Unconventional oil and gas resources will play an important role in the global fuel mix with technological advancement across the entire value chain shaping the profitability of the industry in the long term, a report said.

While crude oil prices are sliding, many companies and governments are cautiously investing in new as well as existing technologies to obtain oil and gas (O&G) from unconventional sources, added new analysis Global Oil and Gas Outlook 2014 from Frost & Sullivan, a growth partnership company.

Despite the increasing affinity towards alternative energy sources, O&G will remain the primary energy source across the globe for years to come.

The liquefied natural gas (LNG) market remains highly attractive, the study found.

Gas will be one of the major fuels for power generation in 2030 despite economic uncertainty in the wake of recent African and Middle Eastern unrest. Furthermore, the recent Western sanctions to Russia following the conflict in Ukraine, will negatively impact Russian oil and gas trade volumes.

In the long term, it is quite likely that the production of unconventional gas across North America, Latin America and China would offset any shortfalls in gas supply and demand.

“Investments in new technologies and resilience of the O&G sector have given rise to innovative exploration and production systems such as deepwater and ultra-deepwater drilling, and arctic explorations at depths of more than 12,000 feet,” said Frost & Sullivan Energy and Environmental Industry Analyst.

“Technological advancements and investor optimism have also spurred the output of unconventional ‘tight oil’ and shale gas.”

Although shale gas has caused a great deal of excitement, there is uncertainty about actual reserves and what percentage of those reserves is recoverable. Moreover, European and Chinese shale plays are much deeper than those in the US, making drilling and extraction much more challenging. The need for refined drilling techniques and rigs will add to development time and cost.

Several additional challenges affect the O&G industry:

•        Geographical and climate hazards in difficult-to-access locations

•        O&G security risk in high consuming regions, especially China, India and Southeast Asia

•        Low operational safety, high risk of spills, and environmental disasters

•        Future projects classified as highly challenging in terms of technology and operational efficiency

•        Uncertainty related to growth of alternative O&G markets

•        Switch from oil-based technologies to substitutions such as biofuels and electric power

•        Strict policies related to carbon emissions

The proper assessment of reserves and recovery rates will be crucial over the next two years. Focus on increasing production and reducing costs will also be priority in the short term. To that end, investments in advanced technologies such as horizontal drilling, hydraulic fracking, downspacing and deepwater drilling will rise.

“While there still remain uncertainties with respect to reserves, technologically superior extraction and production methods can exponentially improve recovery rates,” noted the Analyst. “Widening pipelines and terminals to connect production areas with refineries will hence be a key opportunity area for firms in the global O&G space.” – TradeArabia News Service