Betting on Mediterranean shale: 3 plays, 1 winner

• The National Oil Company is holding on to key geological data that would help the industry, but this year should see some new regulations that make exploration even easier
• This is still some way off (but Shell's drilling in Dadas this year might be the turning point-at least the juniors think so)

Israel

Some think Israel is on the verge of a major energy revolution because of the combination of shale discoveries and a recent conventional natural gas discovery (16 trillion cubic feet).

While Israel doesn't have much by way of heavy oil, it does have world-class shale oil resources.

Shale can contain both natural gas and oil, and in terms of oil, Israel's shale plays put it in third place vis-à-vis expected volume, behind the US and China (but ahead of Russia).

Positives

• If these shale oil reserves can be extracted, we're talking about making Israel a rival to Saudi Arabia

Negatives

• Geopolitical tectonics
• Still in the very early stages of this game
• The regulatory environment isn't perfect and the government has raised taxes since discoveries; permits are also hard to come by
• For now, this will remain a game for the juniors. The majors aren't interested: it's a bit tricky to operate in the Arab world and in Israel at the same time
• Because of the above, exploration and extraction will be SLOW, and the market will ignore it for now

Algeria

Algeria-suffering from a decline in conventional production and foreign investment interest recently--has dived right into shale with its state-backed energy firm, Sonatrach. In fact, Algeria seems to be solely focusing on shale now and all its efforts are directed at attracting foreign partners to its shale plays.

Positives