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Is the Shale Revolution a US-only phenomenon?

July 11, 2013

Assessing the data from thousands of shale oil wells, Belfer Center scholar Leonardo Maugeri comes to two important conclusions:

1.  The US in on a trajectory to become the worlds largest oil producer by 2017.  Also, the size of the various shale formations, coupled with the increasing technological and professional abilities to maximize those plays indicate that this position could be held for a long time.

2.  The idiosyncratic nature of the US oil industry makes it unlikely that this revolution will be experienced elsewhere, at least not in the near term.  Three factors unique to the US are driving the Shale Revolution:  (1) the existence of private mineral rights in the US; (2) the large number of drill rigs with hydraulic drilling capabilities in the US – 60% of all the world’s rigs are in the US, and 95% of those can drill horizontally – this allows a high degree of drilling intensity in the three large US shale plays; and (3) the American tradition of “wildcatting” and independent drillers and operators gives the nation a large number of outfits willing to risk and lose it all pursuing oil wealth.

Fortunately, the Shale Revolution has only just begun in the US.   Most of the current activity is centered in three regions – Bakken shale in North Dakota and Eagle Ford and the Permian Basin in Texas.  There are several other shale locations that are likely to be very rich producers as well.  California’s Monterey Shale alone is estimated to have as much as 4 times the amount of oil as the Bakken formation.  Of course, the environmental movement, and its anti-oil contingent, are very strong in California, so it may be a decade or longer before Monterey shale sees any significant production.

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