09/04/2014 05:21 pm ET | Updated Nov 04, 2014

Shale Energy Potential Depends on Water Supply

The shale gas boom that has revved the U.S. economy over the past decade could spread to other parts of the energy-hungry world. But, before governments and businesses go too far, there's an important factor they need to consider: water risk.

According to a new analysis from World Resources Institute, 38 percent of the world's shale resources face high to extremely high water stress or arid conditions. Without proper management, water risk could seriously constrain the expansion of shale gas.

While many countries are sitting on large shale gas reserves, the process of injecting water and chemicals into underground shale to extract fuel is highly water intensive. It's not enough to identify the places with the biggest potential for hydraulic fracturing for natural gas and oil. Energy prospectors also need to know whether there is enough water to get the fuel out of the ground.

For the first time, this information is publicly available. WRI's new report Global Shale Gas Development: Water Availability and Business Risks, looks at the 20 countries with the greatest shale resources and then looks deeper, at the available water near the shale areas. Five of the countries with the biggest potential - China, India, Mexico, Pakistan and South Africa - could face problems in tapping this energy resource due to water stress.

Energy security and commercial incentives are motivators for shale energy development. Shale gas extraction could add 47 percent to the world's recoverable natural gas resources, create new revenue and jobs, and boost national energy supplies, especially in developing countries. In addition, if done right, shale gas production carries less climate risk than many fossil fuels, including coal.

However, the competition for water is likely to be keen in these developing countries. As their economies grow, the need for fresh water for agriculture, industry, and drinking grow along with them. At the local level, adding hydraulic fracturing to the mix could strain already-stressed water supplies.

Shale resource development can require large volumes of water: as much as to 25 million liters, or 6.6 million gallons, for each well. And much of the fresh water used in hydraulic fracturing cannot be recycled.

To understand the issue on a massive scale, consider China, which has the world's largest shale gas resources as well as high water-related risks.

The U.S. Energy Information Administration estimates China has shale gas resources of 1,115 trillion cubic feet, twice that of the United States and nearly four times the resources estimated for the Russian Federation. As the world's largest energy-related carbon dioxide emitter with the world's largest population - 20 percent of the global total - China is aiming to diversify its sources of energy. Shale gas offers energy with potentially lower emissions compared to coal, which is the dominant energy source in China.

However, WRI's new report finds that China is experiencing water stress in the areas of recoverable shale gas and oil deposits. Being aware of hydraulic fracturing's water requirements and the overall need for water in China will help inform policy makers and investors about challenges in extracting this fuel.

China is hardly alone. The United States, which has the world's fifth-biggest reserves of shale gas, faces medium to high water stress across its shale plays.

Worldwide, 40 percent of the top 20 countries with the largest shale gas resources - China, Algeria, Mexico, South Africa, Libya, Pakistan, Egypt and India -- have high water stress or arid conditions. Water availability is such a powerful factor that it could limit shale resource development on every continent but Antarctica.

In areas where hydraulic fracturing has not yet happened, the time to address this challenge is now, while assessments of water availability can inform shale energy development. Business leaders and policymakers should gather information now to ensure that further shale gas development is done responsibly and fully assesses potential water risk. Globally, 386 million people live on land above shale plays where competition for water is an immediate concern.

To protect water security while minimizing business risks, the new report recommends that local officials, communities and industry work together so uncertainty is kept to a minimum. Beyond that, there needs to be adequate governance to keep water supplies secure and reduce regulatory and reputational risk. Importantly, another basic step would be to minimize fresh water use and engage in corporate water stewardship. In these ways, countries and businesses that want to join the shale gas boom can do so without squandering an essential resource: water.