Turkey, Russia also likely; the U.K., possibly; China, some day.
Production of tightly trapped oil and gas outside North America will still likely occur in Australia and Argentina before in other countries, according to securities analysts with Tudor, Pickering, Holt & Co. Securities Inc.
The research group’s “shale-play heat map” factors in geology, economic incentives, the availability of oilfield services, market access, regional commodity pricing, take-away infrastructure, whether investors would fund projects in the region and whether there is government and community support of tight-rock development.
“The rock is most important,” note team members Shola Labinjo and Anish Kapadia. “After that, as free-market capitalists, we tend to weigh private-sector-resource allocation very heavily.”
Australia’s Cooper Basin (tight gas) is likely to be development based on the existence of economic incentive. “But, in a nod to the power of geology, we like Argentina’s Neuquén Basin (tight oil and tight gas) too,” they add.
This is despite that Argentina does not fare as well on the measure of free markets, they note, as Argentina expropriated Repsol SA’s interest in YPF SA last year without fair compensation and also controls prices for gas produced in the country.
The pair also likes Turkey’s Anatolian (tight oil) and Thrace (tight gas) basins and Russia’s Bazhenov formation (tight oil) in West Siberia Basin. But Labinjo and Kapadia have “mixed feelings on the Bowland (tight-gas basin) in the U.K. and (tight gas from) Sichuan (Basin) in China.”
For tight-gas development in Bowland Basin, public support will be necessary. As for tight-gas development in Sichuan Basin, little profit incentive, high costs, market regulations and geology have limited development to date, they note.
As for Poland, where shale-gas exploration has been attempted in the past few years ago, resources found have paled in comparison with the cost of creating a modern oilfield-service industry in the country and building infrastructure. It “is now our least preferred,” the analysis report.
Major oil companies are leading tight-resource exploration abroad, they also note, such as Royal Dutch Shell and Chevron Corp., which are looking at South Africa’s tight-gas Karoo Basin.
“Noticeably absent are the U.S. independents, which are, understandably, pre-occupied with opportunities at home.”
Development of tight-rock resources in other countries, such as France, is possible but has failed on the measure of government support. “Geologically, the elements are in place in most regions (of the world); however, specific issues, including skepticism around hydraulic fracturing…, are impeding progress. Host governments have been divided in their response…A few appear to be in engaged in a ‘who can ban (fracing) the most’ contest.”
Scott Gruber and fellow securities analysts with Bernstein Research report on development of non-North American production of just tight gas that “we continue to maintain our view that commercial development is inevitable but will occur at a much slower pace than the U.S., with little commercial production over the next three years.”
They add that
--Mexico has large tight-gas resources but is looking to more immediately import more gas instead,
--Development of tight-rock resources in Colombia will likely focus on liquids-rich rock as Colombia consumes very little natural gas,
--France has banned fracing,
--Germany has banned fracing,
--Interest in tight rock in Russia has been limited to those that may produce oil and not gas as the country has proven enough gas-production potential already and
--Commercial tight-gas-production potential may exist in North Africa and the Middle East as well.
“However, the U.S. provides a differentiated operating environment that is ideally suited for shale development. This includes a broad E&P industry with ample access to capital, deep geologic knowledge, a legal system that compensates land owners for development, broad oil service and midstream industries to provide the requisite development equipment and infrastructure, limited environmental backlash, especially given the benefit of reduced coal consumption and crude imports, and generally good access to water.
“Many—or at times—all of these factors do not exist in the countries abroad that are also endowed with quality shale,” the Bernstein team report.
–Nissa Darbonne, Editor-at-Large, Oil and Gas Investor, OilandGasInvestor.com, Oil and Gas Investor This Week, A&D Watch, A-Dcenter.com, UGcenter.com. Contact Nissa at ndarbonne@hartenergy.com.
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