Shale Gas Discovery in Western Iran

Shale gas deposits have been found in Lorestan Province, about 500 kilometers southwest of Tehran, an official at the National Iranian Oil Company said.

"We are certain of a shale gas discovery in Lorestan," head of the research and technology at NIOC's exploration department told Mehr News Agency.

The exploration block is located near the Zagros Mountains, he added.

Exploration is now being carried out in four phases. However it is unclear if Iran will make a move to tap into its shale formations because of higher costs of shale oil and gas.

Iran holds the world's second largest natural gas reserves after Russia.

In the gas sector, it is concentrating largely on developing South Pars, a giant gas field shared by Iran and Qatar in the Persian Gulf, from which Iran draws more than 500 million cubic meters of gas per day.

Tehran hopes to complete all South Pars development phases in two years. The mega project is estimated to cost over $90 billion, a lofty investment that virtually leaves little if any room for untested and potentially costly exploration and production projects such as shale.

Shale oil and gas is extracted through a process known as hydraulic fracturing, or fracking, which is costlier than the exploration of conventional reservoirs.

According to reports, the break-even costs for North American shale producers is thought to be about three times higher than similar costs for Middle Eastern producers.

Another downside of shale is that shale wells deplete faster than conventional wells, with production rates falling about 70% after the first year.