“Early Days” for ExxonMobil
A little ways away from “proven” plays
Although not a featured speaker at the European Unconventional Gas Summit Paris 2011, Eric Oswald, Exploration Manager for Europe and Greenland for ExxonMobil was an active participant in the conference sessions with his comments and queries. Mr. Oswald offered an exclusive interview there to Natural Gas for Europe.
He explained that ExxonMobil had operations in Germany for shale gas and coal bed methane, as well as operations in Poland for shale gas, and that his portfolio also covered Norway offshore and Greenland offshore.
“We’re a very large shale gas producer,” he said. “With the acquisition of XTO we’re the largest natural gas producer in North America, where there’s a tremendous amount of shale gas produced. The company a few years ago was a real early mover in Europe in trying to acquire acreage for potential shale gas and CBM plays here in Europe, and so that was after a full analysis of all the potential basins in Europe, we landed this acreage in Poland and in Germany.”
Oswald said ExxonMobil had a long history of producing oil and gas out of the office in Hanover and so the company’s acreage overlapped some of that and it was adjacent to it in Lower Saxony and North Rhine-Westphalia.
He described where the company was at with unconventionals exploration in Germany.
“There’s a tremendous amount of investment being done there and in the success case, a tremendous amount of economic benefit from developing the resources there. But it’s still very early days – none of the plays we’re looking at there have been proven. I think that’s important to keep in mind, especially at a conference like this. You know a lot of people very quickly switch to a proven play mentality and you hear a lot of comments about manufacturing types of processes for getting unconventionals to work – that’s true in a proven play, it’s not true in an unproven play, where you still have to do exploration to figure out whether the play is going to work.”
According to Oswald, ExxonMobil was still in very early days, both in Germany and in Poland.
“We’re just drilling the initial vertical wells just to get a kind of sense of what the geology is doing and we’ll just start with some of the fracks later in the year. So it’s still too early to comment on whether it’s going to be successful or not. I’d say right now it’s risky but we’re still optimistic and working away at it,” he said.
Regarding whether or not the industry would be capable of exporting the shale gas revolution to Europe, he said there were some basic differences.
“I’m a geologist, so that’s kind of how I start looking at the thing, and for sure the geology’s different over here than it is in North America – the scale of the basins tends to be quite a bit smaller, so your running room on the plays is a bit smaller, and the subtleties of the shale compositions are different,” Oswald explained. “There are a number of factors that make it a little bit tougher, certainly tougher than most successful North American gas plays.”
He continued: “So in general I think the geology would say ‘well, it’ll probably go a little bit slower because it’s harder to figure out’ and then you start talking about all the logistical issues and regulatory issues that we’re talking about here at the conference – I think these are all surmountable things that we’re going to deal with and a lot of it is really just the industry realizing that it needs to partner with local communities and the regulators and governments, because there’s a lot of education that needs to be done here.”
For Oswald, that means two-way communication with communities affect by drilling operations.
“We’re moving into parts of Europe where they don’t have a recent history with the industry and it’s really important that we take the time to sit down, listen to their concerns, understand what they’re worried about and then work through the data, our processes and come to a joint agreement on how we’re going to get everybody comfortable,” he said.
“You’re undertaking this activity in local communities and you have to have them comfortable that you’re going to be a responsible operator in those areas and the regulators and governments obviously need to make sure that their constituents are comfortable with it, so I think that’s what we’re doing here: making sure that everybody is aware of all the players that are involved, what their issues are, and once we have that, we can figure out a way to attack it.”
He said he didn’t see anything that was insurmountable regarding the hurdles involved in shale gas production in Europe.
Oswald said: “I just see a lot of education and communication. We have all the technology that we need to make it work. It’s really just a lot of working together and new parties coming together to work in new ways. One of the things that’s come out of the discussions for me today is that it’s very natural for people to be concerned about their water supplies and the quality of their drinking water, as I would be, and so one of the things that’s going to have to happen here is that the oil and gas industry is going to have to work very closely with the various parties that control the water supplies across Europe to make sure that we’re all accountable and responsible for making sure that those water supplies are handled correctly, and not damaged, and it’s certainly something that can be done using well-established best practices from the industry.”
He said there were millions of wells drilled through aquifers all over, not just in the oil and gas industry, but for drinking water wells and geothermal wells, and that it needed to be done correctly.
“You need to have best practices and potentially even regulation in place to make sure that that gets done,” explained Oswald. “So if we can work as a partnership with the other parties that are responsible for that, I think that’s going to pave the way for addressing one of the major concerns with unconventional gas which is harm to the water table.”
Oswald admitted that he had a bias when it came to who was doing the shale gas drilling, believing that supermajors had an upper hand over smaller enterprises.
“My major concern is when an industry moves into an area like this to develop a resource, we’re only as good as the weakest link,” he explained. “It’s very important that as an industry we’re coming together and agreeing upon using best practices, setting a very high bar for how the environment’s going to be treated, how social issues are going to be treated, and I’m confident that my company has the bar set in the right place for that kind of activity and has a history of having the bar set in the right place in Europe, because we’ve operated successfully in Europe and so it’s important to me that everybody at least comes up to that bar, and I think that can be done through industry organizations and working with regulators.”
“I don’t have any direct concerns but this is definitely not a place where you want small, irresponsible operator working. I think it’s very important for these governments to partner with operating companies that have got a proven track record in being able to deal with safety issues, environmental issues and being able to do this in an environmentally safe manner.”
As Oswald sees it, the alleged lack of E&P services for the unconventionals industry in Europe is not likely to be a major obstacle.
“You hear this brought up so many times in unconventional and I might be being a little naïve, but it’s just hard for me to imagine that once we establish that there’s viable shale gas right here, that is such an important thing for the companies and countries involved, it’s just hard for me to imagine that providers of those services are not going to respond to that market call. I think it might be a little bit sticky in the early days of it, but up to this point we haven’t experienced any issues with that in trying to conduct our exploration operations here. Maybe we’ll have a bit of slowness in the early stages, but I’m not really too worried about it now.”
He said the big challenge now was trying to establish that there were viable plays in Europe. “Once we can do that, then we let the market forces start to move and I think those people will show up,” he added.
Regarding the role of shale gas in Europe, perhaps even natural gas exports from Poland in the future, Oswald said that ExxonMobil took estimates from the International Energy Agency as realistic.
“It’s not going to be the dominant energy source, but I don’t think that’s the intent. The important thing is it can be a component of a diversified energy platform for a variety of countries in Europe and that’s really what they’re looking for.”
“Natural gas is a great bridging fuel,” he said. “It’s a fuel that can significantly take a chunk out of greenhouse gas emissions if we can migrate from coal-fired generation power plants to natural gas. So there’s a great case to have it in Europe and how you get it into Europe, and I think everyone would agree that multiple sources is a good thing for all of the countries involved in Europe. They’ll get some of it from Russia, from the North Sea and from Africa, and I think most countries would be happy to have indigenous supplies as well, so diversity of supply is really the watchword.”
In terms of explaining shale gas technology to the layman, Oswald said he wondered if the industry might not be doing itself a disservice by, among peers, pointing out how different unconventional gas was compared to conventionals.
“As a geologist or engineer, you’re of course very attuned to how unconventional gas is different than what you were working on before, and you’re eager to tell people about those differences and make distinctions because there are different, new technologies and things.
“But if you back up a bit from this and ask ‘well, what is it that’s really different? Natural gas?’ Well, natural gas has been produced for much of Europe for many decades, so there’s nothing new there. It’s being produced out of shales – that’s a different kind of reservoir rock than we’ve traditionally produced it out of, but we don’t talk about ‘carbonate’ gas or ‘clastic’ gas and those are just different types of reservoirs, so I’m not really sure there’s that much new there.
He noted that hydraulic fracturing gets lots of hype, but was not a new technology.
“There’s been over 1 million fracks in post war America, none of which have been documented to harm the water table, by the way. It’s an old technology and even in Europe there’s a huge amount of fracking that’s been used in tight gas reservoirs all across Germany and even in Poland, so there’s nothing new there.
“Yeah, it’s unique if I’m a specialist geologist or engineer, I’m really excited about all the differences, but if I’m a citizen sitting on farmland in Germany and wondering about what’s going on, there’s a lot of similarities to what’s happened in the past. Maybe it’s been a few decades since some of these places have been really busy, but the drilling, the well spacing, the techniques – these are all things that have been out there for a while, so we’re not talking about new and unusual technologies. It’s just a new era of bringing it into Europe again, potentially to the great benefit to Europe,” he said.
Oswald also pointed to the potential economic and environmental benefits for Europe.
He argued, “It would be nice in a lot of these countries to be paying themselves for their energy rather than sending their money to another country to get their energy, so there are enormous advantages, both on the economic front and then coming back to the environmental side.
“If you’re concerned about greenhouse gasses, which I think most of us are, it’s the most tractable way that we can combat that problem in Europe is to increase the amount of natural gas that we’re producing, so that we’re not increasing coal production – we’ll potentially even displace some. So it’s a real good thing on a lot of fronts, I just think we have a lot of work to do on education and getting people comfortable on what’s going on and making sure that all the local communities are comfortable with the activities that are undertaken."
Oswald offered some insights into what he’d be looking for in the future regarding shale gas development in Europe.
“I think the next year or two is probably going to be real exciting because the first exploration wells will go down and be fracked and we’ll start seeing the very initial results of what are maybe some of the first plays that are going to be developed versus which are the ones that are going to be a little tougher and take some time. So I’ll be looking carefully at that obviously,” he stated.
How regulatory bodies act will also be a top of mind issue in connection with shale gas.
Oswald said: “The EU is going to be looking at this and making statements. I think a number of the regulators in individual countries are taking a careful look and are making sure the regulatory framework is appropriate for the activity that they see coming and that needs to be done in a very wise and science-based fashion, and I’m hoping that a long as we have a sort of rational discussion, that’s going to play out real well. If we let some of the more emotional, fear-mongering kinds of things come in and affect the debate, then unfortunately I think it’s going to potentially shut down the economic advantages for some of these countries.”
“I’m real worried about the area where you have people preying on people’s fears, where they’re putting material out there that’s not factual and it’s sort of designed to scare people. There are certainly things here to be careful with, but there’s nothing to be scare of.”
He said he thought the film Gasland was a classic case of non science-based scare mongering.
“So I think we need to keep the debate away from that type of approach; we need to talk about the concerns, because the concerns are completely valid and important. We all need to be concerned with the environment and certainly the water quality. In addressing those, the more we can keep that on a science based approach, the better off we’re going to be,” Oswald concluded.