Betting on Mediterranean shale: 3 plays, 1 winner

• Estimated 2 trillion cubic meters of shale gas reserves valued at $2.6 trillion (in three provinces that span 180,000 square kilometers
• Soon-to-come (progressive) tax laws and regulations governing the industry; these new laws will encourage unconventional exploration (the opposite that is happening in Europe)
• Contractual terms are already favorable and the new tax law, if passed, will adjust royalty fees for levels of production. It will also adjust taxes on oil revenues to be proportionate with exploration difficulty and exploration risk
• Already-in-place: more favorable conditions for potential fracking partners
• The government has outlined an $80 billion energy investment plan; $60 billion of that is earmarked for exploration, the rest for infrastructure (including refining capacity)

Negatives

• Doesn't have the infrastructure for shale (though that hasn't stopped the interest-Italy's Eni, Exxon Mobil Corp., Royal Dutch Shell to name a few)
• Commercial viability is still a long way off and we're looking at some 400 test wells in the meantime
• The singular focus of the new hydrocarbon law on shale-at the expense of conventional exploration-is not necessarily sending the right message to foreign investors. Algeria needs its traditional oil and gas production to increase in order to fund its shale ambitions, and infrastructure …
• The ongoing hostage crisis at a BP-operated gas field in the Algerian Sahara desert bodes ill for the entire Sahel. This will reverberate throughout Algeria and then on to Niger and across the Sahel.

So where do you put your money? Turkey - no contest. This is a combination package that includes good governance, good fiscals, brilliant infrastructure and a clear pay off as soon as the juniors and majors strike shale. This is a solid, long-term play whose importance to Turkey's overall energy ambitions cannot be understated.