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Russia has largest shale oil resource


The EIA has published a major update to its study of global shale resources outside the US. We commented extensively on the initial study from April 2011. The new study substantially broadens the number of countries, basins and formations analysed, as well as incorporating estimates for shale/tight oil resources, for the first time.

This new study incorporates initial estimates for Russia and suggests Russia is the largest holder of technically recoverable resources (TRR) of shale oil, with 75bbbl potential, approximately 29% more than the US, which has the second TRR largest shale oil base; Russia accounts for some 22% of the global total shale oil TRR.

The study lists China as having the largest shale gas TRR with 31.6tcm, the USA fourth at 18.8tcm and Russia ninth with 8.1tcm.

In total, the study estimates shale oil TRR of 345bbbl, accounting for some 10% of total global oil resources of 3,357bbbl, with shale gas TRR of 207tcm accounting for some 32% of total global gas resources of 648tcm (22,882tcf/3,814bboe).

While shale resources are now seen as substantially increasing global oil and gas resources, particularly for gas, the ability to convert resource into production and reserves remains unrealised outside North America, so far. While shale/tight oil production and shale gas production accounted for 29% and 40% of total US production respectively in 2012, it was negligible outside North America.

Since shale exploration outside North America remains in its infancy, the estimates in the EIA study are subject to significant revision. This is most evident in the equivalent estimates for shale gas potential in Europe between the 2011 study and the current study. For the EU countries and Norway, included in the 2011 survey, estimated total shale gas resources fell 29% to 11.3tcm (398tcf) from 15.9tcm (563tcf), with significant reductions in resource estimates for Poland and France, which were at the time considered to have the most potential for shale within Europe. France continues to ban fracking, which is essential if shale gas production is to be established, while ExxonMobil, Marathon and Talisman have all now pulled out of Poland after disappointing exploration results.

Despite the mooted scale of shale gas resources, it remains our understanding that China has yet to drill a commercial shale gas well.

Russia still has immense conventional resources, which we expect to dominate production for many years to come, but the study highlights the substantial potential shale resource base that Russia enjoys. Moreover, the EIA study only includes estimates for the Bazhenov shale and excludes an assessment of any other potentially productive shales, such as the Achimov. We expect that results from exploratory shale drilling due to start in Russia this year, notably from the Rosneft (Under Review) - ExxonMobil (Hold, TP USD 90/share) JV, will raise investor interest in Russia’s shale potential.

Colin Smith, Marc Jacouris
VTB Capital analyst

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