EIA: Can Other Nations Replicate North America's Shale Revolution?

---

Written by John Egan for Industrial Info Resources (Sugar Land, Texas)--There's an enormous amount of shale oil and shale gas outside the borders of the U.S. and Canada, but it's unclear whether overseas nations will be able to duplicate North America's shale revolution, according to a recent report from the U.S. Energy Information Administration (EIA), (Washington, D.C.), the statistical and analytic branch of the U.S. Department of Energy (DOE) (Washington, D.C.).

The report, issued this summer, updates and expands an EIA assessment released in April 2011. The new report included more countries, more basins and more formations than the 2011 report. The new report also included an estimate of the world's shale and tight oil resources, something the 2011 report lacked.

EIA estimated global technically recoverable shale gas resources, including in the U.S., to be 7,299 trillion cubic feet (Tcf), a 10% increase from the earlier report. The agency estimated there are 345 billion barrels of technically recoverable shale and tight oil throughout the world.

Click on the icons at right to view tables showing the nation's with the largest shale oil and shale gas resources.

The 10 nations with largest shale oil reserves account for about 78% of the world's shale oil resources, according to the EIA estimate. The agency added that the 10 nations with the largest shale gas resources account for approximately 79% of the world's shale resources.

In preparing its 2013 assessment, titled "Technically Recoverable Shale Oil and Shale Gas Resources," the EIA assessed 137 hydrocarbon formations in 95 basins located in 41 countries, including the U.S. and Canada. By contrast, the agency's 2011 report covered 69 formations in 48 basins located in 32 countries.

The EIA emphasized that its report focused only on technically recoverable resources, which refers to oil and gas that can be produced using current technology, without regard to price or production costs. A different measure, economically recoverable resources, is used to describe deposits of oil and gas that can be produced profitably at current prices, using existing technology. The EIA report did not estimate the world's economically recoverable shale oil and shale gas resources.

Neither did the EIA assess potential shale oil and shale gas in the Middle East or Caspian Sea regions. The estimate is part of a rapidly evolving body of knowledge about how much shale oil and shale gas exists, and the best ways to extract it.

The EIA gave two reasons for producing an updated assessment of shale resources only 26 months after its previous estimate: "First, geologic research and well-drilling results not available for use in the 2011 report allow for a more informed evaluation of the shale formations covered in that report, as well as other shale formations that it did not assess. Second, while the 2011 report focused exclusively on natural gas, recent developments in the United States highlight the role of shale formations and other tight plays as sources of crude oil, lease condensates and a variety of liquids processed from wet natural gas."

The 10% growth in the world's shale gas resource obscures some dramatic downward revisions to some country's estimated shale gas resource:

• Norway's shale gas estimate fell to zero from 83 Tcf in 2011 because of disappointing results from several wells
• Poland's shale gas resource dropped to 148 Tcf from 187 Tcf in 2011
• Mexico's Burgos Basin shale gas resource fell to 343 Tcf from 454 Tcf in 2011, though the EIA report added shale oil to that country's estimated resource base
• China's shale gas resource was adjusted downward to 1,115 Tcf from 1,275 in 2011
• South Africa's estimated shale gas resource fell to 390 Tcf from 485 Tcf in 2011

Turning technically recoverable shale oil and shale gas into economically recoverable oil and gas depends on three factors, the EIA points out: the costs of drilling and completing wells; the amount of oil or natural gas produced from an average well over its lifetime; and the prices received for oil and gas production.

The report noted that economic recoverability rates "can be significantly influenced by above-the-ground factors as well as by geology." The U.S. and Canada enjoy several "key positive above-the-ground advantages ... that may not apply in other locations," including:

• Private ownership of subsurface rights, which provides a strong incentive for development
• Availability of many independent operators and supporting contractors with critical expertise and suitable drilling rigs
• A preexisting gathering and pipeline infrastructure
• Availability of adequate water for use in hydraulic fracturing.

The report provided this cautionary context: "Because they have proven to be quickly producible in large volumes at relatively low cost, (shale) oil and shale gas resources have revolutionized U.S. oil and natural gas production, providing 29% of total U.S. crude oil production and 40% of total U.S. natural gas production in 2012. However, given the variation across the world's shale formations in both geology and above-the-ground conditions, the extent to which global technically recoverable shale resources will prove to be economically recoverable is not yet clear. The market effect of shale resources outside the United States will depend on their own production costs, volumes, and wellhead prices."

"The EIA report makes it clear that it may not be possible to export the shale revolution, at least not overnight and all at once," observed Jesus Davis, Industrial Info's Industrial Info's vice president of research for Oil & Gas Production, Pipelines and Terminals industries. "However, the industry is quickly expanding its base of knowledge about shale geology and production techniques. So as far as getting the resource out of the ground, U.S. companies are second to none, and they are getting better each day. However, enacting and enforcing a system of mineral rights, and building a network of infrastructure to get the product to market, are not engineering questions. Instead, they are largely questions of law and politics. That's what makes exporting the shale revolution so tricky."

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, three offices in North America and nine international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities.