North America is not unique in the abundance of unconventional hydrocarbon resources (in particular, shale), yet it is the only place thus far that has seen significant progress in their extraction and monetization. This success has been driven by a flexible land leasing system for drilling rights, a mature infrastructure network for oil and gas transportation, a favorable fiscal regime, a well-established and very active service industry, and easy access to capital and world leading technologies. To what extent are these attributes singular to North America, and to what extent can the extensive development of unconventional resources seen in North America be replicated in other parts of the world? Many countries have well established and successful conventional E&P activities and fiscal/contractual terms, but have struggled with the question as to how applicable these terms are to unconventional resource exploration, evaluation and development. This paper will seek to identify the key differences in the application of North America’s leasing, regulatory and fiscal regime to shale development, as compared to alternative systems applied elsewhere in the world. The authors start by examining the fundamental cost and production profiles of conventional and unconventional wells in two North American onshore plays, and then in two potentially competing North American capital investment opportunities in order to establish whether there is anything fundamental in the economics of unconventional exploitation that requires different treatment. This analysis is then used to consider economics under cost, regulatory and fiscal regimes outside of North America.
The abundance of unconventional hydrocarbon resources in North America is not unique, though it is the only region that has seen significant progress in extracting and monetising these resources. Many countries have successful conventional exploration and production activities, and have developed suitable fiscal terms and governance models, but these models are challenged with the relevancy of these terms when applied to unconventional resource exploration, evaluation and development. This extended abstract reviews factors that are largely in the control of a host government (for example, the fiscal, licensing and regulatory system), and where challenges lie in cost disadvantages (the provision of services and infrastructure, for which different considerations and approaches need to be applied). It also compares the fundamental economic characteristics between similar-sized investments in an onshore unconventional play and in a conventional oil field in deepwater. Previously, the authors compared these investments in a US environment and the same characteristics will be used for examining typical terms in other environments around the world. By isolating impacts from leasing and fiscal terms, the economics will also be analysed before the overlay of fiscal terms, and then with a royalty/tax and a generic production sharing contract type of fiscal regime. The findings will help in understanding what can facilitate and accelerate the development of unconventional resources, and which enabling environments might be required to attract resources such as capital, technology and expertise.
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