Bahrain Shale Find Puts Oil Market on Notice

Bahrain discovered the first oil on the Arab side of the Gulf in 1932. It took a long time for the small island to find anything of similar significance, but its recent announcement of an enormous shale oil resource under its shallow waters should not be underestimated: Commercial offshore shale oil production would be a first for the worldwide industry.

Perhaps more significant is that this discovery has the potential to boost Middle East output, while raising the odds that shale oil production outside the U.S. and Canada finally takes off. The Middle East has the advantages of good geology, existing petroleum infrastructure, and a lack of environmental or community opposition. To be sure, local producers will have to offer attractive terms to international investors to compensate for the higher costs and technical risks than their conventional fields, source fresh-water or use other hydraulic fracturing technologies, and develop or bring in service companies skilled in unconventional resources. But given that U.S. shale specialists have tended to stay at home, the Bahrain find offers interesting possibilities for large international oil companies as partners.