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JPT Special Section

TRANSCRIPT

Europe Gears Up for the Shale Gale

Shale Gas: Beyond the US and Europe

Shale Oil: The Trend Toward Liquids

Oil Shale: The Rock That Burns

SPECIAL SECTION

SHALECuadrillas drilling site in Singleton, Fylde, UK

Photo courtesy of Cuadrilla Resources.

Europe Gears Up for the Shale GaleJohn Sheehan, JPT Contributing Editor

T

he European shale gas revolution is still in its infancy and though its commercial potential could rival that of North America, significant challenges lie ahead. France has put a moratorium on shale gas activity while a comprehensive study into its environmental impact is being carried out, and its National Assembly has voted in favor of a ban on hydraulic fracturing. The potential for shale gas production in Europe is undoubted, as consultancy IHS CERA estimates that Europes total shale gas in place could be 6,115 Tcf. Among the key challenges that will determine the ultimate productivity in Europe is a regulatory environment that is currently ill-suited to unconventional gas, the company said. Regulations designed for traditional exploration and production

in Amsterdam. We expect Europe to be a significant part of future activity.

Poland Leads the WayPoland plays host to Europes largest known reserves of shale gas. Leasing activity in the countrys three main basinsthe Baltic Basin, the Podlasie Basin in the east, and the Lublin Basin to the southis well under way. The country is keen to push forward with shale gas production as it looks to break away from its reliance on Russian gas supplies. The US Energy Information Administration (EIA) estimates that Poland has 792 Tcf of risked shale gas in place, with 514 Tcf in the Baltic Basin, 222 Tcf in the Lublin Basin, and the remainder in the Podlasie Basin. Chevron and ExxonMobil have been joined by a large number of smaller players such as DPV Service, Cuadrilla, EUR Energy, and Mazovia Energy in securing acreage across the country. Talisman is carrying out seismic acquisition on concessions in the Baltic Basin and it is on track to spud its first two shale gas wells in the fourth quarter of this year, the company said. It moved into the Polish plays through a farmin arrangement with San Leon Energy for a 60% interest in San Leons three concessions. Talisman is committed to drilling a minimum of three wellsGdansk-W, Braniewo-S, and Szczawnowhich cover 600,000 acres. Three optional wells with horizontal sections will be drilled after a successful first phase of testing. San Leon is also engaged in a five-year exploration and development program on its two concessions, Nowa Sol and Wschowa in the Permian Basin South. Both concessions are on trend with prolific Rotliegendes gas and Zechstein oil production. Nexen recently entered into an agreement with Marathon to jointly explore 10 concessions in Polands Paleozoic shale play and it says it will pump USD 100 million into shale-related activities. Nexen will acquire a 40% working interest in the concessions, which encompass more than 2 million acres. Marathon is acquiring 2D seismic this year and plans to drill one or two wells in the fourth quarter and potentially seven or eight wells during 2012. Another company that has snapped up acreage in Poland is Realm Energy, which holds three licenses in the country. The largest license, Gniew, is located in the Baltic Basin and covers 294,296 acres. Two other licenses, Ilawa, also located in the Baltic Basin, and Wegrow, in the Podlasie Basin, cover 161,109 acres and 180,136 acres, respectively, with Realm holding a 50% position. Realms primary targets in Poland are the multiple shale formations within the lower Silurian, Ordovician, and Cambrian geological periods. The company is designing

3 Legs Resources Lebian drillsite in Poland.

have not been adapted to reflect the character of unconventional gas, said Jonathan Parry, global gas director at IHS CERA. There are significant challenges ahead, including uncertainties over length of tenure, permitting regimes and norms, and water management, among others. However, a host of major and smaller operators are lining up to take acreage in a number of European countries where the shale gale is beginning to blow. Europe is just starting down the path of unconventional production, but we have some activities in the US we would like to leverage in order to move Europe forward on a more accelerated path, Linda DuCharme, director of Europe, Russia, and the Caspian at ExxonMobil, told the recent Gastech conference

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seismic programs on its lands and expects to shoot an aggregate 150 sq km of 2D seismic once the necessary permits have been granted and locations have been scouted. In addition, it is currently reprocessing 470 km of existing seismic data. Realm said it intends to move forward with drilling programs on its substantial acreage positions once seismic surveys have been completed and well locationsdetermined. 3Legs Resources holds six hydrocarbon exploration and prospection licenses in the Baltic covering a total area of approximately 1.03 million acres (held through subsidiary company Lane Energy Poland). We are commencing our own exploration program in the heart of Polands Baltic Silurian shale play, said Mike Mullen, the companys chief operating officer. With all the drilling activity that is occurring around our license areas in Poland, it is the ideal time for us to move up our development schedule and begin our seismic acquisition program that will help us select drilling locations in preparation for the drilling of our first well. 3Legs also has two permits covering 620,000 acres in the Krakow region. The work program obligations require one exploration well to be drilled and a certain amount of 3D seismic to be acquired within the first two years. The company is exploring for unconventional gas potential in the Silurian and Ordovician shales and, in partnership with ConocoPhillips, drilled its first two shale gas exploration wells, the Lebien LE1 and Legowo LE1a. The first well on the Lebork concession (Lebien LE1) underwent a singlestage fracture stimulation in November 2010 followed by a period of testing. Further evaluation is ongoing. Polands national gas company, PGNiG, also holds substantial acreage in the region and has 13 of the roughly 60 shale gas licenses issued by the Environment Ministry.

Consistent with projections, the two primary shale target intervals were thicker in the Lebork S-1 well than in the Wytowno 1 well. The Ordovician shale interval in the Lebork S-1 well is approximately 299 ft thick, which is slightly thicker than the 272 ft found in the Wytowno 1 well, the company said. The Cambrian shale also thickened to 49 ft from the 29.5 ft found in the Wytowno 1 well. BNK said this provides further support for its hypothesis about an increasing thickness trend that may continue into deeper portions of the basin. The company anticipates receiving all core analysis back by the third quarter. The log suite in the Lebork S-1 well calculates the highest gas and best properties in the Cambrian shale interval followed by the Ordovician shale interval. BNK said the uncalibrated log suites of both wells indicate higher gas calculations in the Ordovician interval in the Lebork S-1 than in the Wytowno 1, which may change after the logs are calibrated. During the third quarter, the completion will be designed and the first intervals in each well will be fracture stimulated. The company is also planning to drill its first well on the Starogard concession in July.

Supermajors Take AimLarger operators are also getting involved in Poland. ExxonMobil has built a large acreage position in the Podlasie and Lublin Basins of eastern Poland, the location of a potential new shale gas play. The company has total holdings of more than 1.6 million acres. Frances Total has just announced an agreement with ExxonMobil to farm into the Chelm and Werbkowice exploration concessions with a 49% interest. The work program for each of the concessions involves acquisition of seismic data, drilling of an exploratory well, and a production test if drilling results are encouraging. ExxonMobil has already acquired seismic and drilled an exploratory well on the Chelm concession, the results of which are being evaluated. Aurelian Oil and Gas also has acreage in the southern Permian Basin and in the Carpathian Thrust Fold Belt in southern Poland, Slovakia, and central Romania. Activity is less advanced in the Lublin Basin, where Halliburton completed the Markowola-1 exploration well in the PionkiKazimierz license for PGNiG last year. Results were mixed, and further tests are being carried out. Halliburton said significant production of shale gas could begin in Poland within three to four years if economic production of the reservoir is proved.

BNK Spins the BitBNK Petroleum has an interest in six total concessions in Poland that total 1.6 million gross acres (1.1 million net acres). The concessions in Saponis, Starogard, Slupsk, and Slawno are located in northern Poland and total about 730,000 gross acres. BNKs plan is to test multiple targets in the Silurian, Ordovician, and Cambrian shales that are located at depths ranging from 7,000 ft to 12,500 ft. The first well, Wytowno 1, began drilling in December 2010 and was completed in the first quarter this year. The well encountered encouraging gas shows and log responses, the company sai

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