000 metres down and 3000 metres sideways with large frack stages, but still that has driven the cost down, but it is still in the $50 range, and the tar sands in Canada it is almost $80 to get a barrel of oil out of the ground. Desalination will add another $20 a barrel so that won’t necessarily work,” explains Breitling Energy Groups’ Chris Faulkner.

Honeywell says that the amount of energy needed to desalinate water makes the cost of extracting gas too high. “If you use oil to desalinate water, then the same water is used for gas to be used for powering energy plants, it will be very expensive. I don’t seriously see the economic justification for this, but I think some kind of innovation will come up to resolve this water issue, either using salty water located in different areas in the region, or other techniques to get this shale oil and gas out,” Bessiris states.

While air fracking can be used in shallower fields, this is also a non-starter for the Middle East region because most of the unconventional assets are deep. “I don’t think air fracking works here because of how deep the unconventional oil and gas is. So no, it has to be currently water, people have used gel propane and other types of additives, but right now water is predominant,” says Faulkner.

Reserve uncertainty

According to AT Kearney another issue is that there is currently a lot of uncertainty around the geology or the type of reservoirs that are present In the Middle East, in the GCC in particular because the appraisal has just started, so there are a few appraisal wells, but very little data to compare it to.

“There is still a lot of uncertainty about the gas which is technically recoverable, the technology needs some fine tuning and some evolution in particular related to the use of water. The infrastructure is also not there yet. The areas where shale gas is, in particular in Saudi Arabia, are not areas where there is at the moment a developed infrastructure to be able to take the gas from there to the gas plants and be able to use it,” explains Perniceni.

Expense of non-conventional

Non-conventional oil and gas are very, very expensive to produce, and the Middle East region is used to lifting oil out of the ground at around $20 to $25 a barrel, according to Breitling Energy, whereas in the Us it costs about $50 to $55 per barrel to bring oil out of the ground.

“Fracking wells decline very rapidly and are very, very expensive, they are completely oppositie to conventional thinking in the Middle East.  It is interesting today that there is more negative than positives still around unconventionals and fracking because it is very early days. I think this is going to be very like China and the development of unconventionals is not going to happen at the rate it happened in the US. I think the challenges that the Middle East has is the cost of break-even prices of oil has gone up substantially, the oil price has to remain high. Iraq and Iran are big elephants in the room. Iran could start an oil price war, Saudi has to make some decisions and they can’t afford to produce cheap oil,” states Faulkner.

Click here to read more on this issue of Oil & Gas Middle East.