Shale oil energy

Executive summary
• Shale oil (light tight oil) is rapidly emerging as a significant and relatively low cost new
unconventional resource in the US. There is potential for shale oil production to spread
globally over the next couple of decades. If it does, it would revolutionise global energy
markets, providing greater long term energy security at lower cost for many countries.
• Our analysis suggests that global shale oil production has the potential to reach up to
14 million barrels of oil per day by 2035; this amounts to 12% of the world’s total oil supply.
• We estimate that this increase could reduce oil prices in 2035 by around 25%-40% ($83-$100/
barrel in real terms) relative to the current baseline EIA projection of $133/barrel in 2035,
which assumes low levels of shale oil production.
• In turn, we estimate this could increase the level of global GDP in 2035 by around 2.3%-
3.7% (which equates to around $1.7-$2.7 trillion at today’s global GDP values).
• However, the benefits of such oil price reductions will vary significantly by country.
Large net oil importers such as India and Japan might see their GDP boosted by around 4%-7%
by 2035, while the US, China, the Eurozone and the UK might gain by 2%-5% of GDP.
• Conversely, major oil exporters such as Russia and the Middle East could see a significant
worsening of their trade balances by around 4%-10% of GDP in the long run if they fail to
develop their own shale oil resources.
• The potential emergence of shale oil presents major strategic opportunities and challenges
for the oil and gas industry and for governments worldwide. It could also influence
the dynamics of geopolitics as it increases energy independence for many countries
and reduces the influence of OPEC.
• There are significant strategic implications along the value chain. Oil producers, for
example, will have carefully to assess their current portfolios and planned projects
against lower oil price scenarios.
• National and international oil producers will also need to review their business models and
skills in light of the very different demands of producing shale oil onshore rather than
developing complex “frontier” projects on which most operations and new investment
is currently focused.
• Lower than expected oil prices could also create long-term benefits for a wide
range of businesses with products that use oil or oil-related products as inputs
(e.g. petrochemicals and plastics, airlines, road hauliers, automotive manufacturers
and heavy industry more generally).
• The potential environmental consequences of an increase in shale oil production are complex
and appropriate regulation will be needed to meet local and national environmental concerns.
Shale oil could have adverse environmental effects by making alternative lower carbon
transport fuels less attractive, but might also displace production from higher cost and more
environmentally sensitive plays.