Shale Oil 

DEFINITION of 'Shale Oil '

A type of unconventional oil found in shale formations. Shale oil can refer to two types of oil. It may refer to crude oil that is found within shale formations, or to oil that is extracted from oil shale. Oil shale is a type of sedimentary rock that has low permeability, and which has bituminous-like solids that can be liquefied during the extraction process.

BREAKING DOWN 'Shale Oil '

The development of horizontal drilling techniques and hydraulic fracturing (“fracking”) has allowed oil and natural gas producers to extract resources from shale rock and other low permeability rock formations. Development of these techniques has grown rapidly since the 1950s, with the development of shale formations in the United States coming about during the 1970s and the 1980s. In the United States the largest formations of shale providing shale oil are found on the west coast at the Monterery/Santos shales.

Shale oil and shale gas formations can be found around the world. Countries with the largest amount of technically recoverable shale oil resources include Russia, the United States, China, Argentina, and Libya. In 2013, the U.S. Energy Information Administration estimated that 345 billion barrels of shale oil might be technically recoverable, making up approximately 11% of total crude oil resources.

Producing shale oil from shale rock has traditionally been more expensive than conventional crude oil, and can have a greater impact on the environment. This is because oil shale has to be heated in order to turn the oil to a vapor, and then must be processed with chemicals to separate it from gas.

The oil and natural gas industry often refers to “tight oil” rather than shale oil when estimating production and resource estimates. This is because shale oil may be extracted from rock formations that include sandstone and carbonates in addition to shale formations. Tight oil estimates will be greater than shale oil estimates.