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Prof. Klaus Regenauer-Lieb – Head of School of Petroleum Engineering, University of New South Wales, Australia

The newly appointed head of UNSW’s School of Petroleum Engineering (SCOPE), Prof Klaus Regenauer-Lieb highlights Australia’s significant opportunities in what he believes to be the next frontier in oil and gas – deepwater oil and gas and unconventionals – while describing the distinct set of challenges that the nation’s shale environment poses in relation to the United States’. He also depicts the current gap faced by the industry’s pipeline of talent and enumerates the ways in which UNSW is best helping students transition into the workforce – regardless of the macroeconomic landscape.

With its longstanding history in oil and gas, Australia has long been regarded as a technology leader, especially now with cities like Perth acting as a strategic hub for many companies. In terms of technical excellence, what areas of the sector has the country displayed the most prominence in?

From a technological standpoint, Australia has displayed excellence primarily in areas that crossover with the mining sector. Nowhere else in the world engages in as much drilling activity as mining – a sector that still largely resorts to traditional techniques, even in this day and age. Our school here is very strong in this technology. Along with this, comes the geomechanics aspects – whether it’s for considerations such as stability, reservoir compaction, earth model building, or visualizing downhole conditions.

What I think has been a really special development in Australia is the half billion-dollar investment in the deep geothermal well in the Cooper Basin. In this venture, we’re drilling down to 270°C. Rock processes are completely different from what we know on the surface. We have a strong hydraulic fracturing culture, but at those depths, fracking does not work. The teams have stimulated the well four times, and every time they experienced improving percolation, but the well eventually returned to geological background levels. This is because there are chemical processes happening, such as dissolution or precipitation, at those depths and temperatures – cementing the unnatural fractures created by fracking. Given its distinct set of challenges and extreme circumstances, this project has also gained traction overseas from companies like Sinopec, which has a 9.5 km well and observed a similar phenomenon associated with this type of deep shale gas.

The US has been very successful with shale gas. But, in Australia, we have huge problems in effectively harnessing this resource. This is attributed to the differences in stress that is applied to the rocks. In the US, they deal with extensional stress regimes. When performing hydraulic fracturing, the fracture will stay open, as these types of fractures have a natural tendency to open. As such, companies can be very successful with hydraulic stimulants in these scenarios. In Australia, these laterals don’t work, as fractures are oriented differently and have more of a tendency to close up because we’re dealing with compressive stress regimes. The strategy has to be adjusted accordingly.  For the geothermal project, which is incidentally just 500m below the shale, we’ve developed a fracture prediction and stimulation method that allows for the opening of “creep fractures,” which tend to only exist in extreme temperatures. This particular technique will help determine the fluid pressures and angular relationships in these creep fractures. At this stage, however, we’re still very much working on understanding the physical properties on these types of reservoirs to enhance predictability, and ultimately, develop better stimulation strategies.

But, I would anticipate, especially when the market recovers, that Australia, and perhaps even China, will eventually be leading the frontier in deepwater resources and unconventionals – the next horizon in oil and gas.

It seems Australia is still trying to formulate the best ways to unlock the tremendous prospects of shale. Given the right amount of time and resources, can Australia conceivably experience a boom on a scale similar to the US?

Once the techniques are developed, it’ll still be a while considering the massive downturn in oil prices. This is not necessarily bad for the industry. Australians have pioneered a successful history of gold mining – enlarged to other earth resources through the minerals boom; this has fostered a positive environment for high-risk, high-reward ventures. However, these ventures can fail if they are not carefully executed. In the geothermal arena, for instance, many have proclaimed to become the first to unlock gigawatts of geothermal energy disregarding the need for further research before commercial viability. Prior to the downturn my worry was that we will approach unconventional gas with the same mindset. However, it’s simply not going to be that easy to duplicate the US success under the local conditions. We’re going to have to learn how to walk before we can run. Furthermore, in our line of work, if we do not assess all risks carefully, we risk sterilizing a clean new energy form for generations to come.

Speaking of betting big, the major spotlights are now centered on Australia’s massive investments in gas projects that will help fuel its export ambitions. How much of a role will unconventionals play in this regard?

Ironically enough, considering the massive abundance of offshore reservoirs, the exports aren’t particularly reliant on unconventional resources at the moment. Although coal seam gas is technically labeled as unconventional, E&P companies have achieved great success in scaling up the technology for the mass production of this resource—specifically in Queensland where several of the large LNG export terminals are based. Our Prime Minister is certainly excited about the prospects of LNG, which will soon overtake coal as the country’s second-largest export after iron ore.

Now, I would like to see Australia using the gas like the US. Gas is one of the largest assets that Australia has, so it’s almost nonsensical for us to completely earmark all production for foreign exports. Also, in terms of climate impact, liquefaction is a very energy-intensive process that, in some instances, actually loses to clean coal technology in terms of emissions. The US is also set to become a major LNG exporter in the coming years, but its government has been clever enough to recognize the value-adding potential of its asset and reserve a minimum allocation for local use. In the next thirty years, my perception is that we should make more of an effort to burn the gas where it’s produced and fuel domestic consumption with our own production because this is our energy future.

Considering that approximately 67 percent of enrolled students come from overseas—namely Asia Pacific—why has there been such an influx of students coming to Australia to further their education and jumpstart their career in oil and gas?

We have established MOUs with the many institutions in this region such as the Chinese University of Petroleum in Bejing and Qingdao, and the Chinese University of Geosciences to name a few. Also, Australia more or less falls in line with the same time zone as Asia Pacific – a nominal, but nonetheless important factor for students. Secondly, in addition to its favorable climate, Australia is considered a very safe and multicultural country. But interestingly enough, based on the feedback that I’ve received, many students have come here based on the fact that many Australian universities have made it into the top echelons of the QS World University Rankings. In terms of individual disciplines, however, UNSW’s School of Petroleum Engineering (SCOPE) is not specifically ranked. But when looking at the most closely related department, UNSW’s School of Civil Engineering is ranked 14 in the world—and, to provide some context, the SCOPE’s research output even exceeds theirs. In addition to the many other factors, I believe that’s what many of the students value – prestige, quality, and academic reputation.

How is UNSW helping to address the shortage of qualified and skilled labor currently faced in industry, and in your opinion, are engineers these days adequately equipped with the proper resources and skillsets to meet the increasingly complex challenges of tomorrow?

Indeed, we have a global problem with education. Current oil prices are making it very unattractive for first years to study petroleum engineering – we had 20 percent less students coming in this year from a domestic perspective. There will be a huge crisis of talent for petroleum engineering if left unaddressed. The crisis currently affects mainly the final year students who need to be even more competitive in adapting to current industry needs. That being said, however, we’re always going through these industry cycles from exploration to abandonment. Currently in Australia we’re in the production wave, and following will be abandonment. We need to look forward and train accordingly – making sure that our students don’t think that there’s no future. In four years time, the current first year students could be exposed to a completely different macroeconomic landscape.

Our approach is to equip undergrad students with more training, specifically with dual-degree programs, such as the Bachelor of Engineering (Honors) and Bachelor of Science (BE (Hons) BSc). In this program, students, for example, can pursue a major in petroleum engineering and then pursue a minor in other areas such as civil, mechanical, electrical, mining or chemical engineering. Actually, in Australia’s current production phase, mechanical engineers are in large demand. So we not only give undergrads the foundation in petroleum engineering, but also the flexibility to work in other functional roles whether that be in the production facilities or in above ground chemical engineering aspects. Other universities such as Adelaide or Curtin have had closer industry ties from a staffing perspective, especially considering their physical proximity to natural resources and projects, but UNSW has long excelled in equipping the industry with theoretical knowledge and research to push the frontier on innovation.

We also have a drilling school equipped with a state-of-the-art drilling and well control simulator – one of a few globally in an academic environment. Our industry partner also caters for industry so that drilling engineers get re-certified once every three years at one of our facilities in Brisbane or Sydney.

On the other hand, the post grads are essentially the ones piloting our new technologies here. Formerly the director at the Geothermal Center of Excellence in Perth, I’ve been lured to UNSW to contribute to a team that has actually already been very successful in industry relevant research. Together with Australian National University (ANU), a few postgrads at UNSW built a company originally called Digitalcore that centered on a digital rock technology framework that could scan the core on multiple scales, which would then yield physical parameters. Essentially it’s based on petrophysics to minimize risk and establish scaling relationships. After merging with Norwegian company Numerical Rocks in 2013, the company eventually spun out as Lithicon, and subsequently got acquired by Houston-based FEI for USD 76 million in 2014.

Although our immediate curriculum will focus on the production and abandonment phase, our horizon in the next three to five years is for our students to go out into the industry after they graduate and expand the exploration frontier.

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