Will Russia frack for oil?

One of my stranger speaker invitations recently was earlier this month in Moscow to an Adam Smith conference on Russia EOR (enhanced oil recovery), where I found myself in the ironic position of giving a presentation to reassure the audience that fracking,for oil was safe.

Fracking is fracking and there is little or no difference between the methods used for gas or oil. Oil fracking in it’s modern form of horizontal drilling and hydraulic fracturing using less chemicals than before was introduced by Harold Hamm in the North Dakota Bakken about ten years ago and the impact on US oil is now well known. The Bakken turned around the idea that US oil had peaked, and the technology rippled out to the Eagle Ford, Permian and Niobrara formations. One of the nails in the Peak Oil coffin has been the realisation by even the conventional wisdom this year that shale oil can go international. It’s already happening in Argentina, Australia and China, but the big prize is in Russia’s Bazhenov shale in Western Siberia. 

Geologists can argue about tight oil or shale oil, in the same way they do about tight gas and shale gas, but just as gas is gas, oil is oil. Similarly, as in the Permian, tight-oil techniques have spread from shale to a wide range of lower-quality conventional plays. It’s for the geologists to decide what to call them, to you and me it simply means there is a lot of oil. This also means that the oil industry is going to be transformed world wide sooner than OPEC might think. 

This slide from Russian independent RusPetro gives some context as to the size of of the Bazhenov.

Because I had been at the Spectator Shale Debate the night before, I couldn’t make the first day of the conference, where Thane Gustafson of IHS and Christof Ruehl of BP presented on the oil context, in presentations that I can’t reproduce here.  I would have dearly liked to discuss what this all meant for gas.  On the second day, there was a fascinating presentation by Professor Lyudmila Plakitkina, Deputy Director at the Energy Research Institute of the Russian Academy of Sciences, which isn’t available either, but it was in Russian anyway.

Professor Plakitkina’s presentation had some fascinating slides which discussed the Bakken in detail. I though it very ironic that 30 years ago, detailed Russian language maps of North Dakota would have highlighted ICBMs, not oil pads. However, she also was the only one who discussed shale gas, and very interestingly pointed out the Western European implications of shale. She specifically mentioned high gas concentrations in Germany, France and especially the UK Bowland Shale.  

This is yet another ironic twist: The shale doubters of Europe constantly tell us how European gas is some distant far off topic, but here was a top Russian geologist at the state policy level who understood the implications for Russia completely.

Let’s remind ourselves that Russia has always appeared in threatened in public by shale. But could this be more of a Gazprom reaction as opposed to a state energy strategic level. There are many who see Gazprom pawprints, or even money, over anti shale propaganda in Europe. I’m not that paranoid, but it may well be the case in Eastern European markets. Significant “green” opposition in Czech Republic, Bulgaria and Romania is directly linked to former Communist Parties who still have far more votes in the East than Greens have in the West. Recently, the Barton Moss Northern Gas Gala in the UK emphasizes their solidarity with the Pungesti shale gas protestors in Romania, as they remain silent about the far larger Ukrainian demonstrations of people power.

I’ve stressed to Gazprom executives on the conference circuit that Gazprom needs to face reality over shale, while pointing out the other reality that Russia will always be influential in gas the same way that Saudi will be about oil. I believe the message is clear at the Russian state level and among independents such as Rosneft, Lukoil and Novatek, eager to bypass the Gazprom export monopoly.

Gazprom has their own oil company, owning 94% of Gazprom Neft which is a significant Bazhenov player, with a joint venture with Shell. But the message about fracking for gas is still confused.  The only media interest of any note about the Northern Gas Gala comes from RT TV or RT Russian Radio. There, gas glasnost has yet to happen, this being only one of several examples:

More smoke than fire’: Fracking’s economic benefits are overblown

Texan anti-fracking activist Sharon Wilson described to RT the consequences of fracking she had to face, including being forced to move home due to air pollution, a lack of clean water and toxic chemicals.

Afshin Rattansi goes underground on the fracking frenzy in the UK, talking to the leader of the Green Party, Natalie Bennett.

It’s significant that RT gives such prominence to minor fringe groups on fracking dangers, as back in the former USSR, fracking is welcomed with open arms in the Bazhenov. An oil service provider at the conference told me that there are up to 80 frack fleets in Russia, far more than in Western Europe.

Sooner or later, the new party line will come down from Moscow to both Gazprom and RT, and the Barton Moss protestors won’t even be able to depend on that media outlet anymore.