from Energy, Security, and Climate and Energy Security and Climate Change Program

Could the North American Shale Boom Happen Elsewhere?

March 15, 2013

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The dramatic takeoff in oil and gas production in the United States and Canada over the last half decade has left many people asking whether a similar boom will happen in other countries. It’s a good question. To answer it, you have to start by identifying what critical factors enabled the boom to happen here, then figure out whether these same enabling factors exist elsewhere.

Here’s a quick list of seven of these enablers. They vary in importance. Some are essential prerequisites to any shale production gains, like suitable geology. Others are catalysts: Without them, shale production is still possible, but will come much more slowly than it has in North America. The mineral rights regime is an example.

  1. Mineral rights regime: Land owners in the United States and Canada also own the subsurface rights to minerals found on their property. This is a highly unusual legal regime, but one that proved critical in launching the hydrocarbon boom by allowing landowners to negotiate directly with oil and gas companies for drilling rights. Of all the seven factors, this one was unquestionably one of the most important reasons why the boom has proceeded at the pace and volume that it has.
  2. Geology: The United States and Canada are blessed with some of the most prolific shale resources anywhere. Unless you’ve got the reserves, all the other ingredients won’t get you far.
  3.  Water supplies: Fracking is a water intensive process. Each well can require upwards of five million gallons of water, according to Platts, which are injected along with sand and other substances.
  4. Low population density: Unlike some other parts of the world, like the United Kingdom, much of North America’s shale reserves are located beneath places that are relatively sparsely populated. That extra elbow room means an easier operating environment for the industry and less headache for regulators.
  5. Deep capital markets: Financing small, risky drilling operations—the kind of undertakings required for an ultra-competitive upstream marketplace—are nothing new in this part of the world.
  6. Cutting-edge oil service companies: The technical capabilities that service companies like Halliburton offer have allowed new entrants to play in the shale space and even older operators to improve their metrics over time.
  7. Infrastructure: The U.S. oil and gas pipeline network, to name just one facet of the supply chain, is the most prolific in the world—and even it has been swamped by recent years’ output growth. Roads, rails, and other transportation infrastructure have been critical in allowing production to ramp up by linking wells to the marketplace.

I’m sure there are others beyond the seven I’ve outlined here.  Anyone trying to project if or when shale production will get off the ground in a serious way beyond the United States and Canada will have to start by seeing whether the right conditions apply.