Technological developments in the US have recently opened access to unconventional forms of natural gas. Types of unconventional gas include shale gas, tight sands, and coalbed methane. Shale gas is currently the most discussed unconventional gas as it has been credited as revolutionizing the energy sector in the US. Through the combined use of horizontal drilling technologies and hydraulic fracturing, Mitchell Energy was able to extract shale gas at an economically viable rate in 1998.

Partnerships between the US federal government and the gas industry were key to developing the technologies that allow for commercial extraction of shale. The US is projected to become energy self-sufficient by 2030 due to shale gas production. (i)  According to British Petroleum’s (BP) projections, shale gas will continue to grow 7 percent per annum. Initial growth is expected to be concentrated in the US until 2020 and then spread to China and other countries. The success of shale gas in the US, has spurred interest worldwide. In April 2010 the US Department of State launched the Unconventional Gas Technical Engagement Program (UGTEP), aimed at promoting unconventional gas, particularly shale, production abroad.

The ability to replicate the success that the US has achieved in shale gas production remains debated. According to Joseph Geagea, corporate Vice President of Chevron, other countries will face difficulties replicating the unconventional gas boom that the US achieved (ii). Geagea explained that in the US, drillers already had the seismic data necessary to know where to drill. That pre-existing knowledge combined with established infrastructure and government regulation, provided the US with  the  necessary foundation for its shale gas revolution. “It’ll be a long time before it’s replicated,” Geagea informed. Despite the challenges, countries such as Algeria, India, China, and South Africa have all begun exploring potential development of shale gas.

Algeria
According to the US Energy Information Administration (EIA), Algeria holds 231 trillion cubic feet (tcf) of recoverable shale gas. As the country’s conventional oil and gas reserves pass their peak output levels, Algeria has begun exploring opportunities in shale gas. In an effort to attract investors to the country’s unconventional reservoirs the government amended the existing tax law on hydrocarbons in February 2013. Under the revised legislation, royalties will be adjusted based on production rates and revenue taxes will factor in risk and difficulty of exploration. State-owned Sonatrach is still allotted a majority stake in all joint ventures under the law.

Eni SPA (ENI), Royal Dutch Shell Plc (RDS), and Talisman Energy Inc (TLM) have signed agreements with the Algerian government on shale exploration. According to Djaouid Djelloul Bencherif, Sontrach’s director of deposits, over 400 test wells must be drilled in order to determine if production of shale gas in the country is economically viable. (iii)  ENI began exploratory drilling in 2012, while Shell and Talisman are expected to start soon. Sohbet Karbuz, hydrocarbons director at Observatoire Mediterranee de l’Energies (OME), stated that shale gas could almost double the country’s gas production by 2030. However, Algeria’s Energy Ministry said that the country does not expect to begin commercial shale production before 2020.

Production of shale gas in Algeria could also benefit Europe, as the country is already connected to Italy and Spain via trans-Mediterranean pipelines. An increase in production would provide the EU with an alternative to Russia.

Despite new legislative incentives to attract investors to explore unconventional gas, Algeria will face challenges in developing the sector. The January 2012 terrorist attack on BP in Amenas highlights the security risks of operations in the country. Additionally, the environmental risks of hydraulic fracturing, which is necessary for shale extraction, has raised concern among environmentalists. Hydraulic fracturing is a water-intense process that many believe also poses a threat of water contamination.

India
India holds an estimated 63 tcf of recoverable shale gas reserves according to the EIA. However, Schlumberger Asia reports that the country’s shale reserves could be as high as 2,000 tcf. (iv)  India’s Cambay, Krishna Godavari, Cauvery, and Damodar Valley regions are all prospective basins for shale gas extraction. The Oil and Natural Gas Corporation (ONGC) discovered shale gas during exploratory drilling in January 2011 in the Damodar Basin. Commercial production is at least five to seven years away but first more drilling must be completed in order to determine the economic viability of shale gas production in India. (v)

The US government is actively assisting India’s development of its shale resources. In November 2010, the US Department of State and India’s Ministry of Petroleum and Natural Gas signed a memorandum of understanding (MoU) on Shale Gas reserves. Under the MoU, the US Geological Survey will assist in assessing India’s shale reserves and provide training to Indian nationals in resource assessment. With assessments underway, legal frameworks are also in development. In April 2012, the Directorate General of Hydrocarbons (DGH) proposed a draft policy on shale gas exploration to the Ministry of Petroleum and Natural Gas (MoPNG). India is expected to launch bidding for shale gas exploration licenses at the end of 2013.

According to Akshaya Gulhati and William Dusek, the real challenge for India will be resource management, particularly water, which is already problematic in terms of human consumption. (vi) Additionally, land access may also present a challenge, as protests over land seizures have turned violent in the past. (vii)

China
Until recently, China’s exploration into unconventional gas has primarily focused on coalbed methane gas. In addition to its coalbed methane development, China also has plans for confirming and assessing the country’s shale gas reserves. The EIA reports that China has the largest reserves with 1,275 tcf of recoverable shale gas.

In 2009, the US and China launched the US-China Shale Gas Resource Initiative, which provides assistance and support on the assessment and development of shale gas. In 2010 China established a National Energy Shale Gas R&D Center (NESRC) under the National Petroleum Corporation (CNPC). Despite initiatives, progress on the assessment of shale in the country has been slow. At the end of 2012, only 80 shale exploration wells had been drilled.

Almost 80 percent of prospective shale deposits in China are located in conventional oil and gas blocks that are owned by the country’s national oil companies (NOCs). (viii)  The government permitted NOCs to develop shale gas on these blocks so long as they submitted a plan for each block before December 26, 2012. Despite the country’s lack of established policies for shale gas exploration and extraction, in March 2013, Shell signed a production-sharing agreement with the Chinese government for the Fushun shale block in the province of Sichuan. (ix)  Under the contract, Shell will spend a minimum of USD 1 billion a year on exploring shale gas resources in the country.

Extraction of shale gas is likely to be problematic. Due to the country’s geological features, hydraulic fracturing alone is not expected to be adequate due to the deeper location of shale deposits. Lack of experience in producing shale and technology will also be a hurdle to the economically viable extraction of shale. Chinese companies have recently begun investing in the US shale gas sector, where they might be seeking improve their technical knowledge of shale extraction. In spite of the challenges faced, investors and the Chinese government appear committed to developing shale gas within the country.  

South Africa
South Africa is believed to have an estimated 485 tcf of shale gas resources. The majority of the country’s shale is located in the Karoo Basin. The Karoo Basin is 236,000 sq miles. The depth of shale gas in the basin is on average 8,000 ft, however, due to volcanic intrusions seismic imaging is not always possible. (x)  According to Shell, it may take up to 10 years to achieve commercial shale production in the basin.

In April 2011, the country’s cabinet placed a moratorium on shale gas exploration. Following a study on safety and environmental concerns, the government lifted the moratorium in September 2012. According to the Petroleum Agency of South Africa, there are currently five pending applications for exploration in Karoo Basin. Three of the applications belong to Shell, while Falcon Oil & Gas and Bundu Gas & Oil Exploration each have one.

Due to the potential dangers associated with hydraulic fracturing, shale gas exploration has sparked concern by environmentalist and landowners in South Africa. The Karoo Basin is a semi-arid region, home to many rare species, making environmentalist particularly worried over the potential damage hydraulic fracturing may cause to the water-scarce region. It is expected that environmentalists and other groups will appeal exploration licenses, making it unlikely that any licenses will be granted this year.

Conclusion: the Future of Shale Gas
The future of shale gas worldwide remains unknown. The US had favorable conditions that allowed for the development and growth of the industry. In order for other nations to capitalize on their shale gas resources, they must find solutions to existing infrastructure and technological gaps. Thus far, the US government and shale gas producers have offered support to countries hoping to tap their resources. However, each country will inevitably face unique obstacles, rather geographically or politically. The ability to overcome such challenges will ultimately determine each country’s individual capability of producing shale gas at an economically viable rate.

1. BP, BP Energy Outlook 2030. January, 2013.
2. Mark Passwaters, Chevron VP says US Unconventional Revolution Unlikely to be Replicated. April 17, 2013.
3. Bloomberg, Europe’s Shale Boom Lies in Sahara as Algeria Woos Exxon. November 26, 2013.
4. The Economic Times, ONGC Drills Country’s First Shale Gas Well. January 10, 2011.
5. Center for Strategic and International Studies, Prospects for Shale Gas Development in Asia: Examining Potentials and Challenges in China and India. August 2012. 
6. Akshaya Gulhati and William Dusek, Is India Ready for Shale Gas? May 2, 2013.
7. Center for Strategic and International Studies, Prospects for Shale Gas Development in Asia: Examining Potentials and Challenges in China and India. August 2012. 
8. Jane Nakano and Ksenia Kushkina, China Awards More Shale Gas Blocks although Much Remains to be Seen. January 29, 2013.
9. Reuters, Shell Says China Approves Shale Deal, Plans More Drilling. March 26, 2013.
10. Oil & Gas Journal, Unconventional Oil & Gas: Industry Awaits Permission to Explore South Africa’s Karoo Shale Gas. January 1, 2013.

By Maya Moseley