By BEN DuBOSE
SAN ANTONIO, Texas -- The success of the US shale revolution
is unlikely to serve as a template for shale development
around the world because of unique services and
infrastructure in the country, a speaker said on Monday at
the International Petrochemical
Dr. Kenneth B. Medlock III, the James A. Baker III and Susan
G. Baker Fellow in Energy and Resource Economics at Rice
University, said the main risk to global shale development is
economics and whether project
s would be profitable.
When you look at how developed the upstream energy
industry is in the US, in terms of services at the well site,
you have to compare it to other parts of the world which are
nowhere near as developed, said Medlock, who spoke in
Mondays panel session on global shale development.
That raises costs.
In a hypothetical comparison, Medlock said a well in the
Haynesville Shale in Louisiana would cost 2.5-to-3 times more
to drill in Poland.
Access to things that make it possible to drill wells
is not the same, Medlock said. Theres much
less developed infrastructure. That will limit the pace of
entry in those places, so you get a much slower
Medlock noted that among all global rig activity in the
upstream, 80% is currently found in the US and Canada.
What we have here is a very richly developed upstream
services industry to provide services for rig activity,
he said. This is a really important point.
Another huge selling point for US shale development is
The US is unique, said Medlock. Here,
producers can negotiate directly with land owners for mineral
rights and acreage acquisition. Thats big. They get
something. Outside the US, mineral rights are mostly owned by
the state, so there is much less incentive to work
One exception to the rule is Australia, where land owners are
compensated for their cooperation, he explained.
Theres not a large population but they do have
plenty of resources, said Medlock. But the
trouble is they still dont have well-developed
infrastructure. There are only two wells capable of
horizontal drilling in Australia. Thats a
Even with that drawback, Medlock lists Australia as tied with
Argentina for the most high shale potential (outside of the
US) over the short-term.
Positive factors for Australia are that resource developers
can pay land owners for access along with the ability to
trade capacity rights. However, the nations onshore
service industry is underdeveloped, Medlock warned, and costs
are expected to be 2-to-3 times higher than the US.
In Argentina, the service industry is better developed than
in Australia and the shale resource potential is similarly
very large. But costs are still estimated to be approximately
twice as high as the US, and the political risk is project
ed as very high, Medlock
Looking around the rest of the world, Medlock cited a medium
outlook for China over the near-term, but high
over the long-term.
Theres a large resource potential limited by weak
infrastructure now, but the potential for a continental,
hub-based market is high, he said.
With an underdeveloped service industry, costs are seen as
about 3 times higher than in the US.
, the overall outlook is
low, owing to an underdeveloped onshore services industry and
the green movement serving as a major impediment,
Medlock explained. The lone exception is the UK, which has a
medium outlook. Costs there are seen to be 2-to-3
times higher than in the US.
The wild card in the mix could be Mexico, where significant
resource potential exists and the proximity to US shale plays
could help with regards to services.
However, concerns over security are keeping many top
The first reported kidnapping of an oilfield services
worker occurred about 3 weeks ago, Medlock said.
Companies see the resource jewel, but they balk at the
Another potential pitfall for development is an increase in
and changing regulations in developing countries, such as the
Once you have a roof over your head and clothes on your
back, you start to think less about that one extra
dollar, Medlock said. As incomes rise, you start
to see more environment
Thats where were going in China right now, moving
away from an export-oriented model to one that is more
service oriented and more environment
As we look down the next 30 years, thats the next
major transition that were going to see unfold before
our eyes, he added.
As a result, even though a substantial number of shale
resources have been identified or assessed in China, the
manner in which regulatory and institutional features evolve
will be very important.
In the meantime, the US is in the pole position with regards
to shale development, and it appears likely to hold that spot
for quite a while.
Resources are a necessary condition for shale
development, but they are not sufficient, said Medlock.
As you look out around the world, you realize the US is
unique for a lot of reasons.