Global Gas Shales White Paper (9 2011) Final

8/9/2019 Global Gas Shales White Paper (9 2011) Final

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Global Gas Shales and Unconventional Gas Page 2Unlocking Your Potential

Table of Contents

Introduction 2

What is Unconventional Gas? 3

Technology and the Role of GTI 3

A World of Abundant Supply 4

What Abundant Gas Makes Possible 7

Unlocking Your Unconventional Gas 8

GTI is Your Trusted Development Partner 9

Why GTI? 11

Introduction

In a world demanding secure, abundant,

and affordable energy that combats

climate change, natural gas from

unconventional sources has a vital role

to play. As declared by President

Obamain China: The potential for

natural gas production in the U.S. from

hydrocarbon-rich shale formations,

known as shale gas, has grown

dramatically in recent years due to

technological advances. The

development of shale gas is expected to

significantly increase U.S. energy

security and help reduce greenhouse

gas pollution. The United States is not

alone in having significant shale gas

resources.(White House 2009) The

team at the Gas Technology Institute

(GTI) agrees fully with President

Obama and is absolutely committed to

helping bring the technologies and

capabilities developed and successfully

deployed in the U.S. to the rest of the

world.


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The Wall Street Journal calls unconventional gas thebiggest energy innovation of the decade.(WSJ 2009) Others

are calling it a revolution,a paradigm shift, and agame changer. No matter how you describe it, it is not the

resource itself that is new. What is new is the realization of

what unconventional gas makes possible locally and globallyas a result of advanced technology that can now unlock the

potential of this abundant resource.

Guy LewisManaging Director E&P Sector, GTI

What is Unconventional Gas?

Unconventional gas provides a source of abundant,affordable, and cleaner-burning energy to a worlddemanding stable energy prices, energy security andsolutions to the climate change challenge.

Unconventional gas is comprised primarily of threenatural gas sourcestight gas sands, coalbed methane(CBM) and gas shales. Methane hydrates is anotherunconventional gas resource of the future, but not yetready for economic extraction.

There are four characteristics that distinguishunconventional gas from what is commonly understoodas conventional gas:

Unconventional gas formations are depositedover large continuous areas rather than in discrete

geologic traps.The geologic setting of unconventional gas issignificantly more complex and challenging thanfor conventional gas.

For coalbed methane and gas shalesthe gassource, trap and reservoir are the same, not threedistinct elements as for conventional gas.

All three unconventional sources require sometype of stimulation (e.g., hydraulic fracturing) foreconomic production.

In simple words, conventional gas is generally harder tofind, easier to produce while unconventional gas iseasier to find, harder to produce.

Advanced technology has enabled unconventionalresources to be developed economically in the UnitedStates. Technological enhancements still to come willbe crucial to continue to reduce the cost andenvironmental footprint.

The geologic settings of unconventional gas resourcesare uniquely different from one play to the next. It isthe transfer of existing knowledge combined with new

technology tailored to the specific characteristics ofresource plays that will be essential to developingunconventional gas in other countries around the world.

Technology and the Role of GTI

Development of unconventional gas in the UnitedStates was launched with the help of a collaborativeresearch program led by GTI. That effort became acatalyst for experimentation and new technology

development that unlocked the potential of Americas

new natural gas.

Other organizations, notably the U.S. Department ofEnergy, also played a critical role in the economicaldevelopment of unconventional gas in the U.S.

Breakthrough: GTIs Coalbed MethaneResearch Prog ram

In 1982, GTI (as the Gas Research Institute) led the

worlds first effort to develop unconventional gasresources with a research program targeting coalbedmethane. GTI managed a collaborative team ofexperts from industry and academia and developedthe technologies that have enabled CBM to growfrom nothing to now making up fully 12% of totalU.S. gas supply.

Building on this experience, GTI managed parallelprograms for gas shale and tight sands production.These programs led to the development of hydraulicfracturing technology and a fundamentalunderstanding of gas adsorption/desorption in rockformations. Hydraulic fracturing and recent advancesin horizontal drilling are two key technologies criticalto unlocking unconventional gas resources.

Research Partnership to Secure Energy for

Am erica (RPSEA)

In 2007, RPSEA was awarded the contract to managethe Ultra-deepwater and Unconventional Natural Gasand Other Petroleum Resources Research andDevelopment Program created by the United StatesEnergy Policy Act of 2005. GTI played a pivotal rolein the start-up of RPSEA, a non-profit corporationcomposed of a consortium of over 150 top U.S.

related entities dedicated to increasing Americassupply of energy. This role included establishing thetechnology road-map for the Unconventional GasR&D program. GTI manages this RPSEA programthat is now the largest Unconventional Gastechnology program in the world.


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Completion engineers at Mitchell Energy took a chance andstarted experimenting with water fracs that proved successful.

At the same time, Mitchell scientists using techniques

developed by the Gas Technology Institute did a new corestudy using state of the art technology that proved the gas inplace figures were actually four times more than previouslybelieved.

Source: AAPG Explorer

Hydraul ic Fracturing

Credit for economically extracting gas from shalegenerally goes to George Mitchell, former head ofMitchell Energy and Development Corp. In the early1980s Mitchell and his geologists experimented with

hydraulic fracturingthe process of pumping amixture of water, chemicals and sand under highpressure into underground layers of shale to crack therock and allow gas to flow freely from the formation.

Technology developed by GTI including micro seismicfor measuring fracture performance and fracturemodeling software were leveraged by Mitchell anddramatically improved their production results. Today,these technologies are key components in the operationsof all fracturing service companies.

Horizontal Dri l l ing

In 2000, Devon Energy Corp. acquired Mitchell andcombined hydraulic fracturing with horizontal drilling

to make shale gas wells more productive. Horizontaldrilling enables asingle vertical well toturn horizontally andfollow a seam ofshale for up to twomiles. Devonssuccess freed the gasto flow in greatervolumes and at amuch lower unit costthan previously

thought possible.

GTI: Continuin g to Provid e Leadership and

Innovation

GTI is where industry and government agencies lookfirst for bringing together the right partners andtechnology-based solutions to make unconventionalresources productive. Our focus today is on developingand deploying technologies and providing services thatenhance the economic efficiency and minimize risk and

the environmental footprint of field productionactivities.

Global Unconvention al Gas

Interest is high around the world in the natural gaspotential from unconventional resources. GTI and itspartners have been centrally involved in thetechnology and growth of this resource base in NorthAmerica.

To support the dissemination of this experience, GTIwith the cooperation of RPSEA and the InternationalGas Union (IGU) organizes the annual Global

Unconventi onal Gas: Unlocking Your Potentialconference to bring together organizations interestedin this growing energy resource. This premier eventattracts several hundred attendees and provides anideal opportunity to highlight the potential and

technologies associated with unconventional gas. .The 2011 event is being held in Beijing, China,September 13-15.

A World of Abundant Supply

North American Gas Shale and

Unconvention al Gas

In the United States unconventional gas contributedabout 10% of total production in 1990. Today it isover 40% and by 2020 it is expected to supply well

over 50%. Gas shales are driving this growth.

North American gas shales already contribute over 9billion cubic feet per day (Bcfd) or 250 million cubicmeters per day (Mcmd) and are projected to growrapidly (Kuuskraa, et. al. 2009). In ten years, gasshales alone are expected to account for a third ofNorth American natural gas production. The gas shaleresource of North America is vast.

Horizontal Dri l l ing


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The resource endowment (the gas in-place) in the

Magnificent Seven gas shales of the U.S. and Canadaequals 5,146 Tcf (146 trillion cubic meters (Tcm)),with an estimated 715 Tcf (20 Tcm) technically recoverable.Mexico may also have significant resources and is justbeginning to explore their potential.

Coalbed Methane provides an additional 5 Bcfd (150Mcmd) in North America. Tight Gas Sands providesnearly 18 Bcfd (500 Mcmd) in the U.S. Addingcoalbed methane and tight gas to the expectations fromgas shales, by year 2020 unconventional gas will havethe capacity to provide 52 Bcfd (1,470 Mcmd) andaccount for nearly two-thirds of total North Americannatural gas production.

World Gas Shale and Unconv entional Gas

The worldwide pursuit of gas shale and unconventionalgas has not only just begun. All currently publishedresource estimates for world supplies start with H.H.Rogners 1997 top-down study of world hydrocarbonresources. Rogner estimated the world gas shaleresource endowment to be 16,110 Tcf (456 Tcm).

The International Energy Agency World Energy

Outlook (2009) assumed that about 40% of Rogners

resource endowment would become recoverable,which equates to a gas shale recoverable resource of6,350 Tcf (180 Tcm).

If the experience in North America holds for otherplays around the world, Rogners resourceendowment estimate for gas shales will prove to be

Source: H.H. Rogner 1997


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Source: Modif ied from B il l Fisher, Bureau of Econom ic

very conservative. Projections of U.S. technicallyrecoverable gas have increased dramatically since 1985as a result of new discoveries and continuedtechnological advances, setting new records in 2008.

In 2011, the International Shale Gas ResourceAssessment was conducted by Advanced ResourcesInternational, Inc. (ARI) for the U.S. DOE EnergyInformation Administration (EIA).

This shale gas resource assessment captured a first-order view of the gas in-place and technicallyrecoverable resource for 32 countries and 48 shale gasbasins around the world.

Europe

Europes gas shale resource endowment and supplypotential are large and production holds promise.ARI and EIA estimate the shale gas resourceassessment for Europe to be:

2,587 Tcf of risked gas in-place.624 Tcf of technically recoverable resource.

Exploration is underway in several European basinsincluding the Alum Shale of Sweden, the SilurianShale of Poland, the Posidonia Shale in Germany, theCarboniferous sediments in The Netherlands andGermany, and the Mikulov Shale of Austria. Severalcompanies are also seeking permits for shale gasprospects in southeast France in LanguedocRoussillon, the Cevennes mountains region, and theSavoie area near the Swiss border. Other significant

efforts are underway in Hungarys Mako Trough tounderstand the potential of its tight sand resources.

Europes gas shale geology is challenging. Thereforethe development and deployment of technologytailored to each play is crucial for making Europesgas shale resources economically productive.

China and India

China and India have numerous gas shale basins that

Shale Gas Basins I ncluded in I nternational Shale Gas Assessment

Source: Advanced Resources Internati onal, I nc.


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are only now starting to be evaluated. Severalagreements between International Oil Companies(IOCs) and Chinese National Oil Companies (NOCs)have been announced to jointly evaluate and developthe gas shales in Sichuan Province and others.

ARI and EIA estimate the shale gas resourceassessment for China to be:

5,101 Tcf of risked gas in-place.

1,275 Tcf of technically recoverable resource.

India is currently evaluating its resource potential.

South America

There are initial efforts underway in Venezuela,Argentina, and Chile to understand the resourcepotential of tight sands and gas shale.

ARI and EIA estimate the shale gas resourceassessment for South America to be:


1,225 Tcf of technically recoverable resource.

Other Countries

Gas shale exploration is underway in many other partsof the world, including Australia, New Zealand andSouthern Africa.

ARI and EIA estimate the shale gas resourceassessment for Australia to be:


396 Tcf of technically recoverable resource.

And for South Africa:


485 Tcf of technically recoverable resource.

What Abundant Gas Makes Possible

The discoveryof unconventional gas has transformedthe conversation around natural gas in the U.S. fromone of depleting reserves, high prices and a futurereliance on LNG imports to one of abundance,affordability and domestic energy security. Asdevelopment occurs throughout the world, it opens uptremendous opportunities for energy security, reducingclimate change risk, and creating wealth and highpaying jobs.

Provides Energy Security

An abundant supply of home-grown gas has thepotential to change the energy trade balance betweennations. It may be that those countries around theworld who have traditionally imported the bulk of

their energy from elsewhere may instead becomeself-reliant or even energy exporters.

Reduces Climate Change Risk

Abundant supplies of unconventional gas transformglobal debates over climate change abatementstrategies. With a carbon footprint at least 30% lowerper BTU than oil and 45% cleaner-burning than coal,natural gas is highly desirable bridge fuel to a low-carbon, sustainable energy future and will play aprominent role in the energy mix for decades tocome.

New climate regulations that place a price on carbonemissions will shift relative economics in favor ofmore natural gas consumption rather than coal in

electric power generation. Natural gas power plantscan also be built more quickly than coal-fired plants.

Gas facilitates the development of renewable energy.Because gas plants can be switched on and offquickly (unlike coal and nuclear) natural gas canbetter supplement wind and solar power facilities,whose output varies with the weather. New gassupplies leading to more stable prices could alsosupport more transportation fleets being converted tonatural gas without requiring major infrastructureimprovements. Additional technology developmentscould also make the economics of passenger carutilization more attractive over time.

Creates Wealth, Jobs and Investment

Energy development means economic development.

In July 2011, Penn State University issued a studyentitled The Pennsylvania Marcellus NaturalGas Industry: Status, Economic Impact, and

Future Potential thatanalyzed production data andindustry investments, as well as the overall economic

We are no longer in a conversation about whether to usenatural gas for this or that. Abundant supplies of

unconventional gas make it possible to have a conversation ofthis and that.

Guy LewisManaging Director E&P Sector, GTI


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impact natural gas development from the MarcellusShale is having in the Commonwealth of Pennsylvania.

The study projects that Pennsylvanias Marcellus Shalehas the potential to produce 17.5 billion cubic feet ofnatural gas per day (6.4 trillion cubic feet annually)representing nearly one-quarter of Americas annualnatural gas production in 2020, according to U.S.Department of Energy estimates. In 2011,Pennsylvania could produce nearly 3.5 billion cubicfeet per day of natural gas, making the Commonwealtha net exporter of natural gas. This development couldsupport more than 156,000 jobs and generate $12.8billion in economic activity in Pennsylvania alone. By2020, according to the study, Marcellus developmentcould support 256,420 jobs and generate $20 billion inadded value to Pennsylvanias economy. The PSUstudy captures job creation and economic developmentin just one state and from just one resource!

In addition, energy-intensive manufacturing companiesoften relocate in search of cheaper energy in order toremain globally competitive. Regions with abundantsupplies of natural gas will be more successful atattracting and retaining direct capital investment andthe high paying jobs that come with it.

Unlocking Your Unconventional Gas

Developing new gas resources requires a collaborativeeffort between a broad and diverse group of participants.

Some bring new ideas while others perform basicresearch. Others test concepts in the field and manyparticipate in the dissemination and transfer of newconcepts to the gas industry.

Program participants might typically include personnelfrom E&P Operators and Service Companies, Universities,Consulting Firms, Private Research Organizations, Oiland Gas Associations, National Labs and PublicGeological Surveys.

Whether in the U.S. or elsewhere around the globe,developing your unconventional gas endowmentrequires characterizing the resource, applying theappropriate well drilling and completion techniques,ensuring the required infrastructure is in place, andmanaging the reservoir over time (Perry, 2001). Ofcourse, good environmental stewardship must be inplace to earn the right to develop the resources.

Resource Characterizat ion

Most unconventional gas resources around the worldare not well understood and therefore needcharacterization. Accurate mapping of the resource and

determination of the total size, volume, distribution andnature of the gas must be performed. Productionmechanisms tailored to the characteristics of theformation must be studied and verified, leading to thedevelopment of an appropriate technology roadmapfor resource development.

Well Dri ll ing and Comp letion

Conventional drilling practices can often be readilyadapted to the new unconventional plays. However,completion and stimulation practices must bemodified to address issues specific to characteristicsof the formations. Some formations are likely torequire new approaches and advanced technology forboth drilling and completion of new wells. Forinstance, the approaches that have enabled thedevelopment of the Barnett Shale resource in Texas

have been found to be ineffective when applied to theNew Albany Shale resource in Illinois, Indiana, andKentucky.

Well-costs need to be reduced considerably toproduce gas in economically marginal areas and fit-for-purpose equipment may be required to accesscertain resources in challenging terrain. Coiledtubing drilling (CTD) is one approach that continuesto be developed with this objective.

Environm ental Stewardship

The responsible stewardship of the environment is

crucial for the sustainable development ofunconventional gas resources. In fact, it is a licenseto operate.

Environmental impacts such as surface footprint,emissions, water usage, waste disposal, or habitatfragmentation can be mitigated with careful planningand the deployment of innovative processes, fit-for-purpose technologies and techniques that maximizeefficiency. In places where energy developmentoccurs near populated communities, extra measurescan be put in place to minimize traffic, noise, anyimpacts on views, and general intrusion.

Gas Produ ction and Processing

Infrastructure

Gas produced from unconventional gas resources aretypically marketed through the existing natural gasgathering and pipeline systems. Once produced thegas typically does not require any special handling ascompared to the conventional gas resources beingproduced.


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gas project, funded by RPSEA, is a current example ofGTIs intention to enable otherwise noncommercialwells to become economically viable producers. Theproject includes a group of New Albany Shaleproducers and several leading edge technology andservice providers making up a collaborative researchteam.

Joint Industry Partnerships

GTI serves as managing director of two joint industrypartnershipsthe Barnett Shale Water Conservationand Management Committee and the AppalachianShale Water Conservation and ManagementCommitteefocused on water processing, conservation,and public outreach. The objective is to develop low-cost and environmentally sustainable solutions to theindustrys produced water challenges.

Proprietary Technology Developm ent,

Laboratories and Faci l i t ies

GTI has staff expertise and facilities to acceleratedevelopment of proprietary technologies from conceptto commercialization. We offer an exceptionalcombination of skill sets from highly scientific tohands-on field operations.

Laser Dri l l ing and Completion Lab

GTI owns and operates a laser lab employing a 5.34kW ytterbium-doped multiclad fiber laser. High-power

fiber lasers represent a recent technological breakthroughupon which a rugged, deployable system for downholeoperations can be based.

Studies have focused on the interaction of laser energywith rocks, leading toward concepts for improveddrilling and completion methods for oil and gas andgeothermal applications. A unique capability of theGTI laser lab are test cells for studying the response of

rock and metal samples to laser energy undersimulated in-situ conditions of pore pressure, fluidsaturation as well as under controlled gasatmospheres. GTI own the intellectual propertyrelevant for downhole applications of laser energy.

Coiled Tubing Dri l l ing Technology

Coiled tubing drilling (CTD) technology has thepotential to save billions of dollars in shallow wellconstruction costs and reduce the environmentalimpact of developing vital unconventional energyresources such as natural gas from shale andgeothermal power. GTI has managed industrydemonstrations documenting 30% cost savings fordrilling with reduced footprint, waste discharge,emissions, noise and improved safety vs.conventional drilling.

Produced Water Handling

For over 20 years, GTI has worked with academia,government, and industry to develop solutions for theconditioning of produced waters to enableenvironmentally sound and cost effectivemanagement, by-product recovery, and beneficial useor reuse of produced water streams. Recent work:

2011 - The Marcellus Shale Research Consortia2010 - Techno-economic Assessment of Water

Management Solutions2009 - RPSEA Project: Water Management and

Reuse Technologies2009 - Marcellus Shale Coalition Water

Characterization Study2008 - Barnett Shale Water Conservation and

Management Committee2008 - The New Albany Shale Research Consortia

The Techno-economic Assessment of WaterManagement Solutions was a joint industry project of23 companies that was completed it in May, 2011.The project:

Identified 4 flow schemes of water

management system for shale gas plays

Aligned on benchmark cost envelopes ofdifferent management alternatives

Investigated implications of potentialregulatory changes

Provided understanding of how solutionneeds, options, and economics change at each

phase of a development areas life-cycle

Evaluated conventional and emergingtechnology options

Source: Gas Technology Inst i tute


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Identified beneficial alternatives for solid wastedisposal

The management of risk is critically important tosuccessful shale gas development. GTIs Techno-economic Assessment project showed that water basedlife cycle modelingis useful for mitigating risk andreducing costs by providing understanding of thefactors that drive water management costs and

operational decisions throughout the life of adevelopment area. Operators and solution providerscan use this knowledge to anticipate and plan for futurechanges, uncertainties, and challenges related toenvironmental impact; implement strategies anddevelopment work that extends the economic life ofeach well field; and provide assurances to stakeholdersabout technologies and sustainable operating practicesthat fit particular phases of the life cycle.

Below is an example of the life cycle projection thatwas generated by GTIs proprietary model for theMarcellus Shale Base Case.

GTI has laboratory and pilot-scale equipmentthathave been applied to testingmore economicalapproaches for produced water treatment. The GTIcapability in water engineering includes a wide span oftreatment processes to address many challenges in theprocessing of water streams for purposes of surface

discharge and beneficial reuse. GTI has the facilitiesand professional experience to conduct R&D as well asprocess development in technology application areas ofion exchange, biological treatment, membraneprocessing (e.g. nanofiltration, microfiltration,ultrafiltration, reverse osmosis, etc.), electrodialysis,chemical oxidation treatment, cutting-edge nanoscaleiron treatment and the use of natural living systems forcontaminant removal.

Why GTI?

Coordinating large, goal driven development programsrequires full time attention and focus in order to besuccessful. The E&P industry has led projects utilizingthe Joint Industry Project (JIP) structure but rarely

manages large consortium programs. Staff who areassigned to JIP management invariably have additionalduties which divert time and attention from projectmanagement. If the end result is to be the commercialproduction of a significant volume of gas from a newresource, the flexibility of the private sector and thefocus provided by a dedicated organization like GTIis required.

Dissemination of technology is another importanttask. The level of effort and resources required isoften underestimated. To do this efficiently, an entitythat has experience and an ongoing education andtechnology transfer program is beneficial.

Overall program management and technicaldemonstrations are best performed by an entity thatunderstands the importance of not placing an unfairadvantage or bias toward one concept versus anotherwithout extensive due diligence. With GTI you havea trusted partnerone who provides an objectivevoice of science and reason.

GTI also has the facilities, capabilities, and experienceto work with partners privately to successfullydevelop the new technologies that will continue to

reduce the cost and environmental footprint ofunconventional gas production.

GTI is a private not-for-profit organization whoseprimary business is managing large researchprograms on behalf of the gas industry. GTI hassuccessfully managed several large research programs(e.g., Coalbed Methane) and gained the confidence ofboth industry and government. Success was derivedin large part due to the full time focus placed onmanagement and maintaining strong interaction withall constituents.


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For more Inform ation

To learn more about how GTI can help you with yourgas shale and other unconventional gas developmentneeds, please contact:

Trevor Smith

847-768-0795; [email protected]

References

American Association of Petroleum Geologists.www.aapg.org.

Considine, Timothy Ph.D., Robert Watson Ph.D.,

P.E., Seth Blumsack, Ph.D. The PennsylvaniaMarcellus Natural Gas Industry: Status,Economic Impact, and Future PotentialJuly2011.

Fisher, Bill. Bureau of Economic Geology

Perry, Kent. Summary of GTI Coalbed MethaneResearch Program and Review of Related TightGas Sands and Devonian Shale Programs. Sept.12, 2001

Rogner, H. H., An Assessment of WorldHydrocarbon Resources, Annual Review ofEnergy and Environment, 1997

Vello A. Kuuskraa, et. al., Worldwide Gas Shales andUnconventional Gas: A Status Report, Dec. 2009.

Vello A. Kuuskraa and Energy InformationAdministration., World Shale Gas Resources: AnInitial Assessment of 14 Regions Outside theUnited States, April 2011. www.eia.doe.gov

White House, Office of the Press Secretary,Statement on U.S.-China shale gas resourceinitiative,17 November 2009

Yergin, Daniel and Robert Ineson. Americas ShaleGas Revolution. Wall Street Journal, Nov. 2009
http://www.aapg.org/http://www.eia.doe.gov/http://www.america.gov/st/texttrans-english/2009/November/20091117145333xjsnommis0.4233515.html&distid=ucshttp://www.america.gov/st/texttrans-english/2009/November/20091117145333xjsnommis0.4233515.html&distid=ucshttp://www.america.gov/st/texttrans-english/2009/November/20091117145333xjsnommis0.4233515.html&distid=ucshttp://www.america.gov/st/texttrans-english/2009/November/20091117145333xjsnommis0.4233515.html&distid=ucshttp://www.america.gov/st/texttrans-english/2009/November/20091117145333xjsnommis0.4233515.html&distid=ucshttp://www.eia.doe.gov/http://www.aapg.org/

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Global Gas Shales White Paper (9 2011) Final