The earlier chapters on the shale revolution have convinced us that a significant shift in the oil supply fundamentals has just taken place. An exceedingly high rate of productivity improvements in this new industry promises to strengthen the competitiveness of US shale even further.

But another related revolution is beginning to see the light of the day. It is being gradually realized that the technological refinements in horizontal drilling and fracking that have unlocked an immense shale oil resource wealth to economic exploitation can also be applied to conventional oil extraction, thereby substantially improving the productivity of mature and declining oil fields. Several basins in the US and the world are presently experiencing this new occurrence, which we call the conventional oil revolution.

In this chapter, we start by describing basic geological and engineering characteristics that help explain the differences between conventional oil and shale oil. This is followed by examples of the conventional revolution around the world. Though the revolution is thus far unassuming and in its infancy, the application of the “shale technologies” to traditional oil extraction is surprisingly prevalent. The essence of the revolution is precisely to renew output from established, ageing fields, much like traditional EOR methods (such as through the injection of steam, chemicals or gas). Countries with the most to gain are those with high reserves and existing conventional oil production.

THE ROCKS

At this point in the book, a brief geology lesson is in order – even though we are economists. Aguilera et al. (2014) indicate that an oil formation generally consists of source rock, reservoir rock, seal rock, trap and fluid content. Most geologists believe that the origin of oil is organic, related mainly to plants that were altered by pressure, temperature and bacteria. Though it is difficult to prove that oil actually came from a definite source, it is believed that the source rock is responsible for the origin of oil.