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Offshore drilling uncertainty likely to boost search for onshore deposits

Increased costs, regulations and uncertainty surrounding offshore oil and gas drilling in the wake of BP's huge Gulf of Mexico spill could heat up already intense interest in landlocked reserves, which are much larger than previously thought.

Just as deep ocean waters are the growth area for new offshore oil finds, unconventional sources such as shale deposits represent the new frontier of land-based production.

There is enough at stake, particularly in natural gas, to get the attention of global exploration and production giants.

An MIT study released last week found that total U.S. natural gas reserves could fuel the nation at current rates of consumption for 92 years.

The researchers forecast that because of its abundance and expected new government restrictions on emissions, natural gas' share of U.S. energy use will double to 40 percent by 2050 as coal generation is phased out.

New advances in horizontal drilling technology mean that unconventional deposits now can be tapped economically.

"Assessments of the recoverable volumes of shale gas in the U.S. have increased dramatically over the last five years," the MIT researchers found. "The current mean projection of the recoverable shale gas resource is approximately 650 trillion cubic feet. ... Approximately 400 trillion cubic feet cubic feet could be economically developed with a gas price at or below $6 [per million British thermal units] at the well-head. ...

"Some U.S. regions that have not traditionally been gas producers do have significant shale gas resources and the development of these sources could change patterns of production and distribution in the U.S.," the study says.

Deal activity is ramping up in the sector, with five major acquisitions since December.

On Thursday, Reliance Industries said it would pay $1.36 billion for a stake in the Texas shale-gas assets of Pioneer Natural Resources. In April, the Indian oil and gas major agreed to pay $1.7 billion for a 40 percent stake in Atlas Energy's Marcellus shale holdings in Pennsylvania.

And on Friday, Exxon Mobil closed its $35 billion purchase of XTO Energy, also a major player in the Marcellus shale. The deal was announced in December.

"Exxon Mobil's energy outlook indicates that gas will grow more rapidly than any other major energy source given its availability and relatively low carbon profile," Exxon chief executive Rex Tillerson said.

"We believe gas is the fuel of choice for power generation, producing fewer greenhouse gas emissions than other electrical-generation fuels, such as coal."

The authors of the MIT study agree.

"The substantially lower carbon footprint of natural gas relative to other fossil fuels, combined with the development of North American unconventional natural gas supply and the high cost and slow pace of lower carbon alternatives, has focused attention on natural gas as a 'bridge' to a low-carbon future," the study says.

"In effect," the researchers emphasized, "gas-fired power sets a competitive benchmark against which other technologies must compete in a lower-carbon environment."

Buyouts are in progress.

http://www.allvoices.com/contributed-news/6182106-offshore-drilling-uncertainty-likely-to-boost-search-for-onshore-deposits

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