EM141104 DOI: 10.
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The Potential Pitfalls of Using North
American Tight and Shale Gas
Development Techniques in the North
African and Middle Eastern Environments
A.N. Martin, Baker Hughes
Summary
Many companies operating in the upstream gas industry in the
Middle East and North Africa (MENA) are interested in the out-
standing technical successes achieved by the US and Canadian
tight and shale gas producers. It seems almost miraculous that
companies can obtain significant gas-production rates from rocks
with permeabilities measured in nanodarcies—so low, in fact, that
permeability becomes almost impossible to assess accurately. In
North America, the main factor now constraining shale gas pro-
duction is the historically low gas price. Operators in MENA,
who are accustomed to working in formations with permeabilities
five or six orders of magnitude greater, have realized recently that
they may be sitting on top of huge untapped gas reserves that had
been evaluated previously as subeconomic.
In recent years, several major MENA-based operating compa-
nies have bought interests in US and Canadian tight and shale gas
operations, with the objective of acquiring experience and tech-
nology that can be applied to similar formations in MENA and
elsewhere. This seems to be an obvious and wise strategy; un-
fortunately, the problem is not the strategy, it is the tactics (“the
devil is in the details”). In many instances, operating companies
have been disappointed to discover that they cannot simply trans-
plant an American-style development into MENA. Similarly,
many North American independents have viewed the untapped
low-permeability gas reserves of MENA as a natural territory for
expansion, only to find themselves frustrated at almost every turn.
This paper seeks to highlight the potential pitfalls of trying to
use North American development techniques in MENA, and to
promote strategies and tactics that are more suitable. In addition,
this paper will suggest structural changes that could have a signifi-
cant positive impact on low-permeability gas developments in
MENA.
Introduction
History of Tight and Shale Gas in the USA. In 1980, the US
Federal Government introduced the Alternative Fuel Production
Credit, under Article 29 of the Internal Revenue Code. This pro-
vided for an income tax credit for (1) oil produced from shale and
tar sands; (2) gas from geopressurized brine, Devonian shale, coal
seams, tight formations, or biomass; (3) liquid, gaseous, or solid
synthetic fuels produced from coal; (4) fuel from qualified proc-
essed wood; and (5) steam from solid agricultural byproducts
[Energy Information Administration (EIA) 1999]. The tax credit
was fixed at USD 3/BOE, provided that the oil price remained
below USD 23.50, with reductions up to a price of USD 29.50,
above which it ceased (all figures in 1979 US dollars). Initially,
the credit was set to run from 1980 to 1989, but it was subse-
quently extended twice until the end of 1992.
This marked the start of the boom in the US tight gas industry
and, to a lesser extent, the coalbed-methane (CBM) industry,
Copyright V
C 2012 Society of Petroleum Engineers
This paper (SPE 141104) was accepted for presentation at the SPE Middle East Oil and Gas
Show and Conference, Manama, Bahrain, 6–9 March 2011, and revised for publication.
Original manuscript received for review 10 June 2011. Revised manuscript received for
review 11 April 2012. Paper peer approved 31 May 2012.
July 2012 SPE Economics & Management
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which had been almost nonexistent until then. The impact of this
credit on the US natural gas industry has been profound and long-
lasting, producing significant and sustained production from
unconventional natural gas formations (defined for the purposes
of this paper as tight gas, shale gas, and CBM). In addition, the
credit created an infrastructure and an industry that has lasted
well beyond the end of the tax credit to the present day, as illus-
trated in Fig. 1.
For the period covered by Fig. 1, the proportion of the total US
natural gas production that has come from unconventional forma-
tions has increased from 13.4 to 44.2%, with the major benefits
coming from both tight and shale gas production. By 2010, some
reports state that shale gas production alone may have risen to
18% of total US gas production, some five times greater than its
2006 level (Smith 2011).
Over the last 4 or 5 years, the major area of interest has been
in shale gas formations. One loose definition of “tight” is a forma-
tion that cannot produce gas at economic rates without the assis-
tance of significant stimulation, usually in the form of hydraulic
fracturing (a technology that has proved to be essential for all
three forms of unconventional gas). Generally, tight gas reservoirs
are similar to conventional reservoirs except for their much-lower
permeability (generally accepted to be 0.1 md or less). By con-
trast, not only do shale gas reservoirs have permeability perhaps
three orders of magnitude lower than tight gas reservoirs, but they
also differ because with shale the source rock is also the reservoir.
These differences radically alter the reservoir, geomechanical,
and production mechanisms. Nevertheless, while shale reservoirs
are undoubtedly more difficult to exploit than tight gas or CBM,
much of the infrastructure and expertise created to exploit tight
gas can be readily applied to shale. If the US tight gas industry
exists only because of the Alternative Fuel Production Credit,
then the shale gas industry exists only because it was able to
exploit infrastructure, expertise, and resources developed for the
tight gas industry. This has to make the Alternative Fuel Produc-
tion Credit one of the most effective fiscal stimuli ever conceived.
The major US tight and shale gas plays are illustrated in Figs.
2 and 3, respectively.
Global Tight and Shale Gas Reservoir Development. Outside
of North America, activity in tight and shale gas formations has
been very limited. Generally, tight gas developments are in for-
mations with permeability roughly one order of magnitude greater
than in the USA. Thus, the definition of a “tight” formation being
one that requires fracturing to be economic is generally more ap-
plicable than any permeability-based definition. Significant devel-
opment projects have been undertaken in Argentina, Mexico,
Australia, Germany, Algeria, and Oman, with appraisal projects
in many other places. However, activity has been extremely low
as compared to the US—one indication of this is the fact that 90%
of the world’s hydraulic fracturing happens in North America,
and of the remaining 10%, approximately three-quarters are
placed in oil formations. As for shale gas outside of North Amer-
ica, at the time of preparation of this document, the author is
aware of only 620 wells (including one in Tunisia and two in
Saudi Arabia) that have been drilled and fractured, all as
147
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30,000 available for North America. It is fragmented, contradictory, and

often nonexistent or outside of the public domain. While prepar-
25,000 ing this paper, the author spent a considerable amount of effort
Shale trying to track down reliable estimates for tight and shale gas
Gas Production, Bcf

Tight reserves around the world. Many sources of information were

20,000
CBM
15,000
Conventional
10,000
5,000
0
1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
Fig. 1—US natural gas production from conventional and
unconventional reservoirs. This chart combines data from sev-
eral sources (EIA 2010; Pickering and Smead 2008; Ground
Water Protection Council 2009; ARI 2006; Stevens et al. 1998;
and Kuuskraa and Stevens 2009). [The overall natural gas pro-
duction data is probably very reliable (EIA 2010), but some of
the individual figures are less so. In particular, there is a signifi-
cant variation in tight gas production figures among sources,
as the EIA does not specifically track tight gas production. Con-
sequently, the tight gas data should be treated with caution
(and as a result, so should the data for conventional gas pro-
duction, as this was arrived at by subtracting shale, tight, and
CBM production from the EIA’s total production figures.]
exploration or appraisals, although many more may have been
drilled but not fractured.
The simple fact is that there is still a large amount of easy-to-
reach gas around the world, especially from major producers such
as Russia, Qatar, Norway, Indonesia, Algeria, and Nigeria who
are willing to sell their gas to anyone at the end of their pipeline
networks or who can regasify their liquefied natural gas (LNG).
So far, non-North American unconventional gas has not been able
to compete with gas from these sources, except for a few localized
areas where specific geographic and/or political issues have made
gas imports less attractive.
Consequently, the quantity and quality of information on
global unconventional gas resources is far below that which is
obtained. Ultimately, however, they are all based on an apparently
seminal piece of work by Rogner (1997). This dates back some
time and is itself a collation of multiple sources of information
that date back significantly earlier. A summary of the findings for
tight and shale gas are contained in Table 1 and Fig. 4. A full list-
ing of the individual countries in each grouping can be found in
Appendix A.
Although Rogner’s work remains the most reliable and widely
quoted assessment of global unconventional gas reserves, there
are some very important points that must be noted when using the
data in Table 1 and Fig. 4:
1. Given the recent levels of activity in tight and shale gas in
the US and Canada, the figures quoted for North America are
quite obsolete.
2. Many major gas-producing areas of the world (for example,
Russia) have so much conventional gas that very little effort has
been made to assess unconventional gas.
3. It is extremely difficult to track down the sources behind
Rogner’s collated data. This does not imply any criticism of his
methods, but merely that it is not possible to break out the data
from his large and somewhat unique groupings of countries. This
prevents the employment of more-useful individual-country data
and more-practical (or perhaps up-to-date) groups of countries.
4. Some of the data quoted are obviously the result of lack of
data, rather than lack of reserves. For instance, the zero quoted for
shale gas reserves in the Pacific Organization for Economic Coop-
eration and Development (OECD) (PAO) group of countries
(which includes Australia) is plainly incorrect.
The MENA Situation
Table 2 details the estimated conventional reserves as well as the
total 2009 production and consumption for the MENA countries
(EIA 2010). Not surprisingly, this group of countries contains
some of the world’s major players in the upstream conventional
natural gas industry. MENA contains 5 of the 15 countries with
production in excess of 2,000 Bcf/yr (Iran, Qatar, Algeria, Saudi
Arabia, and Egypt) and 6 of the 14 countries with proven reserves

Bowdoin-
Greenhorn

Judith River-
Bighorn Basin
Eagle
Cretaceous
Wild River Basin
Cretaceous-Tertiary
Mesaverde-
Lance-Lewis
Sussex-Shannon Berea-Murrysville
Wasatch- Codell-Niobrara Bradford-Venango-Elk
Mesaverde Muddy J Medina/Clinton-Tuscarora
Niobrara Chalk
Mancos-
Dakota Cleveland
Mesaverde
Red Fork
Mesaverde Granite Wash
Pictured Cliffs
Dakota Travis Peak
Abo Bossier
Davis Cotton Valley
Morrow
Austin Chalk
Thirty-One

Ozona Canyon
Basin
Major Tight Gas Plays
Vicksburg

Fig. 2—Major US tight gas basins and plays [after EIA (2010)].

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Cody
Utica
Gammon

Antrim
Hilliard-
Baxter-
Mancos Mancos Marcellus

New
Excello Albany
Hermosa -Mulky
Pierre
Devonian (Ohio)
Woodford
Lewis Fayetteville Chattanooga

Bend
Woodford
-Caney Floyd Conasauga
-Neal
Barnett
Haynesville
Barnett-
Woodford

Pearsall-
Eagle Ford

Fig. 3—Major US shale gas plays [after EIA (2010)].

in excess of 100 Tcf (Iran, Qatar, Saudi Arabia, UAE, Algeria,
and Iraq). (See Appendix B.)
Another interesting set of data contained within Table 2 is the
reserves-to-production ratio for the MENA countries. There are
some huge contrasts, as well as some countries that could very
easily expand their upstream gas industries to cope with local
demand. Analysis of these data allows us to place the MENA
countries into four groups, as follows:
Group 1—Major Gas Producers With Significant Reserves-
to-Production Ratio. This group comprises Iran, Kuwait, Libya,
Qatar, Saudi Arabia, and the UAE. There is little incentive for
this group of countries to exploit unconventional gas reserves.
Among them, these six countries hold 38% of the world’s proven
reserves but account for only 10% of global consumption. Addi-
tionally, it should be noted that Libya’s production has recently
dropped dramatically because of the civil war. It may be some
time before it returns to pre-“Arab Spring” levels.
Group 2—Countries With Significant Unexploited Reserves.
This group comprises Iraq and Yemen. The emphasis in these
countries, in which political instability is largely responsible for
the lack of production, is to exploit the easy-to-reach gas as a pri-
ority. Unconventional gas will necessarily take a much lower
priority.
Group 3—Major Gas Producers With Limited Reserves-to-
Production Ratio. This group comprises Bahrain, Egypt, Oman,
Syria, Tunisia, and, to a lesser extent, Algeria. This group of
countries has a significant incentive to discover, appraise, and
exploit any and all gas reserves they can find. The economies of
many of these countries are heavily dependent upon gas exports.
Given that some of these countries are already major producers of
natural gas (and hence already have a significant production and
distribution infrastructure), there is considerable potential for
unconventional gas to be exploited within several of these coun-
tries. Algeria, Libya, and Tunisia are directly connected to one of
the world’s largest markets for imported gas, Europe (see Fig. 5),
while Egypt has significant LNG export facilities. Algeria and
Egypt are already major exporters of gas into Europe, and it
would be relatively easy to replace declining conventional gas
production with gas from tight or shale reservoirs. Meanwhile,
Tunisia, a net importer of gas, sits astride a potentially huge
source of both tight and shale gas (in the Ordovician formations
that lie in the region of North Africa where the borders of Algeria,
Libya, and Tunisia meet). See Appendix C for a further discussion
on Tunisia.

TABLE 1—ESTIMATED GLOBAL TIGHT AND SHALE GAS RESERVES (ROGNER 1997)

Area Tight Gas Reserves, Tcf Shale Gas Reserves, Tcf

NAM – North America 1371 3840

LAM – Latin America and the Caribbean 1293 2116
WEU – Western Europe 353 509
EEU – Central and Eastern Europe 78 39
FSU – Former Soviet Union 901 627
MEA – Middle East and North Africa 823 2547
AFR – Sub-Saharan Africa 784 274
CPA – Centrally-Planned Asia 353 3526
SAS – South Asia 705 2312
PAS – Other Pacific Asia 549 313
PAO – Pacific OECD 196 0

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Central & Eastern

Europe

Former Soviet Union

Western Europe

Centrally Planned
North America Asia & China

Middle East &

North Africa

South Asia

Other Pacific Asia

Sub-Saharan Africa
Latin America
Pacific OECD

Shale Gas

Tight Gas

Fig. 4—Map illustrating the global distribution of tight and shale gas resources (after Rogner 1997).

TABLE 2—MENA PROVEN CONVENTIONAL NATURAL GAS RESERVES (2010 DATA),

PRODUCTION, CONSUMPTION, RESERVES-TO-PRODUCTION RATIO (EIA 2010, US DOE 2012)

Proven 2010 2010 Reserves-to-

Conventional Production, Consumption, Production
Country Reserves, Tcf Bcf Bcf Ratio, years

Algeria 159 2988 1018 53.2

Bahrain 3.3* 433 433 7.6
Egypt 58.5* 2166 1630 27.0
Iran 1046 5161 5106 202.7
Iraq 112 46 46 2434.8
Israel (including occupied territories) 1.1 55 129 8.5
Jordan n/a 8 97 n/a
Kuwait 63.5 414 446 153.4
Lebanon n/a 0 0 n/a
Libya Arab Jamahiriya 54.4 594** 242** 91.5
Morocco 2 2 20 1000.0
Oman 30* 957 619 31.3
Qatar 899 4121 770 218.2
Saudi Arabia 264 3096 3096 85.3
Sudan (including South Sudan) 3 0 0 n/a
Syrian Arab Republic 8.5 316** 340** 26.7
Tunisia 2.3 72 116 32.9
Turkey n/a 24 1346 n/a
UAE 214 1811 2138 118.2
Yemen 16.9 220 27 76.8
*Significant variation between the EIA figures for reserves (quoted above) and those quoted in the Statistical Review of
World Energy 2011 (BP 2011).
**Production and consumption data from before the recent political unrest.

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Tunisia

Morocco

Algeria Egypt
Libya

Fig. 5—North African gas-export infrastructure. Major pipelines are shown as red lines and LNG export terminals as blue dots
[Benoit-Guyod 2008; Countries of the World (CIA World Factbook) 2008; California Energy Commission 2010].

Group 4—Significant Gas Consumers With Limited Proven
Reserves. This group comprises Israel, Jordan, Morocco, and
Turkey. All of these countries have significant potential for the
exploitation of tight and shale gas reserves, and recent work by
the US Geological Survey (USGS) (Schenk et al. 2010) estimated
P50 gas reserves in the Levant basin (offshore from Israel, Leba-
non, and Syria) at 112 Tcf. However, the four nations listed in
this group have relatively little existing gas-production infrastruc-
ture and so will have to work harder than the countries listed
under Group 3 to develop any potential natural gas reserves. Tur-
key, strategically located between the world’s largest gas reserves
and the world’s largest import market for gas (i.e., Europe), is
poised to become a “regional energy transit hub” (EIA 2010). The
Nabucco pipeline (Nabucco Consortium 2012) and the proposed
Trans-Caspian pipeline (Wikipedia 2012), which would bring gas
from the Caucasus and the Caspian regions to western Europe,
will run the length of Turkey, supplying (relatively) low-cost nat-
ural gas to large areas of the country and revenues from transit
fees (see Fig. 6) in the process. The geopolitical implications
from the construction of the Nabucco and Trans-Caspian pipelines
are complex, but clearly, it will enable the import of gas from the
huge reserves of Kazakhstan, Turkmenistan, Iran, and Iraq into
Europe. Finally, LNG tankers travelling to the two proposed new
LNG regasification terminals in Romania and the Ukraine will
have to pass through the Turkish waters of the Bosphorus.
Tight and Shale Gas Reserves in MENA. Unfortunately, firm
data are scant concerning the reserves and location of tight and
shale gas reservoirs in MENA. What little data exist concentrate
mostly on North Africa. This is in stark contrast to the huge quan-
tity of data on these types of reservoirs in North America and
even in Europe, where unconventional reservoirs are just starting
to be appraised; there one finds a significant and growing body of
work. Additionally, it is somewhat ironic that most of the best in-
formation on the tight and shale gas reserves in this region comes
from US government sources: the EIA, the USGS, and (perhaps
most ironic of all) the Central Intelligence Agency (CIA).
Recent assessments from various sources have shown that
almost any clastic petroleum-system source rock is a potential
shale gas reservoir. For Algeria, Tunisia, and western Libya, the
main source rocks for the major petroleum systems are the Silu-
rian Tanezzuft formation and, to a lesser extent, the slightly
younger Middle-to-Upper Devonian mudstones (Klett 2000a, b, c;
Ahlbrandt et al. 2000). The areal extent of these source rocks is

Russia
Hungary
Ukraine Kazakhstan

Austria
Romania Georgia

Bulgaria

Azerbaijan
Turkey
Iran

Turkmenistan
Iraq

Fig. 6—Routes for the Nabucco (red line) and proposed Trans-Caspian (green line) gas pipelines, as well as the sites of the pro-
posed LNG regasification terminals in Romania and the Ukraine (blue dots) (Nabucco Consortium 2012; Wikipedia 2012; Benoit-
Guyod 2008; Europe’s Energy Portal 2010; California Energy Commission 2010).

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TABLE 3—POTENTIAL SHALE GAS PLAYS IN MENA

Basin/Structure Countries Geological Period Potential US Shale Gas Analogy

Fahud Salt Oman Pre-Cambrian Wolfcamp

Ghaba Salt Oman Pre-Cambrian Wolfcamp
Grand Erg/Ahnet Algeria, Morocco Silurian Antrim, Marcellus, Woodford
Greater Ghawar Uplift Bahrain, Saudi Arabia Silurian Antrim, Marcellus, Woodford
Illizi Algeria Silurian Antrim, Marcellus, Woodford
Interior Homocline Central Arch Saudi Arabia Silurian Antrim, Marcellus, Woodford
Maqna Egypt, Saudi Arabia Miocene
Ma ‘Rib al Jawf/Masila Yemen Jurassic (late) Haynesville, Bossier
Mesopotamian Foredeep Iran, Iraq, Kuwait, Saudi Arabia Silurian Antrim, Marcellus, Woodford
Pelagian Libya, Tunisia Silurian Antrim, Marcellus, Woodford
Qatar Arch (western flank) Iran, Qatar, Saudi Arabia Silurian Antrim, Marcellus, Woodford
Iran, Qatar, Saudi Arabia Tertiary
Shabwah Yemen Jurassic (late) Haynesville, Bossier
Sirte Libya Silurian Antrim, Marcellus
Rub ‘al Khali Oman, Saudi Arabia, Pre-Cambrian Wolfcamp
Iran, Oman, Saudi Arabia, UAE, Yemen Silurian Antrim, Marcellus, Woodford
Oman, Saudi Arabia, UAE, Yemen Tertiary
Thrace/Samsun Turkey Oligocene (lower)
Trias/Ghadames Algeria, Tunisia Silurian Antrim, Marcellus, Woodford
Widyan Basin-Interior Platform Iraq, Kuwait, Saudi Arabia, Syria Silurian Antrim, Marcellus, Woodford
Zagros Fold Belt Iran, Iraq, Turkey Silurian Antrim, Marcellus, Woodford

huge but poorly defined (readers are invited to consult the work of
Klett and the USGS for more details). Obviously, not all of these
formations will contain gas because it will have migrated upward
over geologic time. However, wherever these source rocks are
overlain by an impermeable formation, potential for shale gas
exists. The major basins of Trias/Ghadames (Algeria and Tuni-
sia), Illizi (Algeria), Grand Erg/Ahnet (Algeria and Morocco),
Pelagian (Tunisia and Libya), and Sirte (Libya) could all have sig-
nificant shale gas reserves.
The main part of the Arabian peninsula, as well as Iran, Iraq,
and Kuwait, contains the largest accumulation of petroleum in the
world. There are four main geological systems. The Infracambrian
system contains “multiple carbonate and shale source rocks of
exceptional quality” (Ahlbrandt et al. 2000) located in the Ghaba
and Fahud salt basins (northern Oman) and the Rub’ al Khali
basin (Oman and Saudi Arabia). The second major system is the
Paleozoic, with Silurian and other Lower Paleozoic source rocks,
including the Lower Qusaiba and Sharawa shales, some of which
Barnett noncore
Woodford
Fayetteville
Barnett core
Haynesville
Eagle Ford
Marcellus
Granite Wash
0.00 1.00 2.00 3.00 4.00 5.00 6.00 7.00
Break-Even Gas Price at 10% IRR, USD/Mscf
Fig. 7—Chart of break-even gas prices required for economic
field development in some of the major US shale gas basins.
Note that while the Eagle Ford and Granite Wash plays are techni-
cally more challenging than, for instance, the Barnett core area,
their liquids-rich gas means that they are less dependent upon
gas sales and have benefited tremendously from the recent high
oil prices (Baihly et al. 2010; Dar 2009; ProLiance Energy 2010;
Simmons 2007; Endeavor 2010; Credit Suisse 2008).
are significantly deep and hot. These sources range all across the
Arabian platform and the Zagros fold belt, in the Widyan basin-
Interior platform (Iraq, Saudi Arabia, Kuwait, and Syria), the
Mesopotamian foredeep basin (Iraq, Kuwait, Saudi Arabia, and
Iran), the interior Homocline central arch (Saudi Araba), the west-
ern flank of the Qatar arch (Saudi Arabia, Qatar, and Iran), the
Greater Ghawar Uplift (Saudi Arabia and Bahrain), the Rub’ al
Khali basin (Saudi Arabia, western Oman, northern Yemen, UAE,
and Iran), and the Zagros Fold belt (Iran, Iraq, and Turkey). The
Jurassic system, which covers large areas of Saudi Arabia, Bah-
rain, Iraq, Iran, Kuwait, western Oman, and northern Yemen,
contains source rocks that are mainly marine carbonates and evap-
orites. Finally, the Tertiary system contains mainly shale-based
source rocks in the Rub’ al Khali basin (Saudi Arabia, western
Oman, northern Yemen, UAE, and Iran) and the Qatar arch (Saudi
Arabia, Qatar, and Iran) (Ahlbrandt et al. 2000).
Turkey contains several complex geologic provinces, but the
majority of these do not have potential for the formation of gas
reservoirs. Most of the country’s limited existing gas production
comes from European Turkey, in the Thrace/Samsun basin (Paw-
lewicz et al. 1997), where the source rocks are Eocene turbidites
(primarily oil) and the Lower Oligocene Mezardere Prodelta shale
(primarily gas) (Gürgey et al. 1991). Aside from this, the other
main potential source of shale gas comes from southeastern Ana-
tolia, where the Silurian/Paleozoic source rocks of the Zagros
Fold belt continue into the country from northwestern Iraq.
Given the lack of availability of data for unconventional reser-
voirs, it is not surprising that there are very few data available
on the estimated quantity of recoverable gas in these reservoirs.
Indeed, given the paucity of the data, Rogner’s (1997) already-
quoted estimates for tight and shale gas in MENA must contain a
significantly large degree of uncertainty.
8.00 Table 3 summarizes the basins and countries with the potential
for shale gas accumulations, as well as a US shale gas play anal-
ogy, based purely on the geological period of the shale deposit
because of lack of any other data.
Impediments to the Development of MENA Tight and Shale Gas
Resources. Cost of Field-Development Operations in MENA.
Fig. 7 illustrates the estimated break-even costs for developing
some of the major shale gas plays in the USA. This figure shows
the gas price needed in order for a project to break even. The solid

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25
USA Henry Hub
German Russian Import
UK Average Heren NBP Index
20
Japan Average LNG Import
Gas Price, USD/Mscf Barnett Core Area Break Even (see Fig. 7)
15
10
5 is to make tight and shale gas competitive against LNG from
0 sian government’s recent attempts to play politics with gas and
Jan-85 Jan-90 Jan-95 Jan-00 Jan-05 Jan-10
Fig. 8—Historical price data for US Henry Hub gas, Russian gas
imported into Germany, UK average Heren National Balancing
Point (NBP) gas index, and average Japanese LNG imports (BP
2011; US DOE 2012; Butler 2012). Also included for reference is
the USD 4.32/Mscf break-even gas price for the Barnett core
area from Fig. 7.
bars indicate the average break-even price from the various sour-
ces used to produce this figure, while the “error bars” indicate the
spread of data from the sources. This figure is based on a 10% in-
ternal rate of return. As can be seen, even the well-known and rel-
atively well-understood core area of the Barnett shale requires a
Henry Hub gas price in excess of USD 4.32/Mscf. Comparing this
to the noncore area of the Barnett (USD 6.53/Mscf) demonstrates
the importance of a favorable geological and geomechanical
environment.
By comparison, Fig. 8 shows the price history for gas imported
into Europe and Japan from various sources, including Russian
gas supplied to Germany, and the price of gas produced from the
UK sector of the North Sea. Because Europe and Japan are the
main markets for exported North African gas, Algerian, Egyptian,
and Libyan gas must be competitive with these prices.
Discussions between the author of this paper and several major
operating companies indicate that the cost of drilling and complet-
ing in the MENA countries is 2.5 to 5 times higher than similar
operations in the US. This in turn means that while (for instance)
Russian gas exported to Germany costs considerably more than
importing LNG or gas in the US, it is still not expensive enough
to encourage development of a Haynesville-type shale play in
North Africa. Two factors influence the high cost of operations.
First, MENA’s drilling, fracturing, and completion infrastructures
lag behind those of the US and Canada, as will be discussed in
further detail in a subsequent subsection. Second, many areas of
MENA are far more expensive places to operate than North
America. Everything from wages to water and pipelines to per-
mits costs more.
Lack of Fiscal Incentives. Unlike the US, most countries in
MENA have so far not offered significant fiscal incentives. Obvi-
ously, for the countries listed under Groups 1 and 2 in the preced-
ing discussion, there is little incentive to do this. However, even
the governments of the countries listed under Groups 3 and 4
have failed to implement any fiscal incentives. The reasons for
this are complex and will be discussed as we progress. However,
it should be noted that even in the US, where it is less expensive
than anywhere else in the world to develop a gas field, the tight
gas industry exists only because of the Alternative Fuel Produc-
tion Credit, and the shale gas industry exists only because it could
use the infrastructure developed for the tight gas industry.
Lack of Infrastructure. Operating companies, especially
those with experience operating in the North American tight and
shale gas plays, often complain about the price and availability of
drilling, completing, and fracturing services in MENA. However,
activity levels within MENA are a tiny fraction of those in North
America. This results in a “chicken and egg” situation, as opera-
tors cannot develop tight and shale gas fields without lower-cost
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services, while drilling and service companies cannot justify the
necessary investment in CAPEX and personnel without substan-
tially increased activity levels.
Competition From Alternative Sources. While the US in the
1980s was faced with few alternatives to indigenous gas, MENA’s
main natural gas export markets (Europe, eastern Asia, and the
present-day US) already have significant natural gas import infra-
structures. Consequently, gas from the exporting Group 3 and
Group 4 countries will need to be competitive against Indonesian,
Nigerian, Norwegian, Qatari, and (above all else) Russian gas.
This presents both a challenge and an opportunity. The challenge
countries like Indonesia, Nigeria, and Qatar, as well as against
pipeline gas from Norway. The opportunity is driven by the Rus-
other natural resources. Over the last 4 years, Russia has partially
shut off gas exports to the European Union (EU) three times,
mostly to punish the Ukraine for not paying its gas bills. When
this happens, a significant portion of the EU gas supply is shut
down. For 2008, the EU received 31.5% of its gas imports from
Russia, 12.3% from Algeria, 2.5% from Libya, 1.8% from Qatar,
and 1.4% from Egypt (European Commission 2010). Conse-
quently, even a modest replacement of Russian gas imports by,
for instance, Egyptian or Libyan gas could significantly increase
gas exports from these countries, in relative terms.
Discomfort With Wellbore-Scale Experimentation. At a
recent oil and gas conference, one of the delegates (who was rep-
resenting an independent US gas producer) described how, in the
USA, it took roughly 10 completions before an operator under-
stood how to develop any given tight gas play—in an environ-
ment that is probably the most efficient in the world at producing
hard-to-reach gas. In fact, the whole reservoir development pro-
cess is built around the need to experiment with wellbores, a
process of trial and error. Many MENA-based engineers are
uncomfortable with this unfamiliar and seemingly unscientific
approach. Much of the engineering is performed retroactively on
the basis of the actual performance of a wellbore rather than
upfront before the well is drilled. How many non-North American
operators are willing to drill 10 wellbores before they understand
the best way to complete a given play? How many MENA-based
operators actually have 10 wells to experiment with? How many
non-North American regulatory bodies are willing to let operators
change their completion plans on-the-fly? To sustainably exploit
MENA tight and shale gas resources, all sectors of the industry
from the regulatory bodies downward will need to make major
changes in development philosophy.
“No two shales are identical. Truly optimizing production
emerges only through experimentation and experience in each
individual play.” From Edward Knott, quoted in Hoyos (2010)
Fundamentally, and especially for shale gas, a huge number of
wellbores are required to exploit these resources (see Appendix C
for an example of this). While many countries in MENA are
largely desert and hence finding numerous wellbore locations is
not a major issue, most operators outside of North America are
uncomfortable with the idea of drilling large numbers of low-cost
wells as “science experiments.” Without a change in philosophy
or some new engineering techniques that can provide the same
data as these experimental wells, many of the major names in
MENA oil and gas production will be hindered from optimally
exploiting their unconventional gas resources.
Lack of Wellbore-Specific Information. In the USA, most
states mandate disclosure of substantial and significant informa-
tion for each wellbore drilled, and this information is in turn avail-
able on public-access databases. While the exact details and the
time period after which the information must be disclosed vary
from state to state, this information usually includes detailed pro-
duction and completion data (often even as detailed as the volume
of proppant and type of fluid used in fracturing operations). Thus,
it is possible for operators to compare completion methods and
practices for huge numbers of wells in similar formations. With-
out question, this has had a major impact on the development of
153
 EM141104 DOI: 10.2118/141104-PA Date: 13-July-12
US unconventional gas plays, allowing independent operators to
shortcut the development process by basing their field develop-
ments on localized “best practices” rather than expensive and
time-consuming geological and engineering studies (which are of-
ten far less reliable than data generated from offset wellbores).
In MENA, it is not possible to develop fields on the basis of
similar data sources because of the comparative dearth of well-
bores and minimal regulatory requirements to publically disclose
production and completion data. Even if public disclosure were
mandated, the lack of a pan-North African or pan-Middle Eastern
regulatory framework would inevitably result in numerous frag-
mentary and incompatible data sources as each country sets up its
own system. This lack of widely shared information makes it
much harder for the efficient and flexible independent operators to
exploit MENA resources. Obviously, within certain countries,
there are single organizations that control all the relevant data
(such as Sonatrach in Algeria), but so far the limited data that
exist have not been made publicly available.
Lack of Political Will. It goes without saying that MENA is
far from being a single political entity. There are considerable po-
litical differences among many of the countries in this region, so
much so that some of the countries have actually been to war with
each other in recent memory. Consequently, it is very unlikely
that these countries will in the foreseeable future cooperate to pro-
duce a contiguous market the size of the USA or the EU. As a
result, it is very difficult for these countries to build up sufficient
scope of work to allow drilling contractors and service companies
to invest the required CAPEX and also to reduce per-wellbore
costs to a sustainable level. In addition, most of the countries
around the Arabian Gulf have little incentive to encourage devel-
opment of unconventional gas reserves because of their huge con-
ventional gas reserves.
Ease of Doing Business. If the countries of North Africa pres-
ent the best opportunities in MENA for the development of tight
and shale gas reserves, they also represent some of the most-frus-
trating business environments in the world for foreign companies.
Corruption, bureaucracy, political instability, and prohibitive cus-
toms regulations all mean that operations are often significantly
delayed or cancelled altogether. While there are notable exceptions
to these problems, and several countries are making genuine efforts
to mitigate these issues, they still remain an overriding factor that
affects everything that happens in the oil and gas industry in these
countries. Even the reputation of these factors is enough to discour-
age external investment, as companies make decisions about how
to deploy limited resources. How many foreign companies will
invest in a market where it takes 9 months to obtain a visa for their
senior staff or where it is almost impossible to move out of the mar-
ket if the investment does not work out? The ability to “cut your
losses” is a major factor influencing investment decisions, after all.
North Africa—Could It Happen Here?
As discussed in the preceding section, there is little incentive for
many of the countries situated around the Arabian Gulf to develop
their unconventional gas reserves. However, and as discussed ear-
lier in this paper, when the countries of MENA are placed into
four distinct groups, there is potential for tight and shale gas de-
velopment in North Africa.
 Algeria. As a major exporter (eighth in the world; see Appen-
dix B), the Algerian economy is heavily dependent upon the reve-
nue generated by natural gas. Superficially, with 55 years of
proven reserves at current production rates (see Table 2), there
seems to be little incentive for Algeria to develop unconventional
resources. However, Algeria has considerable upstream and down-
stream natural gas production infrastructure and a ready demand
for additional exported gas as the EU seeks to reduce its depend-
ency on Russian gas. Consequently, of all the countries discussed
in this manuscript, Algeria has the greatest potential to develop
unconventional gas resources. Even so, tight and shale gas will
have to compete within Algeria’s internal marketplace for drilling,
completion, and fracturing resources, against existing and new
conventional gas developments. Consequently, fiscal incentives
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and considerable political will [from the national government and
Sonatrach, the national oil corporation (NOC)] is required for this
sector to develop.
 Tunisia. This country represents an interesting case. Of all
the North African countries, Tunisia has perhaps the easiest oper-
ating environment for foreign companies, but it is also one of the
two countries that are net importers of gas. Tunisia has a rela-
tively small oil and gas industry, but one that is comparatively
flexible and proactive. Currently, the country is actively investi-
gating the southern Ordovician and Silurian formations, which are
also found in the neighboring areas of Libya and Algeria. It is to
be hoped that the current political instability will not significantly
affect this. As discussed in Appendix C, and assuming that the
resources exist in commercial quantities, it should be relatively
easy for Tunisia to become self-sufficient in natural gas by
exploiting shale gas. Additionally, given the existing major-pipe-
line infrastructure (see Fig. 5), Tunisia could also easily become a
net exporter of gas to the EU.
 Libya. Although the economy of the Libya Arab Jamahiriya
is more dependent upon oil than gas, exports of gas (especially to
the EU) still form a significant portion of the country’s foreign
income. However, Libyan gas exports are only approximately one-
fifth of Algeria’s and the country could benefit tremendously from
a significant increase in gas production. Recent investment in
export infrastructure (in both pipelines and an LNG liquefaction
terminal), as well as the EU’s desire to reduce Russian gas imports,
has left Libya in a situation where it is relatively easy to increase
gas exports, at least from a downstream perspective. However, the
Libyan market is not accustomed to the type of activities required
to exploit tight and shale gas resources (e.g., large numbers of low-
cost wells, the ability to experiment with wellbores, and frequent
large fracturing operations), and as with Algeria, fiscal incentives
and considerable political will from both the national government
and the numerous NOCs will be required for this sector to develop.
 Egypt. Aside from Morocco, Egypt has probably the most-
difficult challenge among the North African countries to develop
unconventional gas resources. This is mostly because it contains
comparatively few of what appear to be suitable gas-bearing for-
mations. However, that does not mean that some of the resources
are not there, and given that Egypt is already a net exporter of
gas, it should be relatively easy to exploit these resources if the
political will exists.
 Morocco. Morocco is in a poor situation. Although it does
sit astride the potential shale gas reservoirs of the Silurian Grand
Erg and Ahnet formations, the country contains little or no gas
production and internal distribution infrastructure. However, the
country does have one major piece of export infrastructure: the
pipeline traveling from Hassi R’Mel in Algeria to southern Spain.
Nevertheless, a major effort will be required by Morocco in order
to develop any significant gas production.
One of the major factors influencing the exploitation of uncon-
ventional gas in North Africa is the cost associated with drilling,
completing, and fracturing. The drilling and service industries
have resources to service small numbers of high-value wells; the
costs associated with operating in these environments leave them
little choice. If the industry is to develop the low-cost drilling and
service infrastructures that are essential to unconventional gas ex-
ploitation, one thing above all others is required: a large scope of
work. One way to do this would be to allow the free flow of goods
and services among the North African countries. If, for example,
a fracturing company operating in Tunisia could also service proj-
ects in Algeria, Libya, and Egypt, then the CAPEX required for
such an investment could be justified on the basis of a much-
larger scope of work, and the costs of fracturing with this opera-
tion would be correspondingly smaller. Increased cooperation
among the countries of North Africa can only benefit from the eq-
uitable exploitation of their natural resources.
Conclusions
1. Although the size and extent of tight and shale gas reserves are
still largely undefined within MENA, there is no doubt that
July 2012 SPE Economics & Management
 EM141104 DOI: 10.2118/141104-PA Date: 13-July-12
considerable potential exists for significant reserves. In particu-
lar, source-rock formations have been identified as potentially
containing large accumulations of shale gas in most of the
countries discussed in this manuscript.
2. For the purposes of this manuscript, the 18 countries discussed
have been divided into four groups: (1) major gas producers
with significant reserves-to-production ratio; (2) countries with
significant unexploited reserves; (3) major gas producers with
limited reserves-to-production ratio; and (4) significant gas
consumers with limited proven reserves.
3. Groups 1 and 2, with the possible exception of Libya, have lit-
tle incentive to develop tight and shale gas reserves. Neces-
sarily, they should concentrate on their proven conventional
reserves. Although limited exploration and appraisal work may
be performed, the main focus of MENA’s unconventional gas
exploitation activities will be elsewhere.
4. Groups 3 and 4 have significant incentives to exploit any
and all tight and shale gas reserves. Whether this would be
for maintaining or expanding exports of natural gas, or for
reducing dependency on imported gas, there is significant
potential for the exploitation of tight and shale gas in these
countries.
5. The countries of North Africa have a ready market for their
exports of unconventional gas. In addition to the rapidly
expanding LNG liquefaction facilities in this region, there is
also a significant pipeline infrastructure from these countries
into the main European gas distribution grid. This means that
any gas produced from tight and shale gas reservoirs could be
brought to market relatively easily.
6. The combination of the need to exploit tight and shale gas
reserves with the existing export infrastructure means that
unconventional gas exploitation is most likely to start on a sig-
nificant scale in one of the North African countries, most likely
Algeria.
7. However, there are still significant obstacles to overcome.
These include the cost of field-development operations in
MENA, the lack of fiscal incentives, lack of infrastructure,
competition from alternative sources of gas, the inability to
experiment with wellbores, lack of wellbore- and field-specific
information, lack of political will, and the ease of doing busi-
ness in MENA.
8. As stated, North Africa has the greatest potential for the ex-
ploitation of tight and shale gas reserves. This would be made
much easier (and potentially turned from very difficult into
possible) by increased cooperation between the countries of
North Africa. The efficient flow of expertise, goods, and serv-
ices both into and among these countries would have a positive
impact on this and many other industries.
Acknowledgments
The author would like to thank the management of Baker Hughes
for encouraging him to complete this manuscript. Next, he would
like to thank Stephanie Weiss for once again proofreading a sow’s
ear into a silk purse. Finally, he would like to thank Tim Berners-
Lee, inventor of the Internet, without which the preparation of
this paper would have been impossible.
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Appendix A—Definition of Country Groups Used Brunei Darussalam, Cambodia, Indonesia, Lao People’s Dem-
by Rogner (1997) ocratic Republic, Malaysia, Myanmar, Papua New Guinea, Philip-
pines, Singapore, Thailand, and all Pacific islands
Population figures are based on the United Nations’ Medium Var-
iant estimate for 2010 (United Nations Department of Economic
and Social Affairs 2010). Appendix B—The World’s Top 20 Natural Gas
Producers and Holders of Proven Reserves
NAM—North America (Tables B-1 and B-2)
(Population 351 million)
USA (including Alaska) and Canada
TABLE B-1—THE WORLD’S TOP 20 NATURAL GAS
LAM—Latin America PRODUCERS (EIA 2011)
(Population 589 million) Rank Country 2010 Production, Bcf
All South America, all Central America, Mexico, and all
Caribbean 1 USA 26,858
2 Russia 22,990
WEU—Western Europe 3 Iran 7,773
(Population 492 million) 4 Algeria 6,789
Andorra, Austria, Belgium, Channel Islands, Cyprus, Den- 5 Canada 6,695
mark, Faeroe Islands, Finland, France, Germany, Gibraltar, 6 Norway 5,253
Greece, Holy See, Iceland, Ireland, Isle of Man, Italy, Liechten- 7 Qatar 4,611
stein, Luxembourg, Malta, Monaco, the Netherlands, Norway, 8 Saudi Arabia 3,426
Portugal, San Marino, Spain, Sweden, Switzerland, Turkey, and
9 Indonesia 3,406
the UK
10 China 3,334
11 The Netherlands 3,131
EEU—Central and Eastern Europe
12 UAE 2,817
(Population 118 million) 13 Malaysia 2,718
Albania, Bosnia and Herzegovina, Bulgaria, Croatia, Czech
14 Venezuela 2,510
Republic, Hungary, Kosovo, TFYR Macedonia, Montenegro,
15 Nigeria 2,392
Poland, Serbia, Slovakia, Slovenia, and Romania
16 Egypt 2,369
17 UK 2,171
FSU—Former Soviet Union
18 Uzbekistan 2,123
(Population 273 million)
19 India 1,883
Armenia, Azerbaijan, Belarus, Estonia, Georgia, Kazakhstan,
20 Australia 1,730
Kyrgyzstan, Latvia, Lithuania, Republic of Moldova, Russian

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TABLE B-2—THE WORLD’S TOP 20 HOLDERS OF PROVEN TABLE C-1—ANNUAL PRODUCTIVITY FOR A SINGLE
NATURAL GAS RESERVES (EIA 2011) TYPICAL WOODFORD SHALE GAS WELL (DERIVED FROM
BAIHLY ET AL. 2010)
Rank Country 2011 Proven Reserves, Tcf
Producing Year Total Annual Gas Production, Bcf
1 Russia 1,680
2 Iran 1,046 1 0.543
3 Qatar 896 2 0.227
4 Saudi Arabia 276 3 0.144
5 USA 273* 4 0.106
6 Turkmenistan 265 5 0.082
7 UAE 228
8 Nigeria 187
9 Venezuela 179 50
10 Algeria 159
11 Iraq 112
40
12 Australia 110
13 China 107

Production, Bcf
13 Cambodia 107 30
15 India 106
New
16 Kazakstan 85 Wells

17 Malaysia 83 20
18 Egypt 77
Wells
19 Norway 72 10 Drilled
in Wells
20 Uzbekistan 65 Year 1 Drilled Wells
Wells
in Drilled
Drilled
*2009 data Year 2 in in
Year 3 Year 4
0
Year 1 Year 2 Year 3 Year 4 Year 5
Appendix C—Example: Replacement of Tunisian
Gas Imports by Locally Produced Shale Gas Fig. C-2—Chart illustrating the numbers of new and existing
In 2009, Tunisia imported approximately 26% of its total gas con- wells required to maintain gas production at 44 Bcf/yr over a
sumption, approximately 44 Bcf (EIA 2010). This example is 5-year period.
based on what it would take to replace this volume of gas on an
ongoing basis with locally produced shale gas. Well productivity illustrated over a 5-year time span in Figs. C-1 and C-2. The activ-
is based on the productivity and decline of a typical US Woodford ity of continually replacing production lost because of rapid pro-
shale well, using data derived from Baihly et al. (2010) and sum- duction decline is central to shale gas development activity. Once a
marized in Table C-1. company starts drilling and producing, it must keep drilling to keep
For the sake of this example, assume that Tunisia decides to producing. From Fig. C-1, we can see that even in the fifth year of
replace all of its gas imports with natural gas from Tunisian shale the project and with 205 existing wells still producing, approxi-
gas formations. This means that (from Table C-1) for 44 Bcf, they mately 42% of the total gas production will come from wells drilled
would need to drill and fracture 82 Woodford-type wells. in that year.
However, this is not the whole picture, because by the second On a long-term basis, given that eventually some of the older
year, productivity from these 82 wells will have declined to 18.6 wells will decline to the point that they will be abandoned or shut-
Bcf and will continue to decline in line with the data in Table C-1. in for extended periods of time, Tunisia will need to drill, com-
This means that in the second year, Tunisia will need to drill, com- plete, and fracture approximately 35 new Woodford-type shale
plete, and fracture an additional 47 new wells. In order to maintain gas wells per year. Assuming that the average Woodford horizon-
a constant 44-Bcf production from the Tunisian shale formations, tal well takes approximately 60 days to drill, this means that 6
the country will need to keep bringing new wells on line to replace drilling rigs and a single frac spread would have to be dedicated
the productivity lost by rapidly declining well performance. This is to this operation.

250
Conversion Factors
Bcf  2.831 680 Eþ07 ¼ m3
Eþ01 ¼ m3
Number of Producing Wells

200 Mscf  2.831 680

Tcf  2.831 680 Eþ10 ¼ m3
150
Tony Martin is Director of Offshore Stimulation for Baker Hughes,
where he is also a subject matter expert on hydraulic fracturing
100 and stimulation. He has 22 years of experience in the oil and
gas industry and has worked all over the world, mainly on proj-
Existing Wells
New Wells

ects involving every aspect of stimulation, especially hydraulic

50 fracturing. He is the author and coauthor of numerous techni-
cal papers, technical manuals, and books. Martin holds an MS
degree in petroleum engineering from Imperial College, Lon-
0 don. He is an SPE Distinguished Lecturer, the winner of the 2009
Year 1 Year 2 Year 3 Year 4 Year 5 SPE South, Central, and Eastern Europe Region Technology
Award for Production and Operations, and has been a com-
Fig. C-1—Chart illustrating the gas production from new and mittee member for several SPE workshops, conferences, and
existing wells required to maintain annual production at 44 Bcf. forums.

July 2012 SPE Economics & Management 157

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