Oil industry circles have known that it is possible to extract oil and gas from shale ever since the 1940s. But this unconventional source did not become commercially viable and broadly attractive until recently, particularly this year. Shale oil and gas thus took off in North America, particularly in the United States. This industry has begun to have an impact on oil and gas exports and imports, with the U.S. now exporting liquefied gas to Europe instead of importing it from the international markets. Furthermore, some forecasts indicate that the U.S. may become self-sufficient in crude oil by 2025, and other predictions even show the U.S. exporting oil in the period in question. It is only natural for these fundamental changes to have an impact on the global oil industry. For one thing, the U.S. is the world's top importer and consumer of oil, which highlights the major importance of U.S. markets. And indeed, the new dynamics have already started affecting the markets beginning with 2012, especially in terms of pricing natural gas in Europe, rendering it simply impossible to overlook them. Here, Mr. Abdullah al-Badri, the Secretary-General of OPEC, stated that it is clear that this energy source will become increasingly important, but added that if one is to assess the situation outside the U.S., then shale oil is still in its early stages of development, and many factors such as production costs, water availability and technical well servicing will have an impact on the availability of sufficient quantities of it in the future – in addition to laws being currently legislated to protect the environment and energy prices, which will also have a significant role in the future of shale oil and gas. In this regard, the U.S. Energy Information Administration (EIA) indicates that developing this industry globally would take between 5 to 10 years, despite the availability of large reserves of energy outside the U.S. One of the top reasons for this is the lack of horizontal drilling technology or fracking technology for shale, to extract their hydrocarbon reserves. The EIA estimates China's reserves of shale gas at about 1275 trillion cubic feet, which is about 30 percent larger than the U.S. reserves. China has already begun shale gas exploration in its vast territory, in cooperation with international oil companies. The China National Petroleum Corporation (CNPC) drilled its first experimental shale well in March 2011. How are shale oil and gas extracted? The first step begins by expanding fissures in the rock to allow hydrocarbons to flow into wells, and then transporting the oil or gas using pipelines. According to the U.S. Geological Survey (USGS), the methods used for the hydraulic fracturing of rocks may cause mild tremors, but not dangerous ones. Furthermore, water resources may become contaminated, since pressurized water mixed with sands and chemicals – including carcinogenic substances – are used in the fracturing, or fracking. In truth, this represents one of the top challenges facing the shale hydrocarbon industry. Indeed, huge quantities of water are used in the extraction process. Drilling a single well requires pumping millions of gallons of water combined with sand and hazardous chemicals, which may seep into potable water aquifers. In addition, drilling one well requires moving very large materials and equipment, including some that may damage the environment. Although this industry has made big and rapid strides in America, 250 towns in the U.S. have enacted legislation banning the production of shale oil in adjacent areas, or tightening the conditions for fracking in order to protect the environment. In September, 2011, the Natural Resources Defense Council (NRDC) in New York launched a plan to provide legal counsel to local governments wishing to enact strict laws that prevent the industry from polluting the environment. But despite these environmental campaigns and others, shale oil output in the U.S. this year amounted to approximately one million barrels per day (600,000 barrels per day from the Bakken oil field in North Dakota, and around 300,000 barrels per day from the Eagle Ford field in southern Texas, in addition to the output of Nebraska and California.) The U.S. output of conventional crude oil in 2011 was about 9.7 million barrels per day, while U.S. consumption of oil amounted to 19.2 million barrels per day. The International Energy Agency (IEA) predicts that the overall U.S. output of shale oil will reach around 3.2 million barrels per day by 2025, or nearly twice the volume of U.S. imports of Arab crude. Meanwhile, U.S. shale gas production rose dramatically recently, from about 15 billion cubic feet per day in 2011 to about 25 billion this year, causing major transformations in the U.S. natural gas industry. According to the IEA, the forecasts had indicated that the U.S. may become one of the major countries for importing liquefied gas, but that imports shrank and now only cover a small fraction of U.S. consumption. It went even further and said that the U.S. exports of gas are set to increase as soon as the required infrastructure is built. It was also necessary for the IEA to draw attention to the fact that export projects require official approval, which usually takes time. Yet indeed, many countries that export liquefied gas had to divert their shipments bound for the U.S. market to other countries, and the major shifts taking place in the industry have had a significant impact on gas pricing mechanisms. It is worth mentioning here that U.S. President Barack Obama, in a press conference at the White House last week, added a strategic dimension to the importance of shale oil and gas, emphasizing the importance of this unconventional resource and its production for his country, and proclaiming that this unexpected boom may lead to a shift in the relations with the Middle East. He said, “That, I think, gives us more freedom of movement to speak to the kind of Middle East that we want to see and the world we want to see." * Mr. Khadduri is a consultant for MEES Oil & Gas (MeesEnergy)