The shale revolution is slowly spreading to Europe and other international areas, but it still faces some major obstacles before the industry can achieve the same success as in North America. These obstacles include uncooperative governments, a lack of infrastructure and shortages of rigs and labor.
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Several oil and gas companies have reported progress over the last few months in exploring shale basins outside of North America. In the Ukraine, Eni (NYSE:E) and Cadogan Petroleum Plc are set to explore for shale gas in the Lviv basin. The two operators will spend approximately $55 million through 2015 on exploration activities here.

Nexen (NYSE:NXY) just released the company's 2012 capital budget, and has allocated up to C$125 million to explore for resources in Poland and other areas. The company is targeting tight oil and shale gas in Poland and plans to drill six exploration wells in 2012. (Changes in the price of oil aren't arbitrary. For more, see What Determines Oil Prices?)

Talisman Energy (NYSE:TLM) and San Leon Energy are also working in Poland, and reported that they have finished drilling the Lewino 1G-2 well located on the Gdansk W Concession. The operators found "continuous gas shows" along with small amounts of natural gas liquids.

Talisman is conducting an analysis of the results prior to completing the well, and then will move the rig to another location for a second exploration well.

Conoco Phillips (NYSE:COP) recently reported the company's fourth successful well in Poland, and plans to conduct a multi-stage hydraulic fracturing operation on this well during the fourth quarter of 2011.

One impediment to the development of shale resources in Europe comes from government actions. In July 2011, France banned the use of hydraulic fracturing to develop oil and gas resources. The law imposes fines on violators, and makes the use of this technique a criminal offense in France.

Although Total (NYSE:TOT), Toreador Resources (Nasdaq:TRGL) and several other operators were issued permits to drill prior to the passage of the new law, these permits were revoked by the government. Total has indicated that the company will appeal the ban and the revocation of existing permits.

Another obstacle to development outside North America is the absence of infrastructure to process and transport any future oil or natural gas production. These countries also lack a local source of rigs, equipment and trained labor to support any exploration and development activity.

The industry seems to be moving faster in exploring and developing shale resources in areas outside Europe. The Vaca Muerta shale oil formation covers more than 7 million acres in Argentina, and is being explored by YPF S.A. (NYSE:YPF) and other operators. The company has 17 vertical wells on production, and has reported initial production rates as high as 600 barrels of oil per day. Spanish oil company Repsol (OTC:REPYY) owns a majority stake in YPF S.A.

The Bottom Line
The energy industry is progressing in the exploration of shale resources outside of North America, and operators are determined to achieve the same success that has been accomplished at home. The obstacles faced by the industry are a problem, but similar issues were overcome in the early development of domestic plays.

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At the time of writing, Eric Fox did not own shares in any of the companies mentioned in this article.

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