The shale boom that revolutionized the oil and gas market in the U.S. and Canada is beginning to have a global reach.
by Savanna Gray
August 26, 2015

The shale boom that revolutionized the oil and gas market in the U.S. and Canada is beginning to have a global reach. Countries such as China and Argentina are building infrastructure to support the commercial recovery of unconventional hydrocarbons. Other nations are also starting to look into shale formations. Poland, Algeria, Australia, Russia, Colombia and Mexico are in the early stages of exploration.

According to the U.S. Energy Information Administration (EIA), more than 275 wells have been drilled in Argentina and more than 200 in China since 2013. The two are positioned to produce significantly larger volumes of tight oil and shale gas.

Argentina

Much of Argentina's shale activity is concentrated in the Vaca Muerta shale play. Many companies that operate in the U.S. also work in this area.

The Vaca Muerta "has a lot of geologic similarity with the Eagle Ford," according to Jonathan Mack, Technical Sales Advisor for Unconventionals at Halliburton. In addition to this basin, Halliburton operates internationally in Australia's Cooper Basin, the Pimienta in Mexico, the Duvernay and Muskwa in Canada, and shale and tight gas formations in Saudi Arabia.

Both national and international companies produce in the Vaca Muerta. In April 2015, Yacimientos Petroliferos Fiscales (YPF), a national oil company, reported that they produced 22,900 barrels of oil and 67 million cubic feet of natural gas per day. These resources come from projects in which YPF partners with Chevron, Dow Chemical and Petronas.

Argentina is at an advantage in the downturn with its fixed pricing, often set at levels above the commodity price in other markets.

But the favorable comparison to the Brent and West Texas Intermediate prices ($53.44 and $48.72 at press time) does not guarantee the Vaca Muerta will be a good investment. "International oil companies (IOCs) are scrutinizing the economics . . . and operating costs can be high. But for a national oil company the production drivers can be different," said Mack.

Other Regions

Although China is beginning to see commercial levels of shale oil and gas production, most of the activity is being conducted by national oil companies. Several IOCs are also present.

Shale extraction in countries outside the U.S. has generally been slowed by the drop in oil prices. These areas have high barriers of entry, even for companies that are experts in operation technology.

"Most of these regions, excluding Canada and possibly Argentina, require huge upgrades to the infrastructure," said Mack.

"Right now it is difficult to justify the huge investment to build infrastructure for a long-term project with marginal returns. Some areas will essentially shut down until economic conditions improve."

Mexico is pursuing exploration in shale gas and tight oil formations. Petróleos Mexicanos (Pemex) has drilled oil and gas wells and plans to complete more in 2015. Other IOCs and national companies are expected to invest in exploration and production as well.