Capex on tight gas E&P efforts to total $8,718.9M in 2013, says new report

Monday 19 August 2013, Amsterdam

New analysis indicates that CAPEX on Tight Gas E&P efforts will reach a value of $8,718.9m in 2013 as an ever-increasing amount of development efforts begin in China.

Tight gas development is, from a variety of viewpoints, an underappreciated component of the unconventional oil and gas industry.  Like shale, this unconventional resource will enjoy double-digit percentage point growth in E&P capital expenditure over the next 10 years.  Large-scale production is limited to North America and China, a situation that will have changed by 2023.

Not until 2011 did shale gas production overtake the contribution of tight gas to US domestic natural gas supply.  Without the development of the tight gas industry – now decades old – drilling and completion techniques capable of extracting gas from shale formations would not have evolved.

However, the tight gas industry is only a notable part of the natural gas supply picture in North America and China.  The entrance of China is a recent development, but is the most important for future spending on tight gas E&P efforts.  Shale gas and coalbed methane production are far lower than is desired and ambitious targets for domestic natural gas production, set by the Chinese government, will need to be met with ever-increasing volumes of tight gas.

Argentina and Oman help to buttress this capital expenditure, whilst market spaces such as Europe and Australia are delayed by an inability to access any economy of scale.  Indeed, a high cost drilling and completion environment, combined with environmental opposition to hydraulic fracturing, create barriers to tight gas E&P that prevent capital deployment.  Further limitations include artificially low natural gas prices and the depressed hub prices of North America.

Liquids-rich tight gas formations have become crucial to project economics, especially in North America.  Aside from rig efficiency gains and E&P targeting liquids-rich plays, tight gas developers in this region will, in the long-term, rely on the ability to access export markets via LNG.

Despite limitations, mostly as a result of gas prices or drilling and completion cost, the overall picture for tight gas is positive.  Plentiful reserves, a growing global natural gas market and extensive experience born from decades of North American development are just some of the factors that enable capital expenditure expansion over the next 10 years.

The 171 page report contains 100 tables and charts quantifying and forecasting the tight gas market. Global tight gas CapEx forecasts are include along with five leading national markets Argentina, Canada, China, Oman, US plus European, Rest of the World and Rest of Asia forecasts. A PEST analysis is also included. The forecast and analysis are also underpinned by exclusive interviews with Alan Flavelle, Executive Chairman at Greenpower Energy, Viktor Soreg, Director of Exploration Portfolio Management for the Eurasian region at MOL Group and Stephen Keenihan, Chief Executive Officer, Managing Director and Executive Director of Transerv Energy. The report also provides In-depth analysis of the five leading tight gas E&P companies Anadarko, BP, ExxonMobil, PetroChina and Royal Dutch Shell.