| Energy research in developing countries |
|Volume 6: Oil and gas|
Exploration for and development of oil and gas are fraught with considerable risk and uncertainty. Although developing countries harbour significant proportions of the world's oil and gas reserves, they face substantial technical challenges in realizing the development of their indigenous resources. Fortunately, solutions are available, and with the appropriate knowledge, expertise, and international support, developing countries can optimize resource development. However, the key is to access these technical solutions in a manner that ensures that clearly set domestic objectives, which satisfy the needs of the people, are met.
There is substantial interest in exploration for and development of petroleum resources (both oil and gas) in developing countries. Excluding the (former) communist countries, the non-OPEC (Organization of Petroleum Exporting Countries) developing countries harbour about 10% of the demonstrated reserves of crude oil and an estimated 26% of the undiscovered recoverable natural gas in the world. In 1976, a few years into the energy crisis, oil companies were active in 71 non-OPEC developing countries. By the early 1980s, the industry was quite active all over the world and was expanding into the South Pacific, Western Asia, sub-Saharan Africa, Central and South America, and the Far East. China in particular was a centre of attraction.
Technical Challenges and Solutions
The first challenge is to isolate the likely conditions under which petroleum was originally formed and subsequently migrated. Because of its viscous nature and the porous nature of subsurface strata, it is not unusual for petroleum to migrate hundreds of kilometres before it becomes trapped. Sophisticated mathematical models have been constructed over the past 10 years to describe this behaviour, and they have assisted in the identification of likely petroleum sites. Complex geological surveys and analyses also contribute to our understanding of petroleum formation and accumulation.
Additional challenges arise when the petroleum is produced. Conventional production methods at best produce no more than 30% of the oil in place. Enhanced methods of oil recovery that use water, solvents, steam, or other agents can significantly increase these recovery rates.
Other challenges associated with the full-cycle development of resources can be successfully addressed by new technical developments. Aerial surveys, remote sensing, radioactivity surveys, and computer-based image processing all assist exploration activity. Sonic logs, radioactivity logs, and advanced methods of coring provide important insights into optimal reservoir development. Directional drilling technologies have contributed to lower-cost operations, improved recovery, and decreased disturbance of the environment.
Inherent Uncertainty and Risk
Although technology has been steadily improving, exploration and development are subject to significant exploration uncertainty and production risk. Likely areas for exploration may hold water instead of hydrocarbons, or if there is oil present, it may be of a quality or quantity that does not warrant commercial development. Daily production from wells may range from as low as 10 barrels to as high as 20 000 barrels ( I barrel - 0.16 m³). Exploration costs for drilling also vary tremendously (for example, a single well on the Alaska North Slope cost 130 million USD to drill). Economic uncertainty (because of price fluctuations) poses a particular risk for developing even well- delineated deposits of oil shales or oil sands. These heavy oils rely on sophisticated extraction techniques that themselves require a great deal of energy. Even if oil prices rise, the commercial feasibility of these prospects may not be improved because of the energy needed to produce the oil.
Accessing Technology to Optimize Prospects
A major challenge for any developing country is to gain access to the technology that is capable of finding and producing the hydrocarbons, while minimizing the degree of risk exposure. Up-to-date technological expertise is often absent in developing countries, and most approaches to exploration and development have relied on various cooperative arrangements with outside organizations or industries. The most successful approaches have been those that relied on either a risk-sharing agreement or a strict nonrisk technical services contract. Long-term concessions for petroleum development are no longer common. Important aspects of any of the these approaches include a delineation system or grid to define tenure, an incentive framework that provides operators with adequate financial incentives to look for and develop the resource, a regulatory system that is consistent with the operating customs and practices of the industry, and a business and institutional arrangement in which confidentiality of information can be ensured. These factors have contributed to successful exploration and development programs in developing countries.
Role of Local Expertise
Local experts play an important function in providing an assessment of domestic needs and priorities, although to be effective these people must also have a sound understanding of the technical conditions and risks. Furthermore, to ensure that a receptive environment is established for technology transfer and resource development, the local experts must understand the needs of the industry. An effective way to achieve this is to conduct in-country modeling and forecasting exercises to identify priorities and options in the energy sector. This provides a basis both for developing expertise and for energy planning.
Suggestions for Further Research
To ensure that developing countries can exploit their indigenous petroleum resources (both crude oil and natural gas), additional research support is urgently needed at the local level. In any given country, this research support should concentrate on
· The development of local programs to establish a team with adequate technical expertise to monitor the work of hired specialists, and
· The development of a model of future long-term energy needs that places domestic options in a global context, allows for regular monitoring, and provides some mechanism to assist with decisions about energy.