Global Shale Update

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Unconventional oil and gas production, until recently, has been largely confined to the United States and Canada. Countries such as China and Poland have made abortive attempts to produce shale oil and gas, with little success to date. Germany and France have banned hydraulic fracturing altogether.

The shale revolution began around 20 years ago with attempts to extract natural gas in the Barnett formation, located in North Texas near Fort Worth and Denton. That field is estimated to contain 40 trillion cubic feet of natural gas. However, despite the large quantities of natural gas produced in the Barnett, it is the Marcellus Shale field in the Northeastern U.S. that represents the largest reserves in this country, with an estimated 88–141 trillion cubic feet of recoverable gas. The Haynesville formation in East Texas and Northern Louisiana may contain the second- largest supply of recoverable natural gas in the lower 48 states, estimated to be 75 trillion cubic feet.

These three shale fields — the Marcellus, Haynesville and Barnett — are the earliest examples of the use of unconventional production technology for shale energy in the world. And these examples primarily relate to natural gas production.

In fact, prior to activity in the Bakken (located in North Dakota and Eastern Montana), all shale production was focused on natural gas. When natural gas prices fell significantly in the U.S. due to increased production, energy companies began shifting their focus to the prospects of extracting oil from shale. The Bakken was the first shale field to successfully demonstrate that unconventional production techniques could be applied to crude oil as well as natural gas. After that, activity quickly spread to other shale fields, such as the Eagle Ford and many others.

To date, the Eagle Ford has produced over 2 billion barrels of oil and condensate, with an estimated total recoverable quantity of 10–12 billion barrels. Total recoverable natural gas reserves are estimated at nearly 20 trillion cubic feet. Conservative estimates for crude oil reserves in the Bakken are 7.4 billion barrels and 6.7 trillion cubic feet of natural gas.

Exploration and production activity in the Permian Basin is still in the relatively early stages of exploitation. Crude oil production now amounts to over 2 million barrels per day, and is expected to increase for the foreseeable future as additional shale production continues to come online. Total recoverable oil in the Permian is estimated to be in excess of 20 billion barrels. Natural gas reserves are estimated to be 16 trillion cubic feet, although both are likely to be revised upward in the coming years.

While activity outside the U.S. has been limited, that is beginning to change. Argentina, for example, is starting to tap its own reserves in order to decrease its reliance on natural gas imports. Estimates for technically recoverable natural gas in the Vaca Muerta formation are around 300 trillion cubic feet. Crude oil estimates are reported to be 16 billion barrels.
Russia remains the world’s largest producer of crude oil, having surpassed Saudi Arabia. Russia pumped over 11 million barrels per day in 2016 — with virtually no shale production. That may soon change.

Russia’s Bazhenov Shale Formation in the West Siberian Basin is believed to be the largest in the world. The Russian Federal Subsoil Resources Management Agency, Rosnedra, estimates that the Bazhenov may contain more than 180 billion barrels of recoverable oil (although the U.S. Department of Energy [DOE] estimates are lower, at 75 billion barrels). Natural gas reserves are thought be approximately 285 trillion cubic feet. Russia hopes to begin producing from shale as early as 2020 because much of the country’s existing infrastructure lies within close proximity to the Bazhenov field.

As unconventional techniques and technologies continue apace in the U.S. and expand globally, it will be interesting to see what happens when the Organization of the Petroleum Exporting Countries (OPEC) loses its dominance of global energy markets — if, in fact, it hasn’t already. From a global energy perspective, the next decade is sure to look a lot different than the current status quo.


About the author: Thomas Tunstall, Ph.D., is the Senior Research Director at the University of Texas at San Antonio’s Institute for Economic Development, and was a principal investigator for numerous economic and community development studies. He has published peer-reviewed articles on shale oil and gas, and has written op-ed articles on the topic for the Wall Street Journal. Dr. Tunstall holds a doctorate degree in political economy, a master’s in business administration from the University of Texas at Dallas, and a Bachelor of Business Administration from the University of Texas at Austin.