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    Flame On: Unconventional Gas in Spain

Summary

In a consortium including the the Basque National Oil Company “SHESA,” American independent HEYCO Energy Group plans to drill two wells to evaluate the Valmaseda Formation in Spain’s Cantabrian basin.

by: Drew Leifheit

Posted in:

Spain, Shale Gas

Flame On: Unconventional Gas in Spain

With the strong support of a regional government and some North American exploration companies, Spain’s nascent unconventional gas exploration industry is looking to catch fire.

So said speakers at the Unconventional Gas Forum in Barcelona.

John Underwood, Head of Exploration at HEYCO Energy Group, was one of the speakers to divulge some exciting new happenings in Spain’s Cantabrian Basin in the country’s Basque Country.

He said that later this year HEYCO’s subsidiary Petrichor Euskadi would drill two wells to evaluate the Valmaseda Formation in the Cantabrian basin. According to Mr. Underwood, the Formation was up to 4,000 meters thick, and had gas shows (among other characteristics).

Along with True Oil LLC, HEYCO has a joint venture with the Basque National Oil Company “SHESA” who is the project’s operator.

According to Underwood, the consortium is planning to drill vertical wells to do core, complete logging suites and do microseismic monitoring.

“We expect to have our hands around a development scenario,” he said of the exploratory drilling.

Mr. Xabier Garmendia Martinez, Deputy Minister for Industry and Energy from Spain’s Basque Government, said, “Two first wells will be drilled and fracked between 2012 and 2013 in order to evaluate the feasibility. 

“Our commitment is to have enough information in the future whether or not to go ahead,” he added.

“Why Spain?” asked HEYCO’s Mr. Underwood, enumerating the reasons like support from the Spanish government at the national and provincial governments, “who are not taking away permits like some of our neighbors. Those permits have excellent terms. The tax structure makes it very capital efficient where you have to make long term investments.”

Some of the obstacles to the development of European shale gas were not present in the Spanish case, according to him.

He stated: “The area is operationally viable. People talk about ‘why it isn’t going to work in Europe?’ – population density. The Basque country has half the population density of Tarrant County, Texas. In addition, the topography’s not too challenging.”

Most of acreage in the area, he explained, was grassland or cereal crops.

He said the environmental restrictions were also manageable in Spain, showing a chart with various colors indicating areas that were off limits, including local aquifer surface areas, wetlands and forested areas.

Underwood commented, “Here in Spain they are very protective of the forests, so those areas are going to have restricted access.”

Additionally, pipeline infrastructure, he said, already existed and thus was not a challenge in the project.

In terms of producing unconventional gas economically, he said prices in Spain were three to four times what one saw in the United States – good news for a producer.

“What do small independents bring?” he asked, speaking of HEYCO as an American partner bringing something to the table: “A culture that accepts risk. Independents will do something completely different. They also bring in a broad knowledge of a variety of similar plays. We bring experience with the technology needed.”

He stated that in the US independents had drilled 90% of the wells in the US, so they had the knowledge.

HEYCO, he said, as a company had drilled more than 200 active wells and bore 32,500 acres of leasehold. It had drilled a wide variety of unconventional wells like multi lateral horizontals, and multi stage fracks, among others.

HEYCO began its European activities in 1990 in the UK, and received subsequent permits in France, Spain and Morocco. “In the intervening time we’ve operated wells in the UK, Spain and Morocco,” said Mr. Underwood.