Development of International Shale Gas Resources: Challenges and Considerations

In the wake of the U.S. shale gas revolution, resource assessments of unconventional shale gas resources on a global basis suggest reasons for great optimism, but those assessments also warrant a note of caution, especially in terms of pace and timing. For starters, while screening for shale resources is now underway at a wide variety of locations around the world, outside of North America (and possibly Australia and the United Kingdom), hard data on resource potential is still based on little information and relatively few wells—especially when compared to the activity in the United States, where shale gas now comprises almost a third of U.S. production.

Typical resource assessment activity has focused on the geologic screening aspect of global gas resources—i.e., attempting to measure the size and thickness of the play, the total organic content (carbon richness), the maturity of the rock, the relative porosity and permeability of the formation, and subsurface barriers that could impede successful fracturing. On that basis, reserves are ranked according to ranges of estimates for recoverable shale gas volumes. But that’s only part of the story.
What determines the attractiveness of a “drill ready” prospect for potential investor/developers, however, involves considerations well beyond resource potential alone. And in many instances, these other considerations—including proximity to and economic attractiveness of prospective markets; well cost (e.g., depth, pressure, temperature, stratigraphy); absence or presence of supporting infrastructure and needed (competitively priced) materials; governance issues (e.g., ownership of the subsurface mineral rights, pricing policies, industry structure, fiscal terms, taxation, regulatory environment, liability exposure, etc.); cost and availability of other critical resources, such as water, chemicals, steel, and skilled labor; as well as security and living conditions for personnel—can reprioritize one’s list of prospective investments.

In addition, the maturity of the business model in the United States (which begins with acreage acquisition, experimentation with respect to practices and fracturing methods, lessons learned from core development and then applied to achieve better optimization, etc.) takes years to work through, even under favorable conditions. In this regard, the United States is years ahead—maybe a decade or more—of other nations, many of which are still experiencing the early land acquisition and testing phases. And even under assumptions of accelerated technology transfer, training up skilled personnel and providing services at scale will take a while.

The bottom line is that though the global unconventional gas resource potential (coal bed methane, shale gas, tight sands, etc.) is enormous and geographically diverse, no single shale deposit has yet shown the potential of some of the more prolific North American plays. The potential for development outside the United States is clearly there, but near-term investments—at least in the case of the international oil companies (IOCs), which are made on commercial bases—are likely to be highly selective.

Frank Verrastro is senior vice president and director of the Energy and National Security Program at the Center for Strategic and International Studies (CSIS) in Washington, D.C.

Commentaries are produced by the Center for Strategic and International Studies (CSIS), a private, tax-exempt institution focusing on international public policy issues. Its research is nonpartisan and nonproprietary. CSIS does not take specific policy positions. Accordingly, all views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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