Tayvis Dunnahoe, senior drilling editor, reports from Offshore Northern Seas in Stavanger. ONS proves to be not all wet when it comes to the unconventional shale revolution.

Wood Mackenzie estimates world reserves of unconventional gas at approximately 1,895 Tcf. Regions such as the Middle East, Latin America, and Australia are expected to contain modest amounts of shale gas – 25 Tcf, 13 Tcf, and 78 Tcf respectively. Medium strength resource potential exists in Africa (83 Tcf), Europe (145 Tcf), and Asia (203 Tcf), but North America is the current frontrunner in this resource area, holding the lion’s share at 1,348 Tcf.

John Knight, who heads up Statoil’s Global Unconventional Gas Department, believes independents should be recognized for their role in shale gas development. “We credit the large amount of potential resource in North America to the entrepreneurial spirit of independent operators in the US who have dedicated a vast amount of resources to develop and expand shale gas potential in the region,” Knight said.

On Wednesday, August 25, 2010, Statoil held a press conference at ONS outlining its near-term plans for the recent move into North American shale gas development.

In 2008, Statoil purchased 32.5% of Chesapeake’s acreage in the Marcellus, positioning itself as one of the first major operating companies to enter the US shale gas market. “There are essentially five main reasons why Statoil committed to this investment,” Knight said. First, while the exact number remains confidential, the trending applied to break even prices for all known US shale gas plays shows that Marcellus has maintained a fairly low rate throughout the last decade. “By 2015, more than half of US gas production is expected to from unconventional shales,” Knight added. “Unconventional gas development will most likely experience a cost reduction due to new technology within the next decade.” Low break even prices and the potential for cost reduction through innovation make the Marcellus an attractive investment for Statoil.

In addition to these points, Knight said, “The Marcellus is strategically positioned and is becoming a world-class play, with an estimated recoverable reserve of 7,420 Bcm of gas.”

In the US, Statoil sees the unconventional gas market as an established industry. The Marcellus in particular will tend to draw higher prices due to its close proximity to market and ample pipeline access with only an average flux of $0.20 per mcf from Henry Hub spot prices.

Knight added, “Our current joint venture with Chesapeake is giving us an opportunity to train our people in the US shale gas industry.”

Currently, the operator is producing 300,000 Mcf\d (44,000 boe\d) and expects to raise its production to 50,000 boe\d in 2012. With 26 rigs currently operating in the US Marcellus and 118 wells in production, Statoil has definitely established itself in the region.

“In addition to these numbers, we currently have an additional 105 wells that have either been drilled and awaiting completion or completed and awaiting tie-in to existing infrastructure; we also hope to have 34 rigs working in the Marcellus by the end of the year.”

The company expects to begin operating its own rigs by the end of 2012.

Even bigger news was announced on Statoil’s possible move into the global unconventional shale market. Along with its Marcellus partner, Chesapeake, Knight commented, “we are now completing a two-year analysis of shale cores from around the globe.” Key areas of focus for the study were regions that held potential reservoirs with high organic content (TOCs of greater than 12%) that were buried at sufficient depths to pressurize the zone, creating hydrocarbons. These regions would also contain high surface demands for unconventional gas with enough geography to account for space requirements of shale development.

Of South Africa, where coal is the primary source of fuel, Knight said, “Expect to see Statoil and Chesapeake operating in this area soon.” In addition, to the lower emissions garnered by natural gas, the region also hosts a number of gas to liquids facilities, which would give an unconventional gas development quicker access to market.

“Our goal is to take what we are now learning in the Marcellus and transport these skills to other parts of the world,” Knight said.