Wonders Never Cease

True believer stunned by size of shale gas opportunity

Recently, Annop Poddar, Partner, Energy Ventures, spoke at Shale Gas World 2010 in Warsaw, Poland

He told delegates that he remembered 2005 well, when no one had heard of shale gas.

Established in 2002, Energy Ventures manages and advises four venture funds with a total committed capital of NOK 2.3 billion. The company is headquartered in Stavanger, Norway, with offices in Aberdeen and Houston.

The company actively seeks early to mid-stage investments in companies that deliver a marketable, proprietary product or service with potential in the upstream energy space.

“Our focus is only on tech companies in upstream, our company is spread across the globe and we’re proud to be working on the development of shale gas.”

He said Energy Ventures had about 26 companies in its portfolio, which were not all focussed on shale plays.

Poddar explained the reason for the interest in shale gas, providing two key reasons: “The size of the opportunity is huge and the economics are changing. Back in 2005 no one thought you could produce shale gas economically.”

“The size of reserves is mind boggling,” he said. “It makes a huge argument for a gas economy going forward.”

The perception that unconventional gas was expensive, according to Poddar, had changed, because upon finding more basins it had become more economic.

“The US dynamics are changing,” he said. “You’ve got about 14% coming form unconventionals and this should become 35% in 40 years’ time.”

“Productivity has been going up especially since last year,” Poddar continued. “No one believed that shale gas could ever deliver that, because of technology. The industry is thankfully full of people who are very entrepreneurial.”

Shale gas, he said, had finally beaten conventional gas in terms of productivity.

“You should not underestimate the challenge. You’re squeezing hydrocarbons out of rocks, which makes it a hugely challenging task. It’s very very difficult.”

Among three challenges, he listed reservoir characterization; secondly, maximizing reservoir contact and enhancing permeability; and thirdly, maximizing production.

“People are talking about wells shutting down in the Barnett. How do we energize the wells that have declined?” asked Poddar, who offered his general thoughts.

“The challenges are to find the sweet spots which will give you more production, so that you can take more out of the reservoir. On the drilling and stimulation side, I think we have made a lot of progress. Now the focus is on maximizing the contact area. Now it’s about reducing damage to producing channels.

Poddar suggested that by creating a lattice of fractures one could increase their recovery. “It’s huge if you think about the size of the resource we have.”

He said slick-water fracturing had lowered the cost.

There are areas where you can improve on the technology side, like frac placement. You need to understand the reservoir first. In Europe because the areas are so large you must be able to find the sweet spot without using 3D.”

Mr. Poddar dived into the water issue.

“It’s becoming an emotional issue in the US,” he explained. “If you’ve got lighter proppants, you can improve water efficiency, but there’s still the challenge of the water that comes back which has organic content, salinity, bacteria and in some cases some radioactive species.”

Fifty plus companies with various technologies were working on the water, he said.

“Production optimization is ripe for innovation,” he contended. “There are real time technologies that let you monitor the performance of each frack.”

In summing up, Poddar said unconventional gas was a huge opportunity for our generation. “We are believers of the scale of this opportunity. I think a large market awaits us not only in the US, but in Europe too.”