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Global Shale Gas Development: Water Availability & Business Risks

This report analyzes water availability across all potentially commercial shale resources worldwide.

It also reveals that water availability could limit shale resource development on every continent except Antarctica.

Key Findings

Executive Summary

Limited availability of freshwater could become a stumbling block for rapid development of shale resources through hydraulic fracturing. Using information from the Aqueduct Water Risk Atlas, WRI provides the first global and country-specific resource to help stakeholders evaluate freshwater availability across shale plays worldwide.

Innovation in hydraulic fracturing and horizontal drilling techniques is driving the rapid development of shale resources (which include shale gas, natural gas liquids, and tight oil) across the United States and Canada. Already, known shale deposits worldwide have significantly increased the volume of the world’s natural gas and oil resources. Governments from Argentina and the United Kingdom, to Mexico and China, have started to explore the commercial viability of their shale reserves.

The potential for expansion is huge: known shale gas deposits worldwide add 47 percent to the global technically recoverable natural gas resources, and underground stores of tight oil add 11 percent to the world’s technically recoverable oil.

But as countries escalate their shale exploration, limited availability of freshwater could become a stumbling block. Extracting shale resources requires large amounts of water for drilling and hydraulic fracturing. In most cases, these demands are met by freshwater, making companies developing shale significant users and managers of water at local and regional levels, often in competition with farms, households, and other industries.

Although experts agree that critical environmental risks and impacts are associated with developing shale, the risks and impacts specific to surface and groundwater availability have been thinly documented. With Global Shale Gas Development: Water Availability and Business Risks, the World Resources Institute (WRI) fills this gap, providing the first publicly available, global and country-specific analysis to help evaluate freshwater availability across shale resources worldwide. Using geospatial analysis to combine indicators from WRI’s Aqueduct Water Risk Atlas and other sources with the locations of shale resources globally from West Virginia University and the National Energy Technology Laboratory, the report:

  • Identifies locations most in need of government oversight and robust corporate policies to properly manage freshwater availability in the context of shale development; and

  • Informs companies of potential business risks associated with freshwater availability, and builds the case for corporate water stewardship and early source water assessment.

In addition to examining water availability and shale resource development from a global perspective (Figure ES1), this report analyzes for the first time water availability in each shale play (prospective areas within the shale formation where gas and oil could be commercially extracted) for 11 countries: Algeria, Argentina, Australia, Canada, China, Mexico, Poland, Saudi Arabia, South Africa, the United Kingdom, and the United States. WRI selected these countries based on the size of their technically recoverable shale resources (as estimated by the U.S. Energy Information Administration), current exploratory and production activity, likelihood of future development, and feedback from industry, academia, and nongovernmental organization (NGO) experts.

Recommendations

Based on the report’s analysis, WRI offers a set of practical recommendations for how governments, businesses, and civil society can continue to evaluate and sustainably manage freshwater availability if shale resources are developed.

1) Conduct water risk assessments to understand local water availability and reduce business risk.

1.1. Companies can evaluate water-related risks. Using a combination of publicly available global and asset-level tools, companies should identify water-related business risks and prioritize areas to engage with regulators, communities, and industry to increase water security.

1.2. Governments can increase investments in collecting and monitoring water supply and demand information. Robust baseline information and estimates of future water supply and demand and environmental conditions can help build a strong, shared knowledge base to inform the development of effective water policies and science-based targets and goals.

2) Increase transparency and engage with local regulators, communities, and industry to minimize uncertainty.

2.1. Companies can increase corporate water disclosure. By disclosing and communicating their water use and management approach, companies can build trust with financial and river basin stakeholders as they investigate water risks and opportunities. Ongoing disclosure will reduce reputational risks.

2.2. Governments and companies can engage with local and regional industry, agriculture, and communities. Companies should closely collaborate with local government, industry, NGOs, and civil society to understand the hydrological conditions and regulatory frameworks within the river basin. This information allows for more accurate estimates of the cost, technology, and processes required to access water for shale development without displacing other users or degrading the environment.

3) Ensure adequate water governance to guarantee water security and reduce regulatory and reputational risks.

3.1. Companies can engage in public water policy. Adequate water governance and environmental protection standards, coupled with predictable implementation and effective enforcement, can minimize environmental degradation and ensure fair water allocation and pricing. A stable regulatory environment allows companies and investors to evaluate long-term opportunities and minimize business risks.

3.2. Governments and companies, through collective action, can develop source water protection and management plans. Governments and businesses in the early stages of developing shale resources have a unique opportunity to work collectively with key river basin stakeholders to develop source water protection and management plans that help reduce business risks; promote a shared water sourcing and recycling infrastructure; and improve the sustainable management of watersheds and aquifers.

4) Minimize freshwater use and engage in corporate water stewardship to reduce impacts on water availability.

4.1. Companies can minimize freshwater use. Using publicly available guidelines, companies can evaluate their potential for using non-freshwater sources and build a business case for investing in technology to recycle or reuse water, use brackish water, or otherwise significantly reduce freshwater withdrawals.

4.2. Companies can develop a water strategy and engage in corporate water stewardship. Companies should embed water management at the core of their business strategy to minimize exposure to risks and ensure long-term water availability for other users, the environment, and their own operations. Corporate water stewardship involves a progression of increasing improvements in water use and impact reductions across internal company operations and the rest of the value chain.

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