Shale Gas in Austria: Beyond Mozart and Wiener Schnitzel

Austria could become known for shale gas, says OMV

Markus Mostegel of OMV Exploration & Production GmbH says Austria is famous for a number of things like Mozart, but what it could be renowned for is shale gas.

At the recent ShaleTech 2010 conference in Vienna, Austria, Mr. Mostegel spoke about Identifying Potential and challenges for OMV’s Shale Gas Play in Austria.

Before he spoke of that activity he told the audience that OMV had drilled over 8,000 wells and was producing oil (BOED) on four continents.

“In 2006,” said Mostegel, “we realized the potential of shale gas in Austria and formed an unconventional gas group.”

He went on to talk about the source rock in the northeast of Austria, showing a cross section. In the Mikulov formation, he said the shale’s organic content was contained in the marlstone.

“All the production since then was from this source rock,” he said. “It has a thickness of 1,000 meters or more, gets thicker the more you go to the east and the maturity increases.”

“You go through the data if you’re going to have a shale gas play in your backyard,” said Mostegel of OMV’s approach to Austria’s shale play. “Where we are drilling contains rather old wells, so we decided to test 400 meters of core; we had to digitize a lot of logs, did 2d and 3d seismic, did well tests and created drilling reports.”

“We had some evidence of shale gas,” he recalled. “From coring, we discovered gas microbubbles in one of the very deep wells, not from the marlstone but just above; the most prominent was where the oil and gas production had already been seen in the Vienna basin.”

Analysis and interpretation included thin section analysis, correlation, geochemical analysis, swelling clay analysis, added Mostegel. “We analyzed the reservoir pressure from well tests and it was low nitrogen and had a low percentage of CO2.”

According to Mostegel, analysis is necessary because the data are invaluable. He said that things like the thickness of the marlstone, characterization of different lithofacies types and the estimated ultimate recovery (EUR) were important calculations.

“We worked together with industry experts on this who are known in their field,” said

Mostegel, who added that the whole thing was a bit like looking into a crystal ball.

“It’s easy when you have a sandstone, you can estimate things like production rate and recovery, but with shale gas it’s completely different.”

He said that OMV had performed volumetrics, coming up with 15% estimated ultimate recovery (EUR), and did a reservoir simulation to get sensitivities.

“Gas in place is a sensitive issue,” Mostegel said given the current subsurface issues and initial water saturation, and “how much of the thousand meters are productive, and what’s non-productive.”

“You try to optimize your frac stages, your frac design,” he continued. “When we started everyone was referring to Barnett but slick water may not be the best solution here with the marlstone. You need to understand what you have, the pattern and in the end it comes down to production.”

Mostegel said that the reservoir in Austria was extremely tight and that the rock required proper stimulation to release gas.

He showed a diagram of primary (tensile hydraulic fracture) and secondary fractures (natural fractures and planes of weakness) and said, “It’s important to maximize and sustain stimulated reservoir volume (SRV) to produce shale gas economically. Higher SRV yields Higher Production.”

“You can see how the pressure wave goes away from the frac after two years,” he noted. Mostegel then showed a fracture network: “These are much lower in conductivity but get 35% more production,” he said.

“How are we going to address this?” questioned Mostegel. “To take things forward we are creating a pilot program to reduce uncertainty.”

“We are quite thick so we’ll do a lot of coring, a lot of testing. Completion effectiveness means we want to know how our fracture develops, we want to know how much this is in percentage - 10 or 50%?  So we plan to do microseismic to get some sort of interpretation, and it gives you an idea what kind of network it is.”

“We’ll drill a second well based on a better understanding. If it’s justified we may do a sidetrack in one of the preferred rock regions that shows high potential, which can show the heterogeneity of the geology.”

Mostegel also spoke about the factors influencing shale gas development, one of which was drilling costs reduction. “It’s much more expensive here,” he said of Europe.

He also mentioned the availability and the cost of frac equipment in Europe, that it’s not available widely at the moment.

In terms of water management, he said, “It’s about recycling the water and what to do with this used water. I’m sure we can solve it but we have to be more careful here than in the US.”

Mostegel said he believes local acceptance/surface landscape will have an impact. “In Europe we will probably have to have a bigger eye on re-fracking - this is new for us.”

He added, “The regulatory system needs to be adjusted in a way that turns exploration into production licenses.”

In terms of the price of natural gas price, Mostegel said, “The main thing is after you buy the program you have to focus on your costs and whether you can make a sustainable something out of this project.”

“Cost reduction is one of the main points,” he explained of cooperation on technology and finance. “We must bring them down, and locals must be with you. In Austria, OMV has been operating for over 70 years and we’re not densely populated.”

Mostegel showed the audience a map of the European Gas Shale Landscape, saying “It shows there is some potential in the basin, estimated at 240 TCF.”

“Wood Mckenzie made a base case assumption, assumed some things and their estimate shows Europe is well ranked in terms of economic potential for shale gas.”

At the end of the day, he said, economic production of shale gas in Europe will depend on production costs, gas price and stakeholders. He noted the lack of EU regulation of shale gas.

“Everybody’s waiting for promising results in Europe,” said Mostegel. “I think this can get a lot of drive if the first wells are drilled and gas is produced.