1
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
© 2014 Gaffney, Cline & Associates. All rights reserved. Terms and conditions of use: by accepting this document, the recipient agrees that the document together with all information included therein is the confidential and proprietary property of
Gaffney, Cline & Associates and includes valuable trade secrets and/or proprietary information of Gaffney, Cline & Associates (collectively "information"). Gaffney, Cline & Associates retains all rights under copyright laws and trade secret laws of the
United States of America and other countries. The recipient further agrees that the document may not be distributed, transmitted, copied or reproduced in whole or in part by any means, electronic, mechanical, or otherwise, without the express prior
written consent of Gaffney, Cline & Associates, and may not be used directly or indirectly in any way detrimental to Gaffney, Cline & Associates’ interest.
UK Onshore Shale Oil: A View on Viability
By Roddy Irwin
Institute of Directors – 15th October, 2014
2
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Shale Oil UK?
Two prospective basins
Midland Valley of Scotland
The Wealden Basin
DECC/BGS
3
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Shale
DECC/BGS
Shales are fine grained laminated rocks
Consist mainly of clays and silts
Some shales have high organic
matter content
If the organic matter (kerogen) is
heated sufficiently, hydrocarbons
can be generated
For shale oil, this heating occurs naturally
through deep burial of the shales
If buried deep enough the shales can be
considered mature for oil and eventually
gas generation
For shale oil, the hydrocarbons must
have escaped from the kerogen and
become trapped in micro pores or fissures
4
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Shale Oil or Oil Shale?
Oil Shale Shale Oil
Kerogen-rich shale, i.e. organic matter still in its
solid state. Does not contain liquid oil. The source
rock for conventional oil fields. Grades to
carbonaceous shale (i.e. rich in carbon) and cannel
coal. Torbanite is a lacustrine type of oil-shale.
Oil occurs in liquid form in largely impermeable
lithologies. These can be shale, but also adjacent
siltstone, sandstone, limestone etc. Also known as
‘tight shale oil’, ‘tight light oil (TLO)’, ‘tight oil’, ‘oil-
bearing shale’ or ‘shale-hosted oil’.
Oil is extracted by (a) in-situ heating of shale at
depth or (b) mining of shale at/near the surface
which is then retorted.
Yields of 15+ gallons/ton are considered viable (25+
gallons/ton is high grade).
Oil is extracted by horizontal drilling and hydraulic
fracturing.
Kerogen is immature for oil generation. Kerogen is mature and oil has been generated.
Examples: the Green River Formation in the
western USA, Ordovician deposits in Estonia and
Sweden, the Tertiary deposits in Queensland,
Australia, the El-Lajjun deposit in Jordan, and
deposits in France, Germany, Brazil, China,
southern Mongolia and Russia. Historical mining in
West Lothian, Scotland.
Examples: the Bakken Shale, the Niobrara
Formation, Barnett Shale, and the Eagle Ford Shale
in the USA, R’Mah Formation in Syria, Sargelu
Formation in the northern Gulf of Arabia region,
Athel Formation in Oman, Bazhenov Formation and
Achimov Formation of West Siberia in Russia, in
Coober Pedy in Australia, Chicontepec Formation in
Mexico, and the Vaca Muerta oil field in Argentina.
DECC/BGS
5
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Bakken Analogue: Example of Large Scale Shale Oil Play
Sonnenberg, 2012 AAPG Convention, Long Beach
“What was made in the Bakken, stayed in the Bakken.”
Bakken reservoir unit is tight sandstone enveloped in organic shale
Three Forks reservoir unit is a series of silty dolomites
6
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
US Bakken: Horizontal Hydraulic Fracturing
Continental
Th
ree
Fo
rks
7
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Water + Sand + Horsepower = Frack Job
N. Dakota Geol. Survey
8
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
UK Onshore Licence Status
DECC/BGS
DECC/BGS recent study areas
2013 licence status (yellow)
14th round ends 28/10/2014
Areas on offer for future licences
-14th round (blue)
North of England Bowland-Hodder
shale is only prospective for shale gas
Other shale oil and gas plays may exist
9
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Weald Basin: Shale Prospective Area
DECC
Shale Prospective Area Existing Licences
10
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Wealden: Cross-section and Current Burial Depth
DECC/BGS
The Jurassic sequences have a limited burial history due to Palaeocene
uplift and inversion related to Alpine tectonic movements.
This means there has been limited opportunity for the organic matter (kerogen)
in the Jurassic shales to be heated sufficiently to produce free hydrocarbons.
11
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Wealden: Potential for Oil Mature Shales
▪ The mineralogy of clays transforms as soft mud is converted to lithified shale, and the
level of smectite-to-illite recrystalisation can be used as a broad indication of thermal
maturity.
▪ The clay mineralogy of the Weald samples suggests that the majority have reached a
maximum burial depth sufficient to reach the ‘light oil’ maturity zone.
DECC/BGS
12
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Wealden: Distribution of Organic Shales within Oil Window
Kimmeridge Clay/ Oxfordian Clays
DECC/BGS
Potentially most prospective between Haslemere, Godalming and Crawley
Where Kimmeridge Fm. is up to 1,000 ft thick.
13
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Wealden: Distribution of Organic Shales within Oil Window
Upper Lias Clay
DECC/BGS
Although the older Lias Clay is more extensive, it is thinner and less oil prone
14
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Oct 2014 Licence Round (28/10/14)
DECC/BGS
Potentially most prospective/oil mature
area from previous slides
15
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Wealden: BGS Estimated Shale Oil Volumes
Total Oil In-place Estimates (Billion Bbl)
With Top of Oil Window at 7,000 ft
(2,130 m) Maximum Burial Depth
With Top of Oil Window at 8,000 ft
(2,440 m) Maximum Burial Depth
P90 P50 P10 P90 P50 P10
Kimmeridge Clay 0.41 2.03 4.77 0.11 0.61 1.44
Corallian Clay 0.20 0.52 1.04 0.11 0.30 0.61
Oxford Clay 0.59 1.39 2.46 0.41 0.96 1.70
Upper Lias Clay 0.28 0.63 1.05 0.22 0.52 0.85
Mid Lias Clay 0.33 0.79 1.43 0.27 0.64 1.15
Combined P90 P50 P10
All Jurassic Clays 2.2 4.4 8.6
DECC/BGS
Note: 1. BGS Estimates of the total potential in-place shale oil resource in the Jurassic, Weald study area.
P90, P50 and P10 values are given for each unit. Note that the ‘combined’ resource figures are the
result of a separate Monte Carlo simulation, they are not the sum of the subdivisions.
16
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Midland Valley of Scotland (MVS) Shale Prospective Area
DECC/BGS
Shale Prospective Area Existing Licences
17
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
MVS: Where the Oil Industry Started
Graham Dean, Reach Coal Seams Ltd.
18
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
MVS: Cross-section and Current Burial Depths
DECC/BGS
The Carboniferous sequences have an extensive burial history.
This means there has been ample opportunity for the organic matter (kerogen)
in the Lr. Carboniferous shales to be heated sufficiently to produce free hydrocarbons
(oil and gas).
19
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
MVS: Potential for Oil Mature Shales
DECC/BGS
Regional overview of est. depth(ft) to oil mature shale (Ro=0.6)
20
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
MVS: Shale Oil Prospective Areas
DECC/BGS
Prospective areas for shale oil in Lr. Carboniferous shale formations
(Depths less than 1,000 ft mining related cut-off excluded)
21
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Oct 2014 Onshore Licence Round 14 (28/10/14)
DECC
Potentially most prospective/oil mature areas from previous slide
22
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
MVS: BGS Estimated Shale Oil & Gas Volumes Total Gas In-place Estimates (Tcf)
Shale Gas Low (P90) Central (P50) High (P10)
Limestone Coal Formation 1.4 3.2 6.1
Lower Limestone Formation 3.7 6.3 10.8
West Lothian Oil-Shale Unit 16.2 32.6 66.7
Gullane Unit 12.5 32.0 73.2
Combined 49.4 80.3 134.6
Total Oil In-place Estimates (Billion Bbl)
Shale Oil Low (P90) Central (P50) High (P10)
Limestone Coal Formation 0.32 0.79 1.65
Lower Limestone Formation 0.26 0.59 1.15
West Lothian Oil-Shale Unit 1.44 4.07 9.26
Gullane Unit 0.10 0.24 0.53
Combined 3.2 6.0 11.2
DECC/BGS
Note: 1. Estimates of the total potential in-place shale oil & gas resources in the Carboniferous, Midland Valley of Scotland study area
beneath the mining/depth cut-off breakdown by unit. Note that the ‘combined’ resource figures are the result of a separate
Monte Carlo simulation; they are not the sum of the four subdivisions.
23
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Summary: Wealden Basin
▪ Wealden basin potentially significant volumes
(BGS est. P50 ~ 4.4 billion barrels)
▪ Existing conventional oil production (e.g. Great Oolite)
▪ Limited mature source rock
▪ No shale gas potential
▪ Local aversion to heavy industry
▪ Rural landscape
▪ Fracturing may stress local water supplies and the locals
too
▪ Trespass has been used in law to block under drilling
24
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Summary: Midland Valley of Scotland
▪ MVS higher potential volumes
(BGS est. P50 ~ 6.0 billion barrels)
▪ More mature source rock
▪ Significant shale gas potential
(BGS est. P50 ~ 80.3 trillion cubic feet)
▪ Coal Bed Methane potential
▪ Existing industrial infrastructure
▪ Less rural, secondary industrial landscape
▪ Abundant local water supplies for fracturing
▪ Scottish law on trespass is lenient compared to England
25
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Shale Oil UK: Production Potential
▪ None proven.
▪ Only information is from US analogues, esp. Bakken Fm.
▪ DECC has announced resumption of shale gas
exploration/fracturing operations subject to new controls
and approvals (13/12/2012)
26
© 2
014
Gaf
fney
, Clin
e &
Ass
ocia
tes.
All
Rig
hts
Res
erve
d.
Thank you
Sources
▪ Andrews, I.J. 2014. The Jurassic shales of the Weald
Basin: geology and shale oil and shale gas resource
estimation. British Geological Survey for Department of
Energy and Climate Change, London, UK.
▪ Monaghan, A.A. 2014. The Carboniferous shales of the
Midland Valley of Scotland: geology and resource
estimation. British Geological Survey for Department of
Energy and Climate Change, London, UK.