The US and Canada are leading the further development of horizontal drilling and hydraulic fracturing, and these technologies will lead the global expansion of unconventional gas production.

KUALA LUMPUR, Malaysia – Industry advances in large-scale LNG production and transportation along with development of unconventional gas resources through hydraulic fracturing and horizontal drilling have opened access to natural gas, said Rex Tillerson, chairman and CEO, ExxonMobil Corp.

“To date, North America has been the proving ground for unconventional gas development – and the result has been encouraging, confirming the enormous potential of this resource,” he told participants at the World Gas Conference 2012 in Kuala Lumpur on June 5.

“The challenge now is to confirm the size of the global unconventional resource and to fully apply these breakthrough technologies to nations outside North America,” he added.

Peter Voser, CEO, Shell, who shared the stage with Tillerson during the morning plenary session, agreed with that assessment. “Our industry in the past decade has developed and perfected the technology needed to unlock gas from places previously assumed to be out of reach,” he said. “As a result, natural gas will be a far bigger player in meeting our future energy challenge than we had previously assumed.”

Economic Growth With Natural Gas

Tillerson noted that “natural gas is quickly becoming a key enabler of economic growth and environmental progress around the world. We are living at a historic moment in the evolution of energy markets. How we respond will shape the quality of life for generations to come.”

By 2025, ExxonMobil predicted, natural gas will overtake coal to become the second most widely used source of energy worldwide.

“Our future success will depend not only on geologic conditions and technological innovations, but also on government policies, effective business partnerships and disciplined investments,” Tillerson emphasized.

“Fortunately, as government and industry leaders consider the growing importance of natural gas and the need for its development, they can study and learn from the successes and shortcomings of the North American experience.”

The policies can achieve responsible development of natural gas by holding the industry accountable for operational integrity and excellence without stifling innovation and investment, he explained.

North American Experience Will Spread

Voser said that the International Energy Agency estimated total worldwide recoverable gas resources would last for 250 years at today’s current levels of production.

“China’s shale gas resources could be as much as 50% higher than those in the United States. South Africa, Indonesia, and India also hold significant deposits of coal-seam gas.

“It is China and Australia that are most likely to see the next wave of this revolution,” he said.

Shell is working with CNPC on several projects to tap these resources, including the Changbei tight gas field in Shaanxi Province.

The company has drilled a number of shale gas wells in China and the results are encouraging, he stated.

“While there is no doubt these abundant gas reserves around the world can be tapped, society should not underestimate the substantial investment and highly complex technology required to do so in a safe manner,” Voser said.

LNG, Other Shell Operations

In addition to the shale revolution, he pointed to the “spectacular growth of the global and regional LNG markets.

“Strong demand growth is possible in part because global liquefaction capacity has increased by around 40% over the past three years. Much of that increase has come from Qatar,” Voser explained. “Australia could eventually rival Qatar as an LNG exporter. It has more than a half-dozen LNG projects planned or under construction.

“Then, there is North America. Its tight gas production boom means it no longer needs major LNG imports. That has freed up supplies for Asia and Europe. It also means we will likely see a growing LNG trade across the Pacific from Canada, the world’s third-largest gas producer,” he continued.

Shell and its Asian partners announced plans to develop an LNG export facility in western Canada.

During a press conference following the presentations, De la Rey Venter, Shell’s head of global LNG, pointed out that the Western Canadian Sedimentary Basin was world class and could supply gas for LNG exports.

“Canadians have a new regulatory program being implemented. We told them we would be happy to be the demonstration project for the new regulations,” he said.

In answer to a question from Hart Energy E&P Online on pipeline right-of-way, he responded that Shell would “move soon to name the pipeline contractor. It will be up to the pipeline company to launch consultations with the First Nations.”

Regarding the bidding for Cove Energy and operations in East Africa, Voser noted that Shell did not talk about individual companies. “Being a leader in global energy, clearly we intend to play a role in East Africa long term. We have an exploration program offshore Tanzania with Petrobras.”

In Nigeria, Shell is continuing its efforts to end flaring. “We have reduced flaring by 60% over the last few years,” Voser said. “We have spent $3 billion on projects there. We’ve taken a final investment decision on another $2 billion in investments through 2014-15.

“We are below the average global flaring already. If you look at Nigeria, our flaring is below the industry average. With this final investment, we expect to bring flaring to a complete close.”

Contact the author, Scott Weeden, at sweeden@hartenergy.com.