6 questions answered on the return to global shale exploration

The first wave of shale oil and gas exploration outside of the US (‘Global Shale 1.0’) was largely unsuccessful. But in an environment of i rising oil and gas prices and increasingly acute regional supply risks, unconventional plays globally are gaining renewed attention. So, what do E&P firms, governments and investors need to know about ‘Global Shale 2.0’?  

For our latest Horizons Live webinar, we spoke to two Wood Mackenzie analysts, the authors of the report A hydrocarbon copy: the upstream industry’s return to international shale exploration. Read on for the first two answers, and fill in the form to access the full discussion about the next wave of global shale.

Q1. Why the renewed interest in international shale exploration? 

Global shale exploration has been tried before, but in the early 2010s, it was largely unsuccessful. A combination of geopolitical shifts, revisions to global oil and gas demand expectations and a now maturing US shale sector make global shale exploration a more attractive proposition than it was just a few years ago. 

Previous global unconventional oil and gas exploration ilast decade resulted in only two significant successes: the Vaca Muerta play in Argentina and the Jafurah project in Saudi Arabia. Failure to progress elsewhere was not due to a lack of potential, however, but rather because lower-cost, lower-risk acreage in the Permian Basin offered better growth options that caused key explorers to retrench. 

Better datasets allow explorers to be more selective, while improved technology has pushed down shale development costs everywhere. The current conflict in the Middle East is driving a renewed focus on energy security, prompting governments to rethink policies.  

Q2. How does Global Shale 2.0 differ from earlier failed attempts? 

In the early 2010s, shale exploration and production was notably more expensive than exploiting conventional plays. Many International projects focused on greenfield frontier geographies where local prices would be high enough to support expected asset economics.  

Unfortunately, however, explorers quickly hit problems. Holes often came up dry, while regulations, permitting and political opposition slowed progress. The oil-price downturn of 2015-16 saw international shale exploration budgets slashed as projects became uneconomic. Instead, global shale E&P firms pivoted to focus almost entirely on the Permian Basin, where projects were cheaper, less risky and faster to scale.  

Today, the ‘unconventional’ techniques used to extract oil and gas from shale are well-established, reducing risk, while economics are more favourable. At the same time, operators are applying a more rigorous approach. Just 20 high-grade plays are currently in the spotlight (compared to over 100 during Global Shale 1.0). Countries with hydraulic fracturing bans, unfavourable fiscal terms and obstructive red tape are being avoided. 

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