Shale exploration in a new region is typically expensive and potentially harmful to the local environment. A tall rig must be assembled on-site and large amounts of concrete, casing and mud must be trucked in, sometimes new pipelines must be laid, and waste water disposed of. These all cause disruption to the local community and potential damage to roads never intended for heavy equipment. The most challenging sites are those that have high potential resources but little hard data to prove viability. For these reasons, local residents, the government, and investors should all prefer to take a more cautious approach to exploratory drilling, one that we call Touchstone Prospecting™.
Touchstone Prospecting is a novel approach for reducing both the cost and the local impact of exploratory shale drilling. We developed it precisely because many of the interesting shale gas plays have insufficient data to make a wise investment decision. It uses a relatively small gauge hole to probe into an interesting formation to provide logging data, mud samples, and even cores. The rigs are much smaller than traditional rigs (see figure below, drawn to scale), and typically weigh less than 20% of a standard rig. The small size, in turn, leads to fewer materials needed, a smaller crew, less site preparation required, and lower mobilization and demobilization costs. Touchstone rigs use readily portable infrastructure that can be brought in by small trucks or even heli-transportation if local roads don’t provide access. Touchstone rigs are quieter and have substantially lower visual impact, an important consideration for local farms, ranches, and residents. A Touchstone hole well cannot be used for production, but only to gather information important to the investor.
The components needed for Touchstone Prospecting have been under development since the late 1950s. The use of narrow gage (small diameter) drilling expanded rapidly in the 1990s to address challenging sites of conventional gas and oil in Africa, Latin America, Southeast Asia, and parts of the former Soviet Union. In Touchstone Prospecting, despite the narrowness of the hole (typically 4½ inches), we have logging equipment that will fit, with gamma, neutron, and mud log capability. The narrow hole is large enough to allow key measurements that allow determination of gas-in-place. Moreover, because the rig is small and relatively inexpensive, we can afford to take the time to recover and analyze cores when appropriate, measurements that are often prohibitively expensive for a standard exploratory rig.
Whereas drilling a typical exploration well often requires $20M to $40M USD, depending on location and depth of the formation, a Touchstone Prospecting probe typically costs between $1M to $2M USD, sometimes less. The low cost means that many potential sites can be explored for the same cost as one traditional exploration well.
Just as with large exploratory wells, Touchstone Prospecting can determine the in-place reserve, perhaps the most important information needed when deciding whether a play is viable. The narrow gauge wells we create cannot be fracked and cannot be used for production; these facts mean that they cannot be used to estimate flow rates, but they low impact on the local environment, and that eases the permitting process. Because there is no fracking with a Touchstone Prospecting hole, public concern over fracking is not relevant.
Once the Touchstone Prospecting hole data have been analyzed, a license holder can make a good estimate of the value of the play, and a decision can be made whether or not to move into production. Because a Touchstone Prospecting probe is substantially cheaper than an exploration well, one can afford a larger number of them, and even if many of them fail, a given region can still be made profitably productive.
Touchstone Prospecting offers a much more economical and environmental approach to early-stage exploration in countries that have not yet “proven” their shale potential. Examples we are developing include China, the UK, and Morocco.
In China, numerous exploratory shale gas wells have been drilled in central China (at great cost), but only a few have proven successful. Regions near the successful ones have frequently been unproductive, and because the overall success rate has been small, investment in China’s shale has slowed. Shell Oil is pulling out, and the government has lowered its short-term goals. The problem is the high cost of the exploratory wells, and the relatively low probability of success. However, with Touchstone Prospecting, ten to twenty sites can be probed for the cost of a single large exploration hole. This approach allows low cost identification of the regions with the highest potential productivity. And, as said earlier, because of the small size of the rigs, the Touchstone Prospecting evaluation probes can be accomplished with minimum impact on local roads, easing the environmental impact for local residents.
The UK offers a second example. It is important to recognize that virtually all of the government estimates of the shale gas potential of the UK are little more than guesses, based on analogies with US formations. We have not seen a single measurement of gas in place; those require core samples and lab analysis. Global Shale’s Touchstone Prospecting can provide those key but missing elements.
A third example is Morocco. The Tadla basin in central Morocco is estimated by the US Energy Information Agency to have natural gas reserves of 20 Tcf of risked shale gas in place, and 3 Tcf of risked technically recoverable shale gas resource. Yet there are few wells in the area that have penetrated to the “hot” lower Silurian, and so an expensive exploratory well would be high risk for an investor. With Touchstone Prospecting, we could evaluate 10 to 20 sites at the same cost of one traditional exploratory well.
Global Shale brings together a unique combination of expertise in early stage shale exploration and Touchstone prospecting. Touchstone prospecting, because of its low cost and minimal environmental impact, can be the decisive technology that can break through the barriers to entry in many new shale regions around the world.