Unconventional 3.0: A new energy outlook

During the past decade, the fast-paced and adaptive nature of Lower 48 exploration and production has reshaped global energy dynamics. We identify the three distinct phases of the unconventional onshore revolution and explore the future of the sector in North America and internationally.

1.0 Numerous mega gas plays
This period was characterised by intense production growth, with operators amassing positions in dozens of mega gas plays.

In 2005, the Barnett Shale in North Texas was the only significant shale gas play but by 2011, seven plays were all producing more than 500 mmcfd. Marcellus shale supply rose rapidly, with producers adding over 3.0 bcfd to the market each year over a 36-month period.

 North American shale gas supply - play contributions

*Click the image to download the charts (2140K)

Associated gas from the Eagle Ford, Niobrara and sections of the Marcellus and Woodford also increased. However, it was the emergence of these 'liquids-rich' gas plays which signalled the shift to the next phase.

2.0 High margin, smaller volume tight oil plays
In 2011, the booming supply of shale gas caused prices to drop and producers quickly began redeploying their asset teams to high margin tight oil plays, including the Eagle Ford, Wolfcamp, Bone Spring and Cline.

Yet as oil plays developed, total production volumes from successful plays were – on average - around a third smaller compared with typical unconventional gas plays during a similar timeframe.

Most importantly, a smaller absolute number of commercially successful large scale liquids plays have been discovered. Two plays are clear leaders, currently producing more than 800,000 b/d, whilst the third most productive asset is only producing 160,000 b/d.

Lower 48 tight oil supply - play contributions

*Click the image to download the charts (2140K)

3.0 Development of niche assets
The smaller number of large scale plays in the unconventional 2.0 tight oil phase provided the impetus for operators to explore more aggressively.

In this current third phase, producers are using the combined knowledge from unconventional 1.0 and 2.0 to target niche plays  - essentially re-evaluating existing inventory and underexplored strata previously considered insufficiently permeable.

Smaller companies are leading exploration efforts and unexpected sweet spots are being identified at a fast pace.

Consequently, non-headline 1.0 and 2.0 plays now have 35 more unconventional rigs running in them than they did last year. This is a larger year-on-year increase than the joint number of rigs added in the prominent Utica and Denver-Julesburg Niobrara plays, which together boast over 550,00 boed in production.

In a global sense, operators have struggled to build unconventional 1.0 and 2.0 projects outside of North America, and we believe the emergence of this new 3.0 development phase could provide the bridge needed for international unconventional projects to ultimately be successful.

Should countries such as Mexico, the UK,  Colombia, and Poland adopt a similar operational mentality and deploy similar models within their projects, we believe that unconventional 3.0 could become the first successful phase of international projects, rather than the last.

Read more
Unconventional 3.0 - A discernible new outlook [Subscription required]
Unconventionals: Achieving commercial success in Europe

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