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O shore fracturing to exploit oil and gas resources locked in shale, siltstone and mudstone, as well as production of oil from oil sands, has opened huge new sources of energy supply. Nowhere is the development of unconventional oil resourc- es more rapidly advancing than in North America. Between 2011/2014 the production of oil in the US and Canada in-creased 39%, primarily the result of incremental production of shale/tight oil in the US and oil sands resources in Canada. As a result, production of oil in the US and Canada now ac- counts for 27.6% of non-OPEC oil production ? up from 22% in 2011.Development of shale/tight oil resources outside the US has been much slower due to land rights issues, access to drill equipment, environmental opposition to fracking, etc. But the shale/tight oil revolution will undoubtedly spread beyond the US. Opportunities are too big to ignore. The EIA estimates that shale/tight oil resources worldwide total 345 billion bar- rels ? and account for 10 percent of global oil reserves. The equally spectacular revolution in shale/tight gas produc- tion is changing global gas supply and is threatening the domi-nance of major players in the LNG sector. And like shale/ tight oil, the shale/tight gas revolution is centered in North America. Production of shale/tight gas in the US is projected to grow 52% over the next decade. According to the EIA, shale and tight gas is expected to provide 71% of US natural gas produc- tion in 2024, up from 61% today. In 2024 the US is expected to be producing 22.5 TCF of natural gas from shale and tight rock formations ? the equivalent of more than three times the current natural gas production of Qatar. A substantial, though yet unclear, portion of future US gas production will be exported as LNG. BP expects that the US ?will become a net LNG exporter from 2016, reaching a total net LNG export volume of 11.2 Bcf/d by 2035.? ExxonMobil sees North America shifting ?from a net importer to a net ex- porter of natural gas by 2020 as production outpaces demand.? Like oil, development of shale/tight gas resources outside the US has been much slower due to land rights issues, limited drill equipment, environmental opposition to fracking, etc. But the shale/tight gas revolution will undoubtedly spread be- yond the US. As with shale/tight oil, the opportunities are too big to ignore. The EIA estimates that world shale gas resources total 7299 Tcf ? 32% of world natural gas resources Shale/tight oil and gas development ultimately competes with deepwater for investment resources. These resources are nite ? and energy companies will channel their investment resources to the opportunities offering the best nancial re- turn. Given the advances taking place in the shale/tight rock sector, it is reasonable to conclude that the shale/tight rock revolution is eroding investment in deepwater projects. Signi cantly, the competitive balance is shifting in favor of shale/tight rock. The cost of drilling shale/tight wells is fall- ing ? and well productivity is increasing. Meanwhile, techni- cal challenges of ultra-deepwater development, local content barriers and an overheated industrial base are forcing deepwa- ter costs higher. Energy Company Investment Cutbacks Many energy companies have recently indicated they plan to reduce capital spending this year. For example: Projected Growth in Global Natural Gas Demand (Quadrillion Btu)Source: ExxonMobil Source: IEA Ten Year Trend in US/Canada Oil Production(millions of barrels/day) May 201410 MTRMTR #4 (1-17).indd 10MTR #4 (1-17).indd 105/12/2014 10:12:33 AM5/12/2014 10:12:33 AM
