Chevron Corporation (CVX), Schlumberger Limited. (SLB), Halliburton Company (HAL): Will the Shale Revolution Go Global?

Page 1 of 2

In the U.S., advances in drilling technologies, such as horizontal drilling and hydraulic fracturing, have brought about a veritable energy renaissance.

Thanks to staggering production growth from shale oil plays previously thought inaccessible, U.S. oil output is the highest it’s been since at least 1998. Some experts are even suggesting that the shale revolution could help bring about energy independence as early as 2020.

But while the U.S. may have been a first-mover in applying advanced drilling technologies to shale fields, it’s not the only nation endowed with vast shale reserves. In fact, China may hold 1,275 trillion cubic feet of technically recoverable shale gas, according to data from the U.S. Energy Information Administration. If accurate, that’s nearly 50% more than America’s 862 trillion cubic of recoverable reserves.

Will China and other countries around the world see the same success with shale drilling that America has?

A global shale revolution?
Probably not any time soon. According to Andrew Brown, head of international oil and gas production at Royal Dutch Shell plc (ADR) (NYSE:RDS.A), shale development in the rest of the world won’t proceed as quickly as it has in North America.

Chevron Corporation (NYSE:CVX)The lack of sophisticated equipment, highly skilled personnel, and the need for much more exploration would limit international growth in shale output, he said. Unlike in the U.S., where high initial levels of investment ensured that shale projects were brought online rapidly, projects in the rest of the world can be expected to take much longer.

Brown’s assessment is supported by Shell and other oil majors’ experiences with shale drilling outside of North America. For instance, Exxon Mobil Corporation (NYSE:XOM) retrenched from its operations in Poland last year after initial tests failed to produce commercial quantities of natural gas. Chevron Corporation (NYSE:CVX) echoed similar concerns, offering a bleak outlook for shale production potential in Europe.

Other barriers to shale development outside North America include legal hurdles, such as onerous regulations and political opposition to fracking in Europe, and resource limitations, such as shortages of water — a crucial input in the fracking process — in China.

China highlights challenges for global shale development
In fact, China’s situation is a great example of some of the major hurdles facing foreign shale development. Despite its vast potential reserves of shale gas, Chinese companies have virtually zero experience in shale drilling. As a recent auction highlighted, of the 16 firms that received rights to explore the country’s shale gas fields, not a single one had drilled a gas well before.

China also lacks two other crucial advantages that helped the U.S. become a pioneer in shale drilling — the existence of clearly defined and enforceable property rights and the existence of a vast network of pipelines and other infrastructure capable of transporting large volumes of oil and gas.

For instance, though oilfield services firms Schlumberger Limited. (NYSE:SLB) and Halliburton Company (NYSE:HAL) have shown a keen interest in developing China’s shale resources, the absence of clearly defined and enforceable patent and property protection laws has given them reason to pause.

Instead, they’ve decided to gain exposure to China’s shale potential through acquiring interests in smaller, Chinese companies that are closer to the action. Last year, Schlumberger Limited. (NYSE:SLB) paid roughly $80 million to purchase a 20% stake in Hong Kong-listed Anton Oilfield Services Group, while Halliburton Company (NYSE:HAL) inked a joint venture deal with China’s SPT Energy Group.

Page 1 of 2
blog comments powered by Disqus
Insider Monkey Headlines
Insider Monkey Small Cap Strategy
Insider Monkey Small Cap Strategy

Insider Monkey beat the market by 52 percentage points in 24 months Click to see monthly returns in table format!

Lists

The 14 Most Watched TV Finales Ever

The 10 Best Selling Role Playing Games of All Time for PC

10 Most Influential Papers In Economics

Top 8 Biggest Charities in the US

10 Worst Celebrity Career Moves Ever

Top 10 Best Paid Tennis Stars in the World

10 Cities with High Demand for Nurses

6 of the Worst Greeting Card Messages Ever Crafted

6 Ways to Make Money in ArcheAge and Build Your Empire

10 Foods To Eat To Lower Cholesterol Levels

The 10 Most Hated Television Characters of All Time

The 30 Worst Halloween Costume Ideas Ever Brought to Horrible Life

10 Vocational Skills in Demand Today with Jobs Waiting to be Filled

10 Best Places to Visit in Central and South America

The 10 Greatest Empires in History Which Nearly Conquered the World

The 6 Cheapest Boarding Schools In America 2015

5 Clear Reasons LoL is Better than DotA, Continues to Rule MOBAs

The Only 9 Teams with a Chance to Win the Super Bowl

The 15 Most Common Phobias in America that Induce Fits of Panic

Top 6 Least Expensive Tourist Destinations in 2014

Jim Goetz, Peter Fenton, Jim Breyer: Top 6 Venture Investors for 2014

Top 15 Billionaires in 2014

5 Pitfalls To Avoid When Buying a Franchise

Top 20 Medical Schools in the US – 2014 Rankings

4 Business Strategies that Turned Jamie Oliver into the World’s Richest Chef

6 Qualities That Make You A Good Team Player

10 High Paying Seasonal Jobs in America this Holiday Season

The 10 Busiest Shipping Lanes in the World

5 Most Valuable Brands in China

The 10 States with Highest Substance Abuse Rates Crippling Their Populace

The Top 10 Things to Do Before You Die That Will Echo for Eternity

The 10 Best Selling Items on Etsy

Top 10 Things to Do in Tokyo, the Greatest City in the World

10 Mistakes on Social Media that Can Harm You and Will Probably Get You Canned

The 10 Best Cities to Find Jobs in 2014

The 10 Most Controversial Songs Of All Time to Hit (and get Banned from) the Airwaves

The 20 Biggest IPOs in US History

The 10 Best Places to Visit in Mexico that Are Beautiful and Safe

7 Bad Habits that Age You Beyond Your Years

The 40 Best Fortune Cookie Sayings That Will Leave You Bemused, Befuddled, or Beguiled

10 Foods to Eat Before a Workout to Make Every Drop of Sweat Count

The 5 Best Documentaries On Netflix You Must See

The Most Heartwarming and Inspirational Story Of This Halloween Season, It Will Make You Cry and Jump For Joy

10 Best Party Songs of All Time to Bring the House Down With

5 New World Order Conspiracy Theories that Will Strangle the World

The 10 Highest Rated Movies of 2014

The 10 Largest Container Shipping Companies in the World

The 10 Largest Armies in the World: Who Should We Be Afraid Of?

Best Warren Buffett Quotes on Money You Need to Hear

The 10 Highest Suicide Rates by Profession

Subscribe

Enter your email:

Delivered by FeedBurner

X

Thanks! An email with instructions is sent to !

Your email already exists in our database. Click here to go to your subscriptions

Insider Monkey returned 47.6% in its first year! Wondering How?

Download a complete edition of our newsletter for free!