The Gusher Phase of Unconventional Resources: An Interview with Dr. Robert Kleinberg
Dr Robert Kleinberg is a former Schlumberger Fellow, a researcher for institutions including the Centre for Global Energy Policy and Boston University, a published author on the topic of energy technology, an inventor of several commercially successful geophysical instruments, and a recognised expert on the extraction of unconventional oil and gas resources. We spoke to him about the shale gas revolution, U.S. energy policy, and what the future holds for America’s unconventional resources.
“We are in what I call the gusher phase of these tight oil and shale gas resources. So if you think back to around the turn of the 20th century in 1900, and you look at the spindletop and the gushers of the Texas Gulf Coast or Baku, that’s the phase that we’re in with our tight oil and shale gas resources.”
In this a good time in the gas industry to be in transition?
It’s an excellent time to be in transition actually. There are so many new issues coming up. Really a lot of challenges, but also unparalleled opportunities. Certainly with the advent of shale gas, it rejuvenated my career. And I think that is the big story of really this half century.
And do you think that will continue for the next five to ten years, that you would still characterise that as the big story?
I think that five to ten years is way too little. This is going to be going on for a long long time. In my talk today I described some reasons why I think that shale gas productivity is really sustainable in the sense that there’s an awful lot of resource, and there’s also a lot of technology that we can bring in to sustain production even as the very best places to drill are depleted.
Let’s talk about U.S. policy. We can’t get away from politics, we can’t get away from regulation, and I just wonder how you feel everything is playing into that in the market at the moment.
Well, the present U.S. administration is very positive on fossil fuels in general and coal in particular. I think coal honestly is a dead end. When I talk to electric utility executives, among whom are large burners of coal for electric power, they are all getting out of coal, shutting down their coal plants, changing over to natural gas (and renewables, to a certain extent). And when I ask them why, they say they have thirty-year planning horizons – and over thirty years, coal is just not going to be in the market.
So it’s making – in your opinion, and in their opinion – no difference, the particular policies, as to what’s already been set in stone.
That’s right. You know in the energy business economics is always more important than government action. And I think that’s certainly true here.
So what are the challenges that the market has then? If regulation and U.S. policy is not one of them, what are the challenges?
Well certainly one challenge is just in sheer pipeline capacity and infrastructure. And in fact the federal government in the United States does have a role there in making it easier to permit pipelines. Although many of them are within states like Texas that are pretty pipeline friendly already, but the Federal Energy Regulatory Commission which regulates our infrastructure is now much more positively interested in permitting more pipelines, and I think that’s healthy.
Yes, but that’s internally within the States. When you look at the figures, it’s export that a lot of people are noticing.
That too. Now our liquefied natural gas export capacity has also been licensed at a pretty fair clip – I don’t think there’s too much to complain about there. And certainly we have built a lot, maybe overbuilt temporarily – but the demand is still going up, so there will be continuing need for export facilities.
Will exports still be concentrated on the Asian market?
Well, as you know the earliest exports went to Latin America. And now a lot is going to Europe. So it’s very diversified, yeah.
But the actual volumes, where they are going, surely they are now concentrating on the big growth areas of Asia?
Well it seems to be very diverse. And maybe the market is young enough that it’s still finding its feet. But yeah, a very diverse group of customers. On the other hand, one country that is not a customer of U.S. liquefied natural gas is the United States. I live in Boston, Massachusetts. We have the only liquefied natural gas import terminal in the United States that is functioning, in Everett in Boston harbour. And our liquefied natural gas has been coming from Russia. It’s because of strange shipping laws in the United States.
Now it has created a rather interesting conundrum, that shipment. A lot of people here at Flame raised a few eyebrows when it was mentioned a couple of times within the conference. How do you see that developing?
Well like I say, this particular situation is sort of lost in the minutiae of American shipping law, which says that any cargo from an American port to an American port has to be carried in an American flagged vessel, which is more expensive than other shipping. So it’s more economical to bring it from somewhere else. And Russia seems like an odd place to bring it from but that’s what happened in February.
You’re wincing when you say that.
Yeah, I am.
Do you find it very uncomfortable?
I am a Boston gas consumer. I would just as soon burn American gas.
So why isn’t that happening?
Like I say, it’s the minutiae of these shipping laws.
But is that going to stay like that? It may well be shipping laws. But there are shipping laws and there are bigger politics at play here.
Exactly. And honestly I don’t know the details of all that.
You prefer to leave it there.
I prefer to leave it there [laughs].
You are a very successful inventor, and I just wondered about the amount of R&D that is going into the industry at the moment, and all the different ways of getting more out of the resources. I wonder whether actually there is enough going into R&D, because at the moment there is enough supply, and you don’t actually need to get every last drop out of resources.
Well you are absolutely correct. And as I mentioned in my talk today, we are in what I call the gusher phase of these tight oil and shale gas resources. So if you think back to around the turn of the 20th century in 1900, and you look at the spindletop and the gushers of the Texas Gulf Coast or Baku, that’s the phase that we’re in with our tight oil and shale gas resources. We’re drilling the very best resources, the ones that don’t need a lot of technology, and people are making money – and that’s fine. But those particular resources – that are called sweet spots – will deplete. They will. And people are going to have to go to more difficult areas where the gas and oil do not come out quite so easily, and that’s when they’re going to need more technology. Now maybe it’s too early to have a big technology push in that direction, but certainly it’s something I’m very interested in.
And when do you think that might be – maybe ten years?
Yes, I think ten years is probably a good round number. The resources that we have are very big. Marcellus alone is huge; one of the largest gas fields in the world. So it’ll be a while. But I’d say next decade I think we’re going to start seeing this depletion problem, and then that’s going to call on new technology and possibly higher prices to pay for it.
There was one other thing I wanted to mention based upon your presentation earlier this morning. You were talking about who the “gods” were at the moment, and saying that the supply chain managers are the gods… who are the next gods?
… It’s going to be supply chain managers for a good long time, because the construction of these horizontal wells that are massively hydraulically fractured take amazing inputs.
