The Oil and Gas Technology Revolution: The Impact on
Africa
Dr. Gary K. Busch
In the last three years there has been a major revolution in the
technology of extracting oil and gas from where it lies trapped
below the surface of the earth or seabed. Until quite recently the
exploration for oil and gas has been the search for pockets of oil
and gas trapped below the surface and drilling a pipe down to open a
passageway for that oil and gas to rise to the surface where it can
be loaded aboard giant tankers, pumped into oil or gas pipelines, or
refrigerated into liquefied natural gas or liquefied petroleum. The
technology has concentrated on producing equipment which can go ever
deeper below the surface to reach these oil and gas concentrations.
A substantial part of oil recovery is from deep sea wells.
However, there are other deposits of oil and gas which are not part
of pools of oil or gas. There are a number of formations which are
"continuous" oil accumulation; i.e. the oil resource is dispersed
throughout a geologic formation rather than existing as discrete,
localized occurrences. There is a substantial amount of oil and gas
trapped in shale below a hard crust of rock not very far below the
surface. In recent years there has been the development of a
technology which can access these shale oil deposits and deliver the
entrapped oil and gas to the surface. These technologies include
“horizontal oil well drilling” and “hydraulic fractioning or
“fracking”. “The first new technology is horizontal drilling, which
allows one vertical well to tap widely into a whole layer of oil or
gas. The second is hydraulic fracturing, or "fracking," which
involves pumping mixtures of water and chemicals into certain rock
formations, particularly shale rock. This breaks up the shale to
release the oil and gas that had been trapped in the rock. This
"fracking" is a game-changer, unleashing our access to oil and gas
that were hitherto out of reach.” Most of these are on dry land and
do not require deep sea wells or pumping stations.
There have been massive finds of “continuous” formations of oil and
gas in the continental U.S. Two of the biggest are the formations
known as the Williston Basin (more commonly referred to as the
Bakken Formation) and the Barrett Formation. The Bakken is the
largest domestic oil discovery since Alaska's Prudhoe Bay, and, on
its own, has the potential to eliminate all American dependence on
foreign oil. The Energy Information Administration (EIA) estimates
its potential at 503 billion barrels. The Bakken is located in the
western two-thirds of North Dakota; western South Dakota; and
extreme eastern Montana (and parts of Manitoba). It encompasses some
25,000 square miles in North Dakota, Montana, Saskatchewan and
Manitoba. About two-thirds of the acreage is in western North
Dakota, where the oil is trapped in a thin layer of dense rock
nearly two miles beneath the surface. Companies use pressurized
fluid and sand to break pores in the rock and prop them open to
recover the oil.1
Perhaps even bigger than the Bakken Formation is the Green River
Formation of Colorado, Utah and Wyoming which “holds the equivalent
of 800 billion barrels of recoverable oil—as much as the U.S. would
use in 110 years, at current consumption levels, and three times the
proven oil reserves of Saudi Arabia,” according to a Nov. 13 press
release from the Bureau of Land Management. “More than 70 percent of
the Formation, including the richest and thickest oil shale
deposits, lies under federally managed lands,” the release said. The
federal government has a critical role in determining the future of
12. “Government Says Huge Oilfield in N.D and Montana”, AP 10/4/08.
the U.S. oil shale reserve, and it has quietly taken steps to
support oil companies in accessing this resource. The oil produced
in both the Bakken and Green River formation is a light, sweet
crude.
In short these two formations make available, within the borders of
the US, more oil than all the other proven reserves on earth. Here
are the official estimates:
- 8-times as much oil as Saudi Arabia
- 18-times as much oil as Iraq
- 21-times as much oil as Kuwait
- 22-times as much oil as Iran
- 500-times as much oil as Yemen
This is very impressive but it doesn’t take into account similar
massive gas formations which have also been found. With the ability
to perform horizontal drilling and the fracking of the substructures
a massive volume of natural gas has been discovered and has become
commercially viable With the tremendous success of the Barnett,
Fayetteville and Woodford shales in the United States, the gas shale
resource base will play a major role in the future natural gas
production on which the nation will depend. Already the Barnett
Shale gas play in Texas produces 6 percent of all natural gas
produced in the Lower 48 states. Recent announcements of emerging
plays in Appalachia, Northern Louisiana, British Columbia, and South
Texas indicate the widespread potential of shale gas resources
across North America. Each of these shale gas basins is different
and each has a unique set of exploration criteria and operational
challenges.2
2 “ API, “Facts About Shale Gas” 1/2/10
The Potential Gas Committee assessment of the nation’s gas
resources in June 2009 indicates that the United States possesses a
resource base of 1,836 Tcf of natural gas. When combining these
results with the Department of Energy’s latest determination of
proved gas reserves, 238 Tcf (trillion cubic feet) as of year-end
2007, the United States has a future supply of natural gas of over
2,000 Tcf. At current consumption rates, this is enough natural gas
to supply the nation for the next hundred years. This is an increase
of more than 35% when compared to the Committee’s 2006 assessment.
This increase is largely attributable to increased supplies from
unconventional gas plays, specifically from shale gas development.
These numbers are increasing as technology improves.
Within a short period of time the US will be self-sufficient in oil
and natural gas. Rather than build the planned LNG receiving trains
for the import of gas, the U.S. will begin building liquefaction
plants and trains for the export of natural gas to the rest of the
world. U.S. energy costs will shrink and remain stable. The use of
generating clean energy using gas will greatly improve the emission
of carbon dioxide. It will also improve the efficiencies of
renewable energy sources as a back-up to solar and wind-power
stations which stop or slow down when the wind drops and the sun
sets. These developments will have a major effect on world trade and
development.
The greatest impact is likely to be on Russia. Russia has moved
itself into a dominant position, via Gazprom, in supplying gas to
Europe. It has been able to exploit its abundance of supply to bully
the Ukraine, Belorussia and others. It has compelled many to accede
to its demands for the location of key pipelines. However, it needs
a massive capital investment to complete its largest project, the
Stokhman fields and to modernise its existing structure. Russia will
find it very hard to attract such a capital inflow as its virtual
monopoly will be broken. It s business plan envisioned exports of
gas to the US. That is very unlikely to happen now. Indeed the US
may become its competitor. This is equally true for Iran which has
been ramping up its gas production for an export bonanza. That will
not happen. Europe will have the opportunity to use the technology
on its own shale formations and buy any additional requirements from
the US. The Chinese have some shale formations and may acquire the
technology to exploit them more fully. The energy equations are
changing and the political equations will change as well.
This will also have a dramatic effect on Africa. As US oil import
dependence diminishes, countries like Nigeria will find themselves
in a bind. There is no reason to suppose that they will necessarily
have to reduce production but the declining US imports and the
increase in US exports of refined products and LNG will have a very
negative effect on OPEC. Someone will have to cut production or
prices will inevitably drop. Angola, Africa’s biggest, or second
biggest, exporter, has been busy diversifying its economy to expand
its production of metals, diamonds as well as investing in increased
food production. Nigeria has wasted every opportunity. Nigeria is
immensely endowed with mineral wealth but has never exploited it.
The Extractive Industries Panel found large reserves of precious
stones, uranium, tin, bauxite, coal and other ores which lay
undeveloped because of the greed and short-sightedness of it ruling
political elite. The agricultural production is unable to feed the
country. It is particularly ironic that most of this mineral wealth
is in the North and the Middle Belt, the two regions which have been
sucking the wealth of the South-South into its pockets to feed their
largely unemployed citizens. Had they exploited the wealth beneath
their feet instead of coveting the wealth of their neighbours it
would be a far different country.
Elsewhere in Africa there are better prospects. The opportunity to
have a less expensive and improve energy supply in South Africa can
unleash the manufacturing capability of that nation. The factories
already exist. The raw materials are there. This will be a major
boost to South Africa. Zimbabwe as well, may be able to use this
supply of fuel and petrochemical products to restore its
agricultural production to become, once again, the breadbasket of
Africa. It already has the factories and the mineral wealth. The
impact on many of the other countries in Africa will be marginal.
This is not because they lack the resources but because they lack
the political and economic institutions to make them work.
There is a new wind blowing and it may do a lot of people a lot of
good.
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