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Executives predict shale boom in Russia and China, but Europe lags behind

04.17.2013  | 

Torbjorn Tornqvist, chief executive of trading house Gunvor, said Wednesday it was clear that shale production on a scale similar to that in the US is possible in several of the world's biggest current energy producers and consumers -- but that Europe is unlikely to be transformed by it.



LAUSANNE, Switzerland -- Russia and China will lead the way in the production of resources from shale after the US, according to executives, but Europe will likely lag behind.

Torbjorn Tornqvist, CEO of trading house Gunvor, said Wednesday it was clear that shale production on a scale similar to that in the US is possible in several of the world's biggest current energy producers and consumers -- but that Europe is unlikely to be transformed by it.

Surging production of oil and gas from unconventional sources has seen the US outstrip predictions to become one of the world's most energy-secure regions.

"Is it possible to adapt that elsewhere? And the answer is yes, but not everywhere," Mr. Tornqvist said. "I think in Russia, you will see the first major change. You have the political climate there to drive through large-scale shale operations both in gas and oil."

He also said that China, Australia and South America were promising as a shale-exploiting countries.

Mr. Tornqvist sounded a much less positive note for Europe, which has so far been divided on its approach to the relatively new technology of hydraulic fracturing, the method of extracting shale resources known as fracking. France has voiced strong opposition to the idea, while the UK government has insisted that shale gas production "will happen."

Mr. Tornqvist said: "Europe? You all know the problems there: political problems, no-one really wants to see rigs on the landscape -- and problems and fears about groundwater and so forth will prevent Europe from exploiting its resources, which aren't that big anyway."

The Gunvor CEO was addressing the Financial Times Global Commodities Summit in Lausanne, Switzerland.

Bob H. Takai, general manager in energy for Sumitomo, speaking in a panel discussion that followed Tornqvist's talk, said that China could rival Russia as the biggest shale producer.

"As far as the reserve is concerned I think China has got the largest potential reserves of shale oil and shale gas, even bigger than the US," Mr. Takai said. He added that before those reserves could be accessed China would struggle with problems ranging from infrastructure to the availability of water.

The discussion led Tornqvist to reiterate: "It will take a long time. And if I was to put the first nation to do that in the scale, I would guess today Russia.

"Because they, through their political system, they have decided to do it," he said. "They have the infrastructure, they have the tradition of drilling gas, it isn't so densely populated, they have the water, they have the ingredients.

"And they're already doing it," he said. "I know from my talks with Gazprom; they have advanced plans to get into shale gas and shale oil."

Dow Jones Newswires

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What a lot of people don't know is that mneahtol can be made fro natural gas.Is there anyone who does not know this, really? Short of changing one element to another, you cna make nearly any hydrocarbon from any other hydrocarbon. It is just a Question of Cost. A lot of natural gas is used to make fertilizer, among many other things.Yep, you can liquify natural gas, but you have to supercool it to do it. as Vange points out, it takes a lot of energy to do this, which means you use a lot of NG to make CNG, which raises the price.Methanol is CH3OH and Ethanol is C2H5OH and Butanol is C3H7OH. Same as Methane is CH4, Ethane is C2H6 and Butane is C3H8. When you burn them you convert the carbon to CO2 and the Hydrogen to H20. In either case, the longer the chain the more energy released.The lighter the molecule the higher the vapor pressure and the easier it is to create an explosive mixture with air. Methanol explodes easily and has an almost colorless flam when it burns, hence it is very dangerous as a fuel, which is one reason Indy cars no longer run on it.As far as I can tell, Vange is 100% correct in his critique. We can do damn near anything, the trick is to make it pay. But anything we do has cost trade offs, and sometimes those trade offs are in things that are not priced or not properly priced. Until we get a whole lot better at agreeing on what people own and how they should be valued, we are going to make a lot of suboptimal decisions.It is hard to figure why one producer is flaring gas becasue it is not worth delivering, when another porducer at the other end of the continent is drilling holes to get the stuff.


Amy Myers Jaffe, director of Baker Institute Energy Forum, a pocliy think tank at Rice University in Houston. "They are saying to themselves: I am going to produce the gas regardless of what the price is, because I'm making money on the oil and liquids."The article isn't about shale gas. It talks a great deal about gas production coming from drilling for oil. A lot of that gas comes from conventional oil wells, not shale. Yes, these companies can make a lot of money. But that does not mean that the shale gas producers who get a bit of liquids can make it with prices as low as they are. With petroleum selling for $90 a barrel, drillers in places like the Eagle Ford shale or the Bakken can give away their natural gas for nothing and still make 100% annual returns on their drilling dollars. -- ForbesShow me the 10-K forms that tell me that shale gas is profitable. (And when you do make sure that you are not just looking at the production cost, which is a fraction of the total.)Technology development and application are and will remain key elements in maximizing the full value of these large, long-life resources. Here are some examples: Unconventional production from Haynesville increased four-fold in 2010, while production in Fayetteville doubled in 2010. The Barnett Shale, where we currently have gross production of approximately 900 million cubic feet per day of gas, is another good example of value creation through technology. We have been able to maximize long-term ultimate recovery with longer lateral lengths and improved drilling and completion efficiency. And our net unit development cost in this shale play is about $1 per thousand cubic feet equivalent, a 50 percent improvement in the last five years ..." -- ExxonMobileWhat exactly is meant by net unit development cost? What happens when you include all of the other costs? Does this cost include the full depreciation or is Exxon using the overstated reserve estimates and the high EURs that have yet to be seen in the real world?And surely if shale gas were this profitable the pure shale gas players would be swimming in cash. But if that were true why are they swimming in read ink instead and trying to sell themselves off or find new credit lines.

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