How Long Will Shale Oil Last?

Many experts have hailed shale oil and gas as a game-changer for the U.S. economy. The application of new drilling techniques has led to an unprecedented surge in domestic oil production, prompting many to conclude that U.S. energy independence may be just around the corner.

But shale oil, like most other natural resources, is a finite resource. Some skeptics have even pointed out that shale wells exhibit much steeper decline rates than conventional wells, which, they suggest, implies that the boom could fizzle out much sooner than mainstream commentators believe.

So just how long could shale oil last?

A decade of global shale oil
According to a new study by the U.S. Department of Energy, the world has enough shale resources to satisfy more than a decade of global oil consumption. The report, which marked the first time the department has assessed the size of global shale resources, pegged technically recoverable shale oil resources at 345 billion barrels, or about 10% of global crude oil supplies.

The study surveyed shale reserves in more than 40 countries and determined that Russia had the world's largest shale oil reserves, at around 75 billion barrels. The U.S. was second with about 58 billion barrels. Rounding out third, fourth, and fifth places were China, at 38 billion, Argentina, at 27 billion, and Libya, at 26 billion.

However, the report considered only resources that were deemed technically recoverable -- meaning those that can be extracted using current exploration and production technology -- without taking into account cost and profitability. It further left out prospective shale areas, such as those underneath major oilfields in the Middle East and the Caspian Sea region, and cautioned that its estimates are "highly uncertain."

North American success with shale
Though the new estimates are encouraging, there are a few important points to consider. First and foremost, it's unclear whether North American success in shale drilling can be replicated around the world. Thus far, only the U.S. and Canada have managed to extract commercial quantities of oil and gas from shale formations.

The main reason for this has been the large-scale application of new technologies, such as horizontal drilling and hydraulic fracturing, or "fracking," that have allowed producers to more easily coax oil and gas from dense rock formations. Though oilfield services firm Halliburton (NYSE: HAL  ) was the first company to use hydraulic fracturing commercially to recover oil and gas all the way back in 1949, the practice didn't become widespread until just about half a decade ago.

Now, Chesapeake Energy (NYSE: CHK  ) is one company using the technique in popular oil plays, such as Texas' Eagle Ford, where it has been met with considerable success. In the first quarter, the company reported a staggering 225% year-over-year increase in daily net Eagle Ford production, which came in at 75,000 barrels of oil equivalent. Some companies are even finding innovative new ways to power their fracking operations.

After Range Resources (NYSE: RRC  ) paved the way by becoming the first company to apply hydraulic fracturing techniques to recover natural gas in the Marcellus shale of Pennsylvania, Cabot Oil & Gas (NYSE: COG  ) followed in its pioneering footsteps by recently becoming the first company to use "field" natural gas in northeastern Pennsylvania to fracture wells –--a feat it accomplished by using engines that can run on either natural gas or diesel.

Can North American shale success be copied?
However, it's unclear whether U.S. and Canadian success in shale drilling can be replicated in other countries with large shale resources. In addition to having pioneered new drilling technologies, U.S. and Canadian energy producers enjoy several key advantages that their international counterparts do not yet possess.

Chief among them is the presence of a sophisticated and extensive infrastructure network, consisting mainly of pipelines and storage terminals. In addition, U.S. and Canadian energy producers have preferential access to crucial ingredients in the fracking process, such as specialized drilling rigs and plenty of water, as well as clearly established and enforceable property rights.

One company that was a true pioneer and driving force behind the U.S. shale revolution is Chesapeake Energy. While debt-related challenges continue to cast a dark cloud of uncertainty over Chesapeake's future, few would question the superb quality of its remaining oil and gas assets. For many investors, the important question is whether Chesapeake's current share price reflects the true value of its assets. To answer that question and to learn more about Chesapeake and its enormous potential, you're invited to check out The Motley Fool's brand-new premium report on the company. Simply click here now to access your copy, and as an added bonus, you'll receive a full year of key updates and expert guidance as news continues to develop.


Read/Post Comments (11) | Recommend This Article (11)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On June 16, 2013, at 1:52 PM, GeorgePolitico wrote:

    If our new supplies of natural gas suddenly run out, it will be calamitous. We need a national energy inventory and a world energy inventory. We should diversify to minimize the effects of sudden exhaustion (or prohibition) of any one energy source, and we should subsidize non-carbon sources of energy, "green" energy in particular.

  • Report this Comment On June 16, 2013, at 2:34 PM, VegasSmitty wrote:

    Going to school in the late 50's we were told we'd be out of oil by now.

  • Report this Comment On June 16, 2013, at 2:44 PM, luckyagain wrote:

    "According to a new study by the U.S. Department of Energy, the world has enough shale resources to satisfy more than a decade of global oil consumption."

    So that means that the world has an extra ten years of oil consumption. It is good for the US but it is not a solution for oil consumption on a worldwide basis. Hopefully the US will use this cushion to make use of more solar and wind resources. Otherwise in a few years, the US will again face the upward cost of oil and its heavy hand on the economy.

  • Report this Comment On June 16, 2013, at 5:11 PM, externity wrote:

    So, in ten+ years or so, this house of cards will crash and burn(*) and all those stocks will become worthless.

    So, are you in touch with reality, do you have a serious plan?

    Buy Soylent Green stock?

    (*) and civilization as we know it, will be over and done.

    ..............and we're still planning a Mars landing......

    GD all the Motley Fools

  • Report this Comment On June 16, 2013, at 5:54 PM, GaryR40 wrote:

    And what will the future generations use for petrochemical feedstock if we selfishly, greedily and irresponsibly use up all the oil and natural gas we have in the ground? I am sick of those who insist that we have unlimited supplies of them waiting to be discovered and extracted. News flash: Other countries' petroleum supplies DO NOT belong to us and we DO NOT have a birthright to cheap fuel!

  • Report this Comment On June 16, 2013, at 6:58 PM, farmerandre wrote:

    During my teen years in the 70's, Oil was supposed to last until about 2025 and even though they knew about shale oil then, they weren't sure how to extract it on a widespread basis!

  • Report this Comment On June 16, 2013, at 11:26 PM, RHO1953 wrote:

    I remember the barely functional moron Carter sitting in the WH wearing a sweater and telling us we would be out of oil by 2000. That was 13 years ago for you democrats and we still have quite a lot of oil. I think perhaps oil is not really finite. They have yet to demonstrate how oil is created. The old idea of decomposing dinosaurs is probably bs.

  • Report this Comment On June 17, 2013, at 1:21 AM, mbee1 wrote:

    this estyimate is just bogus. The articles comment can the technology be exported is another bogus comment on technology. They have been using horizontal drilling and fracking overseas for at least 40 years. Ten years of reserves is also bogus. I remember valueing an oil field share for the state. The estate appraise said it had only a three year life. I looked at the estimated oil reserves in the field , the rate of drilling and saw

    the estimate was bogues as tht field is still outputing oil at the same rate it was doing 20 years ago and per the reserves has at least another 30 years of life. Another example is all those oil fields in the LA basin, they were depleted yet somehow drilling is going on again and oil a lot of oil is coming from depleted fields. When an oil person claim reserves of X, triple them as the common assumption is the reserves that can be extracted are 1/3 of the total oil.

  • Report this Comment On June 17, 2013, at 3:17 AM, Higins wrote:

    So Motley Fool believes these "experts" but somehow does not factor in the scientific consensus of every national and international scientific body of standing which says the continued burning of fossil fuel at our current pace will catastrophically increase global warming?

    If we do burn these glorious ten years of shale oil and the rest of the planet's known reserves of fossil fuel, we are toast. At that point, the escalating positive feedbacks of methane released from the arctic, the albedo effect, the warming and acidification of the oceans, and the loss of the major forests due to drought will make any effort to limit climate change a moot point.

    But at least we will have our investment portfolios.

  • Report this Comment On June 17, 2013, at 7:08 AM, stevema1 wrote:

    This is just like when the tree huggers told us in the 70's that we would be out of oil by the 80's and we would all freeze to death, all that was all crap just like this report is.

  • Report this Comment On June 17, 2013, at 8:30 PM, damilkman wrote:

    I love these articles as it brings out the political extremists :) I think what is lost in the politics wars is that the combination of market forces and innovation have increased recoverable reserves of oil and natural gas. If for some reason the estimated reserves are less and the price increases then other methods of generating hydrocarbon based energy like Rock Shale, natural gas in solid form on the sea floor, or even algae will be economical.

    On the flip side we are observing that the masses are using less energy because the stick that is high prices is impacting their habits.

    The lesson is that the market will take care of itself if we let it. For those who are worried about global warming 3 billion impoverished people are not going to care about the uncertainty of the various models when they have an opportunity to not live in the same building as their animals. If Al Gore were even half right I should be under water by now. Since Al Gore is a zillionare he could care less about them as long as he has his stuff.

    The American public will be interested in green technologies when the price and technological threshold is right. The reality is alternative energy is a couple Moore's Law flips away before it is really competitive. If green companies do a good job at that time, we will see the end of the oil age.

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