Offshore fracking: The next step

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Early attempts to stimulate low-permeability offshore reservoirs have produced positive results

Offshore fracking is being used on increasingly more complex formations, bringing new challenges with it

The high costs of offshore drilling and advanced fracking technology can be prohibitive for smaller companies

The rise of hydraulic fracturing has been most notable in North America’s onshore shale plays, where, in combination with horizontal drilling, it has unlocked oil and gas resources that were previously considered inaccessible. It is not only in shale formations that fracking is employed, though, and indeed not only onshore. Offshore fracking has been around for years but its extent has been limited in comparison to the onshore boom. In 2011, the offshore was estimated to account for 5% of the fracking market. Within this, 20% of offshore fracking took place in the Gulf of Mexico, with the other major areas of focus being Mexico, Brazil, the Arabian Gulf, West Africa and the North Sea. The major oilfield services companies – Halliburton, Schlumberger and Baker Hughes – all operate fleets of stimulation vessels.

Interest has risen in the potential of offshore shale and other low-permeability formations as the industry has witnessed increased flows from fracking. A number of countries are attempting to emulate the US shale boom, but efforts to kick-start fracking have met with local resistance in several parts of the world. For instance, the practice has been banned in both France and Bulgaria. The UK and South Africa have lifted temporary moratoria on shale drilling, but no further onshore development has taken place in either country as yet.

Offshore fracking, meanwhile, often comes without the local opposition that has plagued onshore operations. Some of the main concerns among fracking opponents relate to pollution, groundwater contamination and impacts on local communities. Taking the practice offshore, and indeed into regions where conventional oil and gas projects have long been in operation, can remove some of these fears – though on the other hand, environmentalists remain concerned about the impact of fracking regardless of where it takes place. The UK and South Africa are two countries where opposition to onshore shale development has been considerable, but where companies are proposing offshore fracking operations. While there may yet be opposition to such projects, it is likely to be less fierce than resistance to onshore developments.

Offshore projects

As companies attempt to extract hydrocarbons from increasingly challenging formations, the use of new techniques has become more widespread. Recent attempts to boost productivity through fracking in offshore oil and gas fields produced positive results.

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In the late 2000s, fracking was reported to have resulted in a production increase of up to 230% from Eni’s Kitina field, offshore the Republic of Congo (Brazzaville), where the technique was employed to revive under-performing sandstone reservoirs.

“The multi-stage fracturing technology has opened up possibilities for production optimisation and reserves increase, not only in Kitina, but also in many other low-permeability reservoirs in Congo previously considered noneconomic,” Eni Congo’s reservoir manager, Loris Tealdi, was quoted as saying in a case study by Schlumberger, which provided services to Eni for the project. “The multi-stage hydraulic fracturing technology is now the key for Eni Congo to rejuvenate low-performance reservoirs and to develop previously abandoned low-deliverability reservoirs,” Tealdi added.

South Africa’s PetroSA is also planning to improve the productivity of its F-O field offshore Mossel Bay through the use of fracking. In July, the company applied for an amendment to its existing production right, Environmental Authorisation (EA) and Environmental Management Programme (EMP) for the development, which would allow fracking to take place to improve the productivity of three wells. The vessel PetroSA would use for this process would have limited carrying capacity, and it has been estimated that it would need to make around five trips per well between the port and the F-O field. If the approval is not given, PetroSA will continue F-O field development under the existing EA, which it anticipates could result in lower output from the wells and shorter life expectancy for its gas-to-liquids (GTL) refinery in Mossel Bay.

As well as being used to boost output from mature fields, fracking is being employed in new offshore projects. RWE Dea used the technique on its Clipper South gas field on the UK Continental Shelf, which came on stream in 2012 – which also involved horizontal drilling. Meanwhile, a small UK firm, Trapoil, announced earlier in 2013 that it was seeking a partner to hunt for oil in the Central North Sea, using fracking.

“We’ve worked very closely with DECC [the UK Department of Energy & Climate Change] to bring our idea to fruition,” Trapoil’s CEO, Mark Groves-Gidney, was reported by the Scotsman as saying. “The acreage we’ve been granted is close to the giant North Sea fields – like Brent and Ninian – so that, if the test well is a success, we could tie the well to the existing infrastructure, prolonging its life and making extraction commercially viable.”

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Trapoil believes unconventional technology could lead to more oil and gas being produced from the North Sea than has so far been pumped by conventional means. The company hopes that bringing in a major as a partner will enable it to drill a test well in 2014. However, the move shows that the costs of drilling in the North Sea – especially using new, complex technology – can be prohibitive for smaller companies.

As well as potentially holding vast amounts of oil in tight reservoirs, the UK might have large reserves of offshore shale gas, which has increasingly attracted more attention as the country attempts to assess its unconventional potential. In 2012, a number of reports emerged suggesting that the UK could have around 1 quadrillion cubic feet (28 trillion cubic metres) of offshore shale gas. However, the British Geological Survey (BGS), to which the figure was attributed, was subsequently reported as saying that it did not recognise the estimate and did not anticipate that much gas to be recoverable. There is also uncertainty over the viability of offshore shale production, and fracking has so far only been employed in other types of tight reservoirs.

Offshore challenges

Even with financing available for expensive offshore operations, the technological challenges are considerable. McMoRan Exploration’s first ultra-deep Davy Jones well in the US Gulf of Mexico’s shallow waters is due to be fracked. The company ran into technical problems, owing to extremely high pressures in the 30,000-foot (9,144-metre) well, and was planning a large-scale fracking treatment in order to break through solidified drilling mud and get gas flowing from the Wilcox formation, according to a report in Forbes. However, this would be the first such operation of its kind, and getting the necessary fracking equipment in place, as well as building heavy-duty blowout preventers (BOPs), would take time. It was reported in May that McMoRan expected to resume work on Davy Jones by August, but the outcome of any attempt to fracture the well remains to be seen.

On the US West Coast, fracking seems set to generate even more concern. Considerable opposition already exists to the development of the onshore Monterey shale in California, given the heavily faulted and challenging geology, and uncertainty over what impact fracking could have on seismic activity in the region. The Monterey play also extends offshore, and it was reported that Venoco carried out fracking in federal waters off Ventura County’s coast in 2009, under existing authorisations from the US government. The activity resulted in concern among environmentalists, but was only flagged up by the Environmental Defense Center in 2011, at a time when there was a far greater focus on offshore safety in the wake of the Macondo disaster. The US government has subsequently moved to tighten regulations for offshore drilling, and such operations are therefore now likely to be scrutinised more closely. Meanwhile, the California Coastal Commission has launched a probe into the practice being carried out off the state’s coast, although federal regulators have said only a handful of small-scale fracking operations have been carried out in the region since the 1990s.

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Frack to the future

Nonetheless, the use of fracking has proved revolutionary in tackling challenging reservoirs, and is only likely to be employed more widely in the coming years. As technological advances enable drillers to frack wells in deeper waters, and more challenging regions, this could mean rising concerns about environmental impacts. However, offshore fracking does not come with the same sort of local concerns that have affected onshore operations, especially in Europe. In the UK, for instance, one of the major challenges for would-be shale drillers is engaging with local communities, and the country’s government has been working towards ensuring that those living near planned shale projects stand to benefit economically from operations in the area. Fracking off the coast of the UK, meanwhile, does not come with such challenges, although it would still result in opposition among environmental groups.

It is cost, though, rather than safety concerns, that is likely to be the biggest obstacle for offshore fracking operations. The US shale boom was driven primarily by smaller independent drillers. Offshore, meanwhile, the high costs of drilling mean that small companies wanting to be the first movers in the relatively undeveloped fracking market may not be able to participate without larger partners that have more funds available.

In addition, it could be the case that offshore fracking progresses in a similar manner to onshore shale – with a far larger number of drillers driving development in the US while the rest of the world struggles to compete. The US has the advantage in terms of evolving technical expertise and numerous companies attempting to frack ever more challenging formations. However, the offshore fracking segment is still small, and other countries are increasingly willing to get involved.

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