We are still in the infancy of the shale revolution, so it is impossible to know exactly how it will play out over the next years and decades. If some of the skeptics are right, it may well be that the shale revolution will represent not much more than a minor bulge in the hydrocarbon (oil and gas) fuel cycle that the world has experienced since the mid 1800´s, and which could maybe last somewhat beyond the end of the 21st Century.
Unless the current fracking and production technology improves significantly, making shale oil and gas more competitive, the shale revolution may turn out to be a relatively short-lived phenomenon, and a minor factor in helping extend the projected two-hundred-and-fifty or so year expected duration of the oil age. It may even turn out to be of little help as a bridge fuel to the longer lasting gas age based on unconventional gas resources, or as a bridge fuel to the post-hydrocarbon energy age. The duration of the current gas age, which could extend well beyond the 21st century, is much more likely to be more positively impacted by unconventional gas resources such as gas hydrates, rather than shale gas, as hydrates come closer to being a commercial reality.
That is not to say that while we are in the midst of the shale revolution, it will not be significant, or that it will not profoundly affect many countries and businesses, or even bring about great changes in world energy geopolitics. It surely will achieve all those things, and it has already brought about many changes in geopolitical considerations.
We only have to look as far as the major impact that the large increase in oil and gas production in the USA, mostly from the shale revolution, has wrought in world geopolitics. The swing producer production shifted from Saudi Arabia to the USA. The menace to European energy security and political stability in the region, brought on by Western Europe´s overdependence on natural gas from Russia, has subsided, along with Russian world leverage. World oil prices tumbled over 75%, and not as a short-term phenomenon due to temporary market imbalance, but as a result of a clear longer-term phenomenon of greater production and slower increase in demand worldwide.[2] The influence of world oil players also shifted drastically, benefitting some, such as the USA and European Union oil and gas importers, and hurting others (Venezuela, Russia, Canada, and challengers to the Saudi dominance of OPEC and world oil pricing). And the economic boost to world economic growth, from far lower energy prices, cannot be overestimated.
The lower oil prices that have been in effect since 2014 have indeed brought about major changes in the world energy scenario, including to the very shale producers in the USA that precipitated the shale revolution. The laws of economics, and especially the law of supply and demand, continue to rule over prices. But corollaries also apply – lower prices have affected investment allocation, and dollars have shifted away from shale gas exploration activity, which has dwindled along with energy prices. Overall production is slowly reflecting decreased activity levels, falling approximately 8% since the shale production-driven high of 9.6 million bopd in June of 2015.
That being said, however, there is clear evidence that the shale industry is poised to continue to play a large and growing part in the world oil and gas scenario, and that such protagonism will continue to be led by the USA for quite some time. Besides some pain, the adversity in oil prices also brought strong pressures for more efficient operations. The results have been impressive, despite many pundits who saw low prices as a death blow to shale producers and a threat to the recent resurgence of USA oil and gas production. The USA shale revolution has demonstrated its resilience, and USA shale oil and gas producers are poised to resume a sharp uptrend in production as soon as higher prices show evidence of staying at or above current prices (approximately US$50/bbl).
The sharp increase in efficiency in the USA shale industry led to much higher production from individual rigs and individual wells, making the traditional metric that the industry used in order to estimate near-future production (i.e. the number of rigs in operation), useless as a production forecaster, since rigs now allow completion of many more wells, and each of those wells is much more productive. Recent evidence supports this conclusion: while the USA rig count is down 50% in one year, production has fallen much less.
Furthermore, the shale revolution has not easily spread around the world with the same speed and success it exhibited in the USA, as some believed it would. However, there are success cases of note in other major world shale plays. Argentina´s Vaca Muerta shale, in Neuquén Province, has, for some time, been widely recognized as the next best candidate to approximate the success of shale plays in the USA.[7] Now, it appears that despite Argentina´s troubled and relatively unfavorable political and economic environment over the last decade or more (although now benefitting from a change in political direction since the last general election), it has also been able to achieve remarkable efficiency gains (sharply lower drilling costs) in exploration activities there.
The resilience and even success of the USA shale industry, as well as that of a large, new and still undeveloped shale play (Vaca Muerta, in Argentina), while in an adverse price environment, contrasts sharply with the pain and suffering that other countries and companies in the industry are experiencing. Besides the upbeat prospects for shale plays in the USA and Argentina, other countries, as different as Mozambique, Canada, Norway and Mexico, have also exhibited strong investment interest at bidding rounds for new conventional oil and gas exploration opportunities. On the other hand, Brazil languishes and Petrobras is forced to downsize drastically and forego planned investments.[9] Recently, Statoil, along with BP and Total, reported strong operating results despite weak market conditions, showing that many majors have been able to sharply reduce costs and increase efficiency, leaving them poised for major gains when market conditions improve.[10] If other countries and companies whose resource plays are even more geologically and economically challenging have been able to successfully overcome the difficulties posed by current low oil prices, the problems in Brazil cannot be solely blamed on the world oil crisis.
Unfortunately, there is strong sentiment in many countries heavily dependent on oil production and exports, to look at the shale revolution, especially that of the USA, as a very short-term phenomenon, and one that is untenable, either because oil and gas prices do not justify exploration and production activities, or because of supposedly unfavorable technical characteristics, such as high production decline rates.
During much of the first decade of the 21st Century, while the country was surfing the boom cycle of its commodity exports driven by Chinese demand, and basking in the glow of its significant pre-salt discoveries, it is now clear that mismanagement and ideologically driven populist policies were destroying its established and successful petroleum exploration and production model.
Driven by misguided ideology, that model, based on relatively transparent, regular concession bidding rounds, was discarded in favor of a new, unnecessary, oil and gas regulatory framework that paralyzed Brazilian exploration activities, and destroyed confidence and the predictability of governing rules. There was no long-term energy policy planning. Yet politically charged, demagogic statements by Brazil´s then-president Lula suggested that Brazil was immune to the problems that afflicted the rest of the world. Lula bragged that the world financial crisis of 2008 was a tsunami in the US, but in Brazil it would be a mere ripple. Implicit in such pronouncements was the suggestion that Brazil´s new leftist policies were the reason for Brazil apparently outperforming the USA and other first world countries, and that such success justified even more ideologically motivated policies. Now it is painfully clear how wrong that view was.
Since at least 2006, Brazil has been planting the seeds of disaster at Petrobras, by indulging in widespread political nominations to fill technical career jobs at Petrobras. Despite the enormous potential of the Brazilian pre-salt, whose recoverable yet-to-find-oil resources were recently re-assessed at between 176 and 273 billion barrels of oil equivalent, a concern remains regarding the speed of development of those resources. If exploration and production activities in Brazil continue tied, by law and policy, to the rhythm at which Petrobras can pursue those activities, there is the real risk that much of the country´s enormous recoverable resources, such as in the pre-salt region, will remain in the ground forever, rather than being produced. If Brazil reaches the twilight of the oil age with significant recoverable oil and gas resources still in the ground, they will likely never be produced, as the world turns to new energy sources.
The same applies to the unconventional resources of oil and gas in many countries. There is an element of urgency in producing those resources. The opportunity to benefit from the shale revolution may not last for as long as it would take some countries to develop their unconventional shale resources, so those countries need to consider ways of putting them on a fast track, in order to reduce the risk that they may lose the window of opportunity to be produced.
Most countries do not have the exceptional conditions that the USA exhibits, and which have allowed it to enjoy the fruits of those conditions, as now adays, with exceptional growth in unconventional oil and gas production. Those conditions include ready markets, extensive infrastructure for producing and delivering produced oil and gas through pipelines and other efficient transportation means, and a large and diversified services industry, as well as numerous shale basins and conventional oil and gas fields that readily lend themselves to produce unconventional resources.
The investment and time required to build a similar combination of those advantageous conditions may in practice be impossible to achieve in the short term, in many countries. The strength and success of the USA oil industry owes much of its success to the favorable energy policies that stimulated the growth of thousands of independent oil and gas firms, not only the activities of the large majors. Those conditions are sorely lacking in most other countries. Many of those countries, now struggling with a stalled oil and gas industry, fail to see that the favorable conditions in the USA are not entirely due to geological favorability, but were built over the many years that its oil and gas industry was allowed to grow and consolidate itself, while also building an entire infrastructure industry around it.
Nevertheless, Vaca Muerta and other shale basins around the world demonstrate that there are promising success stories elsewhere. They are fast advancing, even under current market conditions. The oil crisis is not an impediment if other, critically important factors, have been in place, especially strategic planning, a favorable regulatory environment, incentives for the creation and operation of vibrant independent oil and gas and service firms, and freedom from government interference and counterproductive, ideologically driven energy policies.
Those countries that are suffering the most, mostly have themselves to blame. Likewise, those that are experiencing bright prospects, also mostly have themselves to congratulate.
石油圈
