Unexplored Shale Oil Deposits: The Future of Global Exploration

Shale oil, despite its vast potential, remains largely untapped in many parts of the world. In this article, we delve into the economics of shale oil exploration, the factors hindering global development, and the future of unexplored deposits. We will also highlight key regions that have yet to fully tap into their shale resources.

Economic Challenges of Shale Oil Exploration

The economics of shale oil are complex and challenging. Shale oil wells produce at a much slower rate compared to conventional reservoir wells, leading to significantly lower future income when calculated using the net present value (NPV) method. The nominal income, calculated from 30 years of cumulative production, often appears more appealing, but this is typically an overestimation.

To achieve more sustainable production rates, unconventional drilling methods such as long horizontal wells and multiple fracturing stages are necessary, adding significant costs to the overall project. These economic challenges make it difficult for many countries to develop shale oil profitably. Only regions with extremely low drilling costs, such as the United States and Canada, and access to cheap financing have managed to do so at reasonable oil prices.

Regions with Undrilled Shale Oil Deposits

Although some regions have begun to explore and develop their shale resources, most deposits remain unexplored. In the Americas, the Vaca Muerta shale in Argentina has seen some development, but progress remains limited due to economic and drilling challenges. Similarly, while there has been some exploration in Great Britain, the majority of global shale deposits remain untouched.

Argentina: Despite having significant potential, Argentina's Vaca Muerta shale is still in the early stages of development due to ongoing economic issues and relatively high drilling costs, approximately twice that of a similar American well.

Great Britain: Some drilling has occurred, but much of the shale potential remains untapped. The high cost of drilling and infrastructure in the UK make it challenging to establish a viable exploration and development program.

Other Regions: In Romania, there were efforts to develop shale oil several years ago, but the depth and lower quality of the deposits made them economically unfeasible.

Global Barriers to Shale Oil Exploration

Two primary reasons explain why many shale oil deposits remain unexplored:

Current Oil Surplus: The global oil market currently experiences a surplus, leading to low oil prices. This makes it difficult to justify the risk and expense of exploring new deposits, as the potential returns may not justify the investment. Drilling Infrastructure Concentration: Most of the world’s drilling rigs and related infrastructure are located in the United States, where the shale oil industry is well established. This concentration makes it economically and logistically challenging to start exploration in other parts of the world.

Currently, there are approximately 1,100 drilling rigs globally, with 900 operating in the United States. This leaves a meager 200 rigs available for exploration in other regions, which are focused on conventional and heavy oil fields where profitability is more assured.

Future Prospects

While some countries like Saudi Arabia have acknowledged the presence of significant shale oil deposits, they are unlikely to invest in exploration for now. Instead, they are focusing on maintaining production in more conventional and heavy oil fields to keep global oil prices stable.

However, if oil prices were to rise substantially or significant breakthroughs in drilling technology were achieved, it is possible that the landscape of global shale oil exploration could evolve. Countries with cheaper drilling costs and better access to financing may then become more viable players in the shale oil market.