Betting on Mediterranean shale: 3 plays, 1 winner

The Mediterranean has joined the shale game, but as most of Europe's Mediterranean countries drag their feet, all eyes are on Israel, Turkey, and Algeria.

For Israel, it will be a slow road without the majors.

For Algeria, it's full speed ahead, in theory-but the foreign interest is just dabbling for now due to a lack of shale infrastructure.

For Turkey, the situation is more promising thanks to a renewed interest by the majors and a near-perfect blend of good governance and attractive fiscals.

Here's what the playing field looks like:

Turkey

Turkey is the best bet here. In Turkey, it's all about the Dadas Shale, in which the majors have recently expressed a renewed interest, making the game immediately more promising for the North American juniors who are betting heavily on this play.

The Dadas Shale is being compared to Texas' Eagle Ford shale and Oklahoma's Woodford shale in both size and potential. What is that potential? Well, those who are investing in it say it has more than 100 billion barrels of original oil in place.

While nothing's being produced, testing is about to begin and new technology has the majors and juniors highly optimistic.

Positives

• Everyone likes working with the Turkish government-permits are fast and bureaucracy is kept to a minimum. Turkey is too keen to become a regional energy hub to let bureaucracy stand in the way. There's just too much riding on this.
• Fiscal terms are very attractive: foreign companies get a flat 12.5% royalty tax and a 20% corporate tax rate
• The infrastructure is already there; it's easy to refine and get to your choice of markets
• Shell has recently renewed its interest in Dadas (it's about to drill five wells)
• ExxonMobil is in talks with the government right now about a Dadas license of its own

Negatives