Shale-Oil Development Prospects: The Role of Shale-Gas in Developing Shale-Oil

Douglas B Reynolds,Maduabuchi Pascal Umekwe

doi:10.3390/en12173331

Abstract

Currently, most of the world’s shale-oil is coming from the United States, but more may be needed from non-U.S. sources in order to keep the world price of oil from increasing, and yet a number of petroleum producing countries have yet to develop shale-oil resources. This article investigates why that may be. One reason for this may be the role that shale-gas development plays in the search for shale-oil. In the oil and natural gas industry over much of the 20th century, finding oil has usually been more valuable than finding natural gas because the gas has less energy density than oil, making each BTU (or Joule) of oil energy easier to store, transport and use for consumers. However, since shale source-rock often has both natural gas and oil, then it behooves a shale search process to start by looking for natural gas first rather than oil to enhance the profitability of the search process. The problem, then, is that a shale-oil only search strategy has the same problem that first plagued the oil and gas industry: What do you do with the natural gas? In this paper, we will examine how this “chicken and egg” exploration scenario has played out in the U.S. in order to draw lessons on how difficult shale-oil development will be for the rest of the world.

Highlights

One of the most fascinating concepts in all of energy economics is how shale-gas and shale-oil extraction are compliments in production when it is primarily shale-gas that is being supplied, but they are substitutes in production when it is primarily shale-oil that is being supplied
We are going to look at the development of shale-oil in the U.S, we will look at the role shale-gas played in the development of shale-oil in the U.S, we are going to look at other countries around the world to see if they are naturally inclined toward developing shale-gas resources and if not, it will be highly unlikely that they will soon be developing shale-oil resources
To suggest that the world will soon be awash in vast resources of shale-oil because the U.S has been able to develop and produce much shale-oil, obfuscates the way in which the U.S shale-oil industry developed, which was through extensive shale-gas exploration and development as a precursor to shale-oil development

Summary

Introduction

One of the most fascinating concepts in all of energy economics is how shale-gas and shale-oil extraction are compliments in production when it is primarily shale-gas that is being supplied, but they are substitutes in production when it is primarily shale-oil that is being supplied. If any natural gas is found, it is not more than 50 or 100 miles from an existing pipeline so that the natural gas can be marketed This gives explorers a greater incentive to go out and find shale-gas and if you happen to find shale-oil, no problem that is valuable too, so the high price of natural gas, which is regionally priced due to the high cost per energy unit to transport the natural gas relative to oil, gives the U.S an incentive to look for shale-gas. We are going to look at the development of shale-oil in the U.S, we will look at the role shale-gas played in the development of shale-oil in the U.S, we are going to look at other countries around the world to see if they are naturally inclined toward developing shale-gas resources and if not, it will be highly unlikely that they will soon be developing shale-oil resources

Shale Resource Characteristics

Regional Issues Associated with Developing Shale-Gas

Findings

Conclusions