Economic appraisal of shale gas plays in Continental Europe

This study evaluates the economic feasibility of five emergent shale gas plays on the European Continent. Each play is assessed using a uniform field development plan with 100 wells drilled at a rate of 10 wells/year in the first decade. The gas production from the realized wells is monitored over a 25 year life cycle. Discounted cash flow models are used to establish for each shale field the estimated ultimate recovery (EUR) that must be realized, using current technology cost, to achieve a profit. Our analyses of internal rates of return (IRR) and net present values (NPVs) indicate that the Polish and Austrian shale plays are the more robust, and appear profitable when the strict P90 assessment criterion is applied. In contrast, the Posidonia (Germany), Alum (Sweden) and a Turkish shale play assessed all have negative discounted cumulative cash flows for P90 wells, which puts these plays below the hurdle rate. The IRR for P90 wells is about 5% for all three plays, which suggests that a 10% improvement of the IRR by sweet spot targeting may lift these shale plays above the hurdle rate. Well productivity estimates will become better constrained over time as geological uncertainty is reduced and as technology improves during the progressive development of the shale gas fields.