U.S. gains global competition as shale energy revolution heats up
The United States has been the dominant player in the shale revolution until now, but new estimates of the world’s potential shale resources show that Russia, China and developing countries such as Argentina and Algeria could be the biggest winners in the future.
Russia — the world’s second-largest producer of oil from conventional reservoirs — has the most shale oil, with about 75 billion barrels hidden deep within the underground bedrock in Siberia, according to estimates published this week by the U.S. Energy Information Administration. The U.S. is not far behind with about 58 billion barrels buried underground in formations stretching from New York to Alaska.
The U.S. remains far ahead of Russia or any other country in exploiting its shale oil resources, however, as U.S. companies pioneered the advanced technologies needed to extract the oil from solid rock. Russia has not even begun to exploit its shale oil — or even determine whether doing so is economically possible — while the U.S. is on schedule to produce more than 3 million barrels of oil a day in the next few years, creating an unprecedented glut of oil in the nation’s heartland.
U.S. stores of natural gas locked in shale also are enormous, and the U.S. has been busily extracting them, prompting news media recently to proclaim that the U.S. has displaced Russia as the global titan of gas. But that might not be true for long, according to the estimates, which put the U.S. behind China, Argentina and Algeria in total holdings of shale gas resources.
Like Russia, none of the other countries is exploiting shale gas in a major way. The energy agency has determined that it is “technically feasible” for each, using technologies developed in the U.S. like hydraulic fracturing and horizontal drilling. Some of the overseas shale gas and oil detected by the agency may not be economically attractive to extract, however, meaning that the cost of getting it out of the ground may exceed the price the producers would get for the oil and gas on world markets.
In the U.S., though, shale technologies have proved profitable, with the process evolving and getting better as companies gain experience. Some private estimates put U.S. shale gas resources at nearly twice the 665 trillion cubic feet level identified by the agency, based on the emergence of cutting-edge technologies that make it possible to extract more gas.
“In essence, we will still be the leader as Russia and China don’t have the resources for now” to get their shale oil and gas out of the ground, whereas the U.S. has the technology to do so, said Jason Schack, oil marketing representative at Baker Hughes.
Altogether, the agency’s latest estimates — which cover 137 promising shale deposits in 41 countries worldwide but are not comprehensive — sharply increase estimates of the world’s potential reserves of gas by 47 percent, suggesting that it will become an even more important fuel for heating homes and running power plants, trucks and factories in the future.
The increase in world reserves of crude oil is less dramatic but still significant — 11 percent — in a world that is growing more thirsty for oil by the day as consumers in developing countries including China and Brazil buy cars and start driving. The estimates add about 345 billion barrels of shale oil deposits to the more than 3 trillion barrels of known conventional crude reserves worldwide.
While the estimates are more complete than the agency’s first stab at assessing world shale resources in 2011, the figures on oil reserves could increase significantly in future assessments. Regions left out of the latest study, conducted by Advanced Resources International, a federal contractor, include the Caspian Sea and Middle Eastern nations that are big oil producers and likely have considerable shale resources as well.
Adam Sieminski, head of the energy agency, said the estimates show that shale oil and gas are abundant worldwide and have the potential to become an important source of fuel everywhere as conventional reserves of oil and gas decline.
“There’s a significant potential for international shale oil and shale gas, though the extent to which technically recoverable shale resources will prove to be economically recoverable is not yet clear,” he said. Each country will have to drill test wells and conduct exploration to determine whether they can profitably produce their reserves, he said.
Though the shale industry remains in its infancy in most other countries, “as shale oil and shale gas production has grown in the United States to become 30 percent of oil and 40 percent of natural gas total production, interest in the oil and natural gas resource potential of shale formations outside the United States has grown,” he said.
Still, some countries with notable shale resources such as France have banned hydraulic fracturing, commonly known as fracking, for environmental reasons. Mexico and others have constitutional or legal prohibitions against the involvement of foreign oil firms in the extracting industry, which limit their ability to exploit reserves.
China, which is eager to exploit its reserves, lacks the technical know-how and has run into obstacles such as shortages of water in western regions where the shale is located. The fracking of shale rock requires enormous quantities of water that may not be available in China or other arid countries.
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