As is known, the extraction of oil requires drilling in both land and sea. Now, there are eager attempts to extract oil through fracturing certain types of rock layers by means of pressurized water with chemical additives [a process known as fracking]. Fracking operations have since expanded, particularly in the United States, an important market for shale gas, while attempts are currently being made to expand the extraction of oil from rocks. Preliminary forecasts show that it is possible to produce around two million barrels per day of crude oil in the area between North Dakota and Texas by 2020, compared to 700 thousand barrels per day currently produced from this same area. Shale oil and gas were discovered decades ago, but commercial production (especially in the case of shale gas) only started a very short time ago. It emerges from initial data, that shale oil and gas would play a key role in the oil industry, given the presence of large shale oil and gas reserves worldwide, and the competitiveness of their prices relative to current high oil prices. This is not to mention that shale oil and gas represent a local source of energy, which would help the cause of energy independence in certain countries and reduce their reliance on energy imports. This industry launched recently in North America, allowing the United States to start exporting gas instead of importing it, while this same industry has begun to gradually make strides in Europe and Asia. But, like any other modern industry, there are fears and dangers that come hand in hand with such new energy sources. There are fears regarding the amount of fresh water needed for fracking rocks for the extraction of oil trapped within, and also regarding the problem of the chemicals added to this water and the possibility of contamination of nearby aquifers. This prompted environmental protection groups to voice their objections to this industry. Some U.S. states passed laws against it, while France attempted to institute a ban on the extraction of shale hydrocarbons in its territories. However, this did not prevent other countries like Poland, Australia, India, China and others to engage in [shale] exploration, drilling and development. However, water scarcity and concerns about possible contamination of ground water basins continues to impede the growth of this industry until further notice. Preliminary information indicates that shale gas reserves would double overall global gas reserves, while their distribution covers a broader span across the countries of the world. Shale gas represented around 15 percent of the total natural gas output of the United States in 2010. Indeed, we find that the successes achieved in the United States have encouraged other countries to consider producing gas from shale. Between 2007 and 2010, the United States managed to increase its output of natural gas by about 40 percent. So will the United States be able to continue the exploration of these large gas reserves and for how long? The success of this new industry will depend mainly on production costs, which naturally vary from one field to another, depending on the geology of the region. Costs also vary from one country to another, depending on the average cost of the various fields in each country. In addition, there is the cost of taxation, government incentives, and the extent these impact production costs in a given country. Initial estimates in America indicate the average cost of production is about 4-5 dollars per million British thermal units (BTU), and that this cost even drops to about two dollars per million BTU in some cases. Of course, natural gas sale prices differ globally by region and by period. The average price of gas imported to Europe at present is 9-10 dollars per million BTU, while these prices previously ranged between 8 to 14 dollars per million BTU. This means that already, shale gas production in the United States costs much less than global selling prices. The U.S. shale oil and gas industry was established and developed owing to the efforts and investments of small oil companies. Afterwards, mega oil corporations followed suit, either by buying these small oil companies or by merging with them. This was the case in 2009 when the ExxonMobil mega corporation took over XTO Energy for 41 billion dollars. There have been other examples since 2008, especially recently, at the level of Asian companies which intend to acquire the expertise and know-how in this field from North American companies, in addition to gaining a share in the gas reserves there. For example, the private Indian company Reliance acquired a stake of about 40 percent in the company Atlas Energy Marcellus for 1.8 billion dollars. Marcellus in the U.S. state of Pennsylvania is one of the largest shale gas fields in the United States. According to preliminary information, shale gas is present in a number of Arab countries, including Oman, Saudi Arabia, Jordan, Algeria, Morocco and Tunisia. However, this industry faces two main obstacles in the region: First, water scarcity and concerns regarding the possible contamination of fresh water aquifers, and second, the fact that gas prices in local markets in many Arab countries range between one to two dollars per million BTU, and in some countries prices are actually below one dollar, rendering the production of this type of gas not economically viable, especially in oil-producing countries. However, despite this, there are studies and agreements with international companies for the production of shale gas in some Arab countries. So will this gas demonstrate its economic viability at the level of the Arab world? And how will the large quantities of water required by this industry be made available, especially in light of the scarcity of water in the Middle East? * Mr. Khadduri is a consultant for MEES Oil &