Where are the tight oil plays outside the US?

What are the prospects for tight oil outside the US? It's a question frequently asked on my travels, and with good reason. If US tight oil can emerge so quickly to disrupt the market, perhaps other plays out there might have the same effect. 

Our upstream analyst teams closely monitor the progress of multiple unconventional oil and gas plays all over the world. We predict that tight oil plays across eight countries will contribute to global supply by the late 2020s. Algeria, Colombia, China, Egypt and Mexico each have an embryonic tight oil industry, and shouldn’t have much impact in that period. Argentina, Canada and Russia are rather more advanced.

Argentina has the most growth potential over the next decade.

The Vaca Muerta has a resource of 2-3 billion barrels of oil (as well as 9.5 billion boe of gas) on the third of the play that has been tested so far either by horizontal or vertical drilling. The remaining two-thirds of the play needs further testing to confirm similar productivity levels. Current activity is mainly focused on developing gas which has had superior well productivity, and price incentives are in place till 2021.

Most tight oil projects are in the pilot stage with operators planning to move to full development by 2020.

There are constraints to rapid progress, among them financial with YPF holding half of the acreage, a lack of infrastructure and limited capacity in the service sector. But IOCs including ExxonMobil, Shell, Total and Chevron have been active since 2011 and bring technological expertise. This will help push oil production up to around 300,000 b/d by 2027 – as well as increase the scope for upside surprise.

Canada today is the biggest tight oil producer outside the US.

Maturing oil-prone plays and low prices have reduced production from the 2014 peak by about 5% to the current 335,000 b/d. Liquids production is split between tight oil (200,000 b/d) and condensate (135,000 b/d).

There are a number of individual plays in the shadows of the Rocky Mountains, including the world-class gas-charged reservoirs of the Duvernay and Montney. These have been productive for oil and condensate, but folding has made Rockies geology more complex – sweet spots are smaller than those of the giant US counterparts.

We forecast tight oil production will be flat at 200,000 b/d over the next decade as new drilling offsets declines. But overall liquids production should rise by around 25% to reach 420,000 b/d in 2027, driven by condensate associated with the rapid growth of Duvernay and Montney gas.

Russia is the tight oil dark horse.

There is already around 1 million b/d of production from unconventional Tyumen and Achimov 'hard to recover' reservoirs that require horizontal drilling and fracking.

The Bazhenov (breakevens US$62/bbl, NPV10; Gazpromneft leading the charge on technology) and Domanik (US$53/bbl, Statoil/Rosneft pilot underway) have huge potential resources of 16 billion barrels of oil, comparable to the Bakken or Eagle Ford. The Bazhenov has the advantage of underlying the existing West Siberian infrastructure. However, EU/US sanctions are hindering technology transfer and the speed of development.

Tight oil ex-USA doesn’t look like a game-changer any time soon.

The plays lack many of the advantages of the US – scale, simplicity of geology, infrastructure, competitive supply chain and a diverse set of operators.

Our forecasts show global production rising from 0.4 million b/d currently, to 1 million b/d by 2027, perhaps to 1.5-2.0 million b/d by 2035. The US does this in a single year rather than several. But in its early stages of development the US has consistently delivered way beyond expectations. It would be a surprise if at least one international tight oil play didn’t do the same.