The exploration of shale gas is a trend that has emerged in the oil and gas arena during the last couple of years. For satellite players, it is another opportunity to provide state-of-the-art communications to one of its biggest customer sets, the oil and gas industry.

When two industries as large, technology-driven and global reaching as the satellite and petroleum sectors come into each other’s orbit, there are bound to be numerous business opportunities that can benefit both camps. After all, in today’s world, two of the most important capabilities that consumers are looking for are on-demand power and communications.

The growth of the shale gas sector in the United States has produced many benefits, with domestic gas prices kept enjoyably low due to the extra supply that the vast shale gas reserves offer.

The exploration and drilling techniques that are applied to shale gas plays can rely heavily on satellite technology for the deployment of networks that will support Supervisory Control and Data Acquisition (SCADA) systems. Voice, data and video recording and transfer to any location in the United States or the world is vital to keeping operations running smoothly and within budget. The good news for satellite companies is that this requires increased bandwidth demands from customers — and increased bandwidth demand is set to continue to grow as shale gas drilling becomes more widespread.

Base camps are often found in remote locations, meaning satellite communications are usually the best, if not the only means of achieving connectivity. “The oil sector has enterprise class satellite communications requirements with a strong broadband demand, an almost insatiable demand, with high throughput needs, services needs and scalability,” says David Hartshorn, secretary general of Global VSAT Forum (GVF).

The size of the company will govern its communication needs but in general shale gas plays cover very wide areas and have numerous drilling sites, creating the need for point to multi-point connectivity because all the data from the well sites has to be delivered to a single headquarter. This is also the case for voice and video connectivity. The distance between the single point and the many points also dictates the bandwidth requirements and therefore costs.

Shale gas plays have a huge real-time requirement, mostly due to simple topography and nature of shale gas drilling at many sites. This also requires the need for data acquisition and remote monitoring at all sites.

 

Post Macondo Onshore Surge

When the BP Macondo disaster struck the Gulf of Mexico in April 2010, Washington was swift to ban drilling in the offshore region. Oil companies were equally quick to shift their attention to onshore plays in the United States, with a lot of investment being directed to the shale gas industry.

Many of the investors were foreign oil players and National Oil Companies (NOCs) and the shale gas business is continuing to grow. All of these companies need good local support for IT and communications to their teams in remote locations across America where shale gas exploration and drilling is ongoing.

Keith Johnson, president, Global Energy Solutions at Harris CapRock, says this has provided a great source of new business, which also requires a lot of bandwidth. “This will provide significant growth in North America for us,” he notes. “But we are looking at increased growth in every region.” He says Brazil was a strong growth market for Harris CapRock and that it was looking to increase VSAT teleport coverage there and in many other countries as the need for increased bandwidth continues to grow around the world.

 

Drilling Rigs

The use of horizontal drilling in conjunction with hydraulic fracturing, or “fracking,” has greatly expanded the ability of operators to economically produce natural gas.

Fracking is a process that involves injecting wells with highly pressurised water and chemicals to crack open the shale rock to release natural gas. In the past five years, shale gas has been recognized as a game changer for the U.S. natural gas market, said the U.S. Energy Information Administration (EIA).

The fact that oil company Shell is drilling more wells this year than the last 10 years combined will lead to a strong demand for communications and bandwidth to cater for its needs onshore in the United States.

“Shell has an ambitious year and is taking on more than 60 land rigs this year for use in the continental United States,” says Donald Happel, upstream Americas field telecoms manager at Shell. “Shale gas is absolutely essential and it is a corporate direction that Shell has taken. Most shale gas fields are in remote areas with very little infrastructure, which means satellite is our tool of choice to meet our communication needs. I do not see a time when we would not use satellite technology in the future. Drilling rigs are getting a lot more sophisticated and record much more data and gather more data while drilling so the bandwidth needs increase.”

Shell mostly uses Ku-band, as it needs little frequency coordination and licensing that would be needed for more permanent drilling once a field is established as a future producer. Happel says that when Shell starts up a new drill site it goes for 1.5 Mbps per second “right out of the gate” for the applications it uses.

Laying cable is also difficult in certain climates, such as large parts of Canada, which has permafrost and so satellite is the best tool for the job.

Rainstorms can bring connectivity problems for satellite solutions, especially in the southern parts of the United States. But Happel says drilling teams can cope with the typical 20- to 30-minute heavy rain sessions that are often seen in the area, adding that Shell uses Ka-band in Canada where there is less occurrence of heavy rain that can disrupt Ku-band.

Once Shell completes its exploration work, drilling and production, the company usually seeks a permanent communications solution to reduce the high cost of satellite service, if the terrain allows it. Happel says Shell looks for permanent microwave solutions that use point-to-point or point-to-multipoint. At this stage, the drilling rig will move to another site and take its satellite communications package with it for use on fresh exploration locations.
 

Real-Time Drilling

Real-time drilling monitoring offers oil or drilling companies the ability to follow operation on the drilling floor and at the drill bit. Operators have real-time drilling rooms with numerous large screens monitoring any given drilling site anywhere in the world 24/7 to make sure the critical phase of each operation runs smoothly and on time. Accurate data is critical and there is plenty of it, making it very data intensive and in need of more bandwidth.

“Availability and reliability is critical at these stages of drilling so we are offering that managed service to companies,” says Johnson. He notes that he saw significant growth in the need for real-time drilling and remote monitoring. This is highlighted by the fact that five years ago drilling companies were happy with 256 Gbps or 512 Gbps a second but now they want up to 1 Mbps.

In terms of oil companies, they used to be fine with 512 Gbps to 1 Mbps but now require 2 Mbps to 4 Mbps a second, says Johnson, adding that Harris CapRock is looking to offer a complete and fully managed service in this area to benefit from the forecast growth in the United States and worldwide.

Todd Tanner, executive vice president and co-founder of Conxx Smart Technologies, comments that video is the service that providers really need to offer to shale gas companies that have multiple sites in remote areas, which need to be covered by video for whatever purpose — be it security, safety, wellhead data or performance reviewing.

Tanner, among many others, thinks that the vast amount of data that will be required to be moved from the wellhead to the companies’ headquarters is going to increase. This will push bandwidth requirements higher and with it prices, so if cheaper alternatives to satellite are viable then they will become available if the field is declared commercial and considered a long-term asset.

“We see an opportunity for licensed microwave to come in to play and have a larger importance that in the past,” says Tanner with regard to some shale gas areas.

So the pattern would be licensed microwave to the drilling platform and onwards to a “star formation” then dropped into fiber for backhaul, adds Tanner. An alternative is an uplink to a larger satellite link for backhaul, which would mean less VSAT usage.

“We are seeing a need for more sophisticated applications to manage horizontal and directional drilling, which is the reason why shale gas plays have been so successful,” says John Nagel, CEO, Oil & Gas Division, ERF Wireless.

He says that in the last mile there is a need for all forms of communications — be it satellite, fiber or microwave. Nagel adds that his company is currently testing LTE as the lower frequencies are good for higher microwave frequencies. Other companies are also looking at using 3G and LTE where it is available.

Francois Loubry, vice president of oil and gas, Alcatel-Lucent, notes that satellite costs are high for many operations in remote areas and that each drilling site or base camp is weighed up on a case-by-case basis to see if terrestrial or VSAT options are best for any given project. On top of that, there is the need for encrypted Wi-Fi for cellular and data use, telemetry and other applications. Of course this needs more bandwidth and the cost of having this provided by satellite can be hefty.

Top 12 Countries in Terms of Technically Recoverable Shale Gas Reserves
Country	Reserves (in Trillion cubic feet: Tcf)
China	1,275
USA	862
Argentina	774
Mexico	681
South Africa	485
Australia	396
Canada	388
Libya	290
Algeria	231
Brazil	226
Poland	187
France	180

Source: EIA (April 2011)

 

Regulation Issues

In terms of global markets, Hartshorn said there are many countries with shale gas reserves that are of interest but emerging nations often require careful approach work due to regulatory problems.

In developing countries, the government can see satellite communications as a means to raise funds so it can decide to apply high landing and spectrum fees, as well as draconian regulations, says Hartshorn. This can work in reverse and deters shale companies from entering the country.

To avoid this situation from developing, GVF offers to advise a nation that has recently found major oil or shale gas reserves to adopt an open licensing framework that allows foreign investment and competitively provided bandwidth.

One great example of success is Nigeria, which around 12 years ago started deregulating its communications sector and penetration rates rose rapidly from nearly zero to double-digit percentage rates.

This success spread throughout Africa and whereas before all African nations had a closed satellite market, now there are only six that are closed, notes Hartshorn.

Among the most attractive foreign markets, according to Hartshorn, are Australia, China, India, South Africa, Morocco, Argentina, Brazil, Paraguay and Canada. Eastern and Western Europe also offer opportunities.
 

Social Responsibility

Many U.S. communities are keen to keep a close eye on the potential environmental impact of fracking, and in return shale companies are tied into social responsibility agreements to maintain good practice and ensure the safety of the environment for the local community.

This often means that operators build schools or health centers as part of the agreement, according to Hartshorn, who points out that there is a huge potential for shale companies to use existing satellite communications providers to supply many other services to the community. These services include: telemedicine; teacher training; distance education; and wireless broadband connectivity to the individual homes.

“This is global and has implications. We know this idea resonates in the oil and gas industry and it will happen in the shale sector too,” says Hartshorn.

The GVF has set up the Satcommunity Initiative to push this concept further and has a working model in the Niger Delta in Nigeria that is backed by Schlumberger, the U.S. Agency for International Development and an unnamed oil major.

The increase in shale drilling activity only widens an enterprise market that already provides satellite operators and service providers with a healthy flow of profits. Analysis firm NSR expects the oil and gas sector’s total satellite communication retail revenues to grow from $660 million in 2011 to more than $1.1 billion by 2021. If these trends continue, the shale gas sector should present new opportunities and an expansion of business between oil and gas companies and their partners in the satellite service realm.