There’s been a fracking party raging for years now, but apparently the United States was the only one invited. Years after the shale boom took off here in America, the rest of the world is still woefully behind in developing their own shale reserves, which naturally raises the question: why is shale failing abroad? The WSJ helps explain:
Chevron Corp., Exxon Mobil Corp. and Royal Dutch Shell PLC have packed up nearly all of their hydraulic fracturing wildcatting in Europe, Russia and China. The reasons vary from sanctions in Russia, a ban in France, a moratorium in Germany and poor results in Poland to crude prices below what it can cost to produce a barrel of shale oil.Chevron halted its last European fracking operations in February when it pulled out of Romania. Shell said it is cutting world-wide shale spending by 30% in places including Turkey, Ukraine and Argentina. Exxon has pulled out of Poland and Hungary, and its German fracking operations are on hold.
Earlier this week Royal Dutch Shell announced it would put its shale operations in South Africa on hold after delays in the permitting process and the drop in the global price of oil soured its initial hopes. Opaque regulations and bureaucratic snarls also helped kill shale proposals in places like Poland and Lithuania.China is estimated to have nearly twice as much shale gas as the United States (it has by far the world’s largest reserves), but its formations are in remote regions that lack important infrastructure like roads and pipelines. Moreover, China’s rocks are more “crunched” than America’s relatively even-layered “wedding cake” geology, further complicating efforts there.Local protests have also posed a large problem in virtually every country with significant shale reserves, from the UK to Poland to China. Unlike the rest of the world, America affords property owners the rights to what’s underneath their property as well as what’s on the surface. These mineral rights have helped overcome the kind of not-in-my-backyard thinking that has stopped operations elsewhere in the world.Russia has its own shale reserves up in Siberia, but Western sanctions have targeted the transfer of technologies necessary to tap those plays, effectively hamstringing its ability to get its own fracking boom up and running.So, to recap, shale is failing around the world because of any and all of the following reasons: complicated geology, byzantine regulations, virulent local protests, under-built infrastructure, smaller pools of capital, and most recently a plunging price of oil that’s made all of these bets look a lot shakier.Many of these hurdles can be overcome with time—countries have very good economic and strategic reasons to do so—but if these failures tell us anything, it’s how truly remarkable the American energy renaissance has been.