US Shale Revolution, Staggering Global Potential

The US may be the only country undergoing a shale revolution, but it doesn’t have the biggest shale oil and gas reserves in the world.

The global shale oil and gas potential is a staggering 345 billion barrels of oil and 7.2 quadrillion cubic feet of natural gas, according to a new report from the US Energy Information Administration (EIA).

Topping the list for shale oil is Russia, with 75 billion barrels—compared to the US’ 48 billion—and China with 32 billion barrels, trailed by Argentina in third with 27 billion barrels and Libya.

For shale gas, outside of the US, the line-up has China on top, followed by Argentina, Algeria, Canada and Mexico. The US comes in fourth, after Algeria, for shale gas resources.

But in terms of developing shale resources, no one comes close to the US, which corners the market on the shale drilling technology.

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“American oil and gas production has seen an unprecedented boom over the past several years, reversing decades of steady decline in output. This revival has come thanks in part to the introduction of new engineering solutions to help tap into the country's unconventional oil and gas deposits and in part to the high prices that have made these techniques economical,” the report said.

What’s different about this report is that it has in the past only considered US shale resources, not global resources, so now we have a bigger picture. But US resource estimates have also been upped in this latest report to 48 billion barrels of oil—up from 32 billion in 2011—and to 7,299 trillion cubic feet of natural gas, up from 6,622 Tcf in 2011.

So while there is definitely growing interest in tapping into global shale resources, for now there is little chance of replicating another “revolution” outside the US.

Canada has seen a great deal of investment into shale drilling technologies. For 2012, Canada’s tight oil production averaged 291,498 barrels per day, while shale gas production was 0.7 trillion cubic feet.

Poland has been a bit of a disappointment. It was the lone wolf among European countries in that it was enthusiastic about allowing hydraulic fracturing but exploration results were not what were expected and initial estimates of reserves were lowered. ExxonMobil, Canada’s Talisman and Marathon have all picked up stakes here.

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Then we have Algeria, which was one of the focal points of the EIA’s report, which noted that Algeria’s shale gas estimates had tripled from the initial 231 Tcf of 2011 to 707 Tcf.  This is what Europe is eyeing zealously, because it’s easy to get to Europe and could supply the European Union for a decade.

Algeria is also being spotlighted because the government took measures earlier this year to attract more investors specifically to its shale plays, with profits-based taxes to replace gross income taxes and long-term licensing to reduce some of the exploration risk.

One of the biggest things keeping investors away from Algeria’s unconventional exploration opportunities has been the tax regime—specifically the windfall tax on hydrocarbons. In February, Algiers removed this tax with a new hydrocarbons law. Royalty fees will now be adjusted based on production levels, and taxes on revenues will take into consideration exploration difficulty and risk.

By. Charles Kennedy of Oilprice.com