The world holds some 3.6 trillion barrels of oil equivalent in such unconventional resources as heavy oil, tight gas, coalbed methane and shale oil, reports U.K.-based energy-consulting firm Wood Mackenzie. The sheer size of the unconventional resource base-double the volume of undiscovered conventional resources-is grabbing worldwide attention.



Spurred by high demand and high commodity prices, North American operators have led the world in the development of unconventional resources. This is changing, however, and supermajors are beginning to establish larger positions in the unconventional arena.



By 2025, unconventional oil is expected to supply more than 20% of global demand. Production from Canada's oil sands is forecast to quadruple to 4 million barrels a day by 2020. And, as less than 20% of total recoverable oil-sand reserves are currently included in commercial projects, significant additional potential exists. (For more on this, see "The Oil Sands' Cost" in this issue.)



Further down the road, the oil-shale deposits in the western U.S. contain possible resources of 1.5 trillion barrels of oil.



Unconventional gas will also be a major energy source, particularly in the U.S. This class of resources will account for 42% of domestic gas supply by 2010, a dramatic increase from its contribution of 27% of U.S. supply in 2005.



WoodMac reports that the continuing refinement of technologies to increase recovery factors and lower unit costs will drive new gas developments.



The consulting firm identified critical factors for successful development of these resources. Companies will need to fully grasp the technical, commercial, fiscal and environmental risks associated with unconventional resources to ensure their investments bear fruit.



"As unconventional resources are distributed widely around the globe, the key risk is not discovering the resource, but in identifying areas where the critical factors are in place to enable economic development," says Phaedra Powilanska-Burnell, WoodMac managing consultant.



In the short- to mid-term future, development will be driven by commodity prices. WoodMac's medium-term oil price ($40 per barrel) and gas price ($5.20 per thousand cubic feet) forecasts suggest a favorable environment for the exploitation of unconventional oil and gas (with the exception of shale oil), outside of existing North American areas.

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