Hydraulic fracturing or "fracking," which refers to the practice of injecting fluid into the ground to break rock and access underlying fossil fuels, is highly controversial, particularly in the United States. Environmentalists, in particular, have expressed concern about the huge amounts of water used in the process. But like it or not, fracking is practiced almost all over the world. This article explores the countries with significant fracking potential and its impact on the overall economy.

First things first. The "To frack or not to frack?" question only makes sense in places that have recoverable shale oil or shale gas resources to begin with. If there are no resources in the ground, fracking is a moot point. As per the Energy Information Administration (EIA) report, the following are two lists of the top 10 countries with the largest shale oil and shale gas resources. The latest study by the EIA was completed in 2015.

 

Country

 

Technically Recoverable Shale Oil

 

(in Billions of Barrels)

U.S.

78

Russia

76

Libya

36

China

32

Argentina

27

U.A.E.

23

Chad

16

Australia

16

Mexico

13

Venezuela

13

 

Country

 

Technically Recoverable Shale Gas

 

(in Trillion Cubic Feet)

China

1,115

Argentina

802

Algeria

707

U.S.

622

Canada

572

Mexico

545

Australia

429

South Africa

390

Russia

285

Brazil

245

A few of these countries have managed to explore the available resources efficiently (like the U.S.), while others are in the initiation mode. European countries like France and the U.K. face environmental concerns and local bans, Mexico struggles with unclear policies, while others have untapped resources due to the lack of technology. Let’s look at some key players.

The U.S.

The U.S. fracking has enabled a decline of around 33% in natural gas imports between 2005 and 2018 for the country. The U.S. first became a net exporter of natural gas in 2017. Natural gas exports in 2019 doubled from 2018 levels and the EIA expects they will double again by 2021. The U.S. primarily imports and exports natural gas with Canada and Mexico via pipelines and LNG. Fracking has also led to the U.S. becoming the largest producer of oil in the world, surpassing Russia and Saudi Arabia, resulting in reduced dependence on foreign oil. Much of America’s oil is in private lands, which enables the private sector to override government bureaucracy. This kind of shortcut is not available in all nations. The energy advancements have also revitalized other sectors in the U.S. like manufacturing, petrochemicals, and steel and have attracted foreign investment into the sector. It's safe to say that shale fracking in the U.S. has contributed greatly to its energy supply and reduced its dependence on foreign energy sources.

Algeria

The third-largest shale gas reserves are estimated to be in the fossil-fuel rich Algeria, which has already taken measures to tap into its resources. In 2013, Algeria updated certain legislation laws to make shale drilling more attractive for energy companies by enacting low service taxes and beneficial royalty rules. Algeria’s chemical company, Sonatrach, has entered into agreements with multinational corporations like Exxon, BP, Chevron, and Equinor to develop energy fields in the region. Many of these talks were stalled in 2019, however, due to political unrest in the country with the population protesting the long rule of President Bouteflika. Bouteflika resigned in 2019 and some of these talks have picked up again since. Algeria is the third-largest provider of gas to Europe, after Russia and Norway. It provides approximately 11% of Europe's gas, so any delays in exports severely impact Algeria's economy.

European Countries

France, Ireland, Germany, and Bulgaria have banned fracking. The U.K. has halted fracking as of 2019 - all due to environmental concerns. In fact, the U.K. had only fracked three wells, all of which resulted in earthquakes over the 0.5 magnitude threshold that requires halting operations.

The list of fracking nations does not include these countries at the top, but they do have reserves worth exploring. Most being developed countries, Europe's energy demands are high. Apart from the environmental impact, exploring the untapped potential of fracking in a balanced manner could result in energy efficiency for these countries.

China

The EIA believes that China is currently the leader in shale gas reserves and the third-largest in shale oil reserves. China has already embarked on exploring its fracking potential with local as well as international companies. It has fully embraced fracking as a source of energy and a means to reduce its dependence on foreign energy suppliers. Even though China is behind in shale fracking when compared to the U.S., both in terms of numbers and technology, it has made great strides in the past few years.

However, a few challenges impede the Chinese venture. For starters, China's shale deposits are deep underground, much deeper than the reserves in the U.S. This makes the reserves difficult to reach and requires larger amounts of water, which are scarce in some regions of China where shale is being extracted. Furthermore, China is a densely populated nation and many of its reserves are in areas with a sizable population. This has resulted in damaging earthquakes and human loss from them in the populated areas where fracking is taking place.

Argentina

Argentina is one of the few countries where shale fracking is as feasible and commercially active as the U.S. and is in fact the country that is most likely able to replicate the U.S. shale boom. The bulk of Argentina's shale lies in its Vaca Muerta rock formation and the country is fully underway in terms of production. From 2018 to 2019, the country's shale gas production grew by 90%. Shale oil production grew by 55%.

Argentina does suffer some of the same roadblocks as many less well-off countries do, such as lack of infrastructure and higher costs. The country has already brought in some of the big gas and oil players, such as Exxon, BP, Royal Dutch, and Shell to help develop its shale capabilities. Argentina's leaders look to this energy potential as a way to greatly rectify many of the economic issues facing the economy and as a general road towards economic recovery. Argentina became a net gas importer in 2008 and is a large consumer in natural gas. Irrespective of all environmental concerns and geopolitical challenges, the fracking business does have the potential to bring economic respite to Argentina.

Mexico

Mexico has had a complicated relationship with fracking. Fracking in Mexico began in 2010 and has met with resistance and opposition since. The intense opposition arises from the fact that many communities that are near fracking sites have suffered the negative environmental impact of it, from polluted water to earthquakes. This led President Obrador in his speeches to end fracking, however, no legislation has been put in place to do so. The government still spends millions of dollars on exploring fracking sites and has authorized new wells for fracking. As of now, it appears that Mexico is attempting to forge ahead with fracking, but meeting a lot of resistance, with many bills proposed to ban it as well as the Environment Minister supporting a ban.

The Bottom Line

Depending upon local, geopolitical, or global pricing factors and infrastructure, fracking may or may not contribute significantly to a nation’s economy. However, there is clear evidence of the benefits of fracking, leading to self-reliance for the energy needs of a country. Nations that take a balanced approach to reap the benefits and address concerns for all stakeholders can be clear winners.