One thing the elite panelists agreed on at the Baker Institute’s Global Energy Transitions Summit at Rice University was that more oil would be needed in the future to supply the world’s growing demand needs—in spite of a threat of electric vehicles taking market share—and that the price of crude would inevitably rise to meet the challenge, albeit at an ambiguous point in time in the next two to five years. But an interesting tussle developed around where that supply would be sourced from to meet the forecasted gap, and it wasn’t the Middle East.

Are U.S. shale economics sustainable to keep production growing enough to meet the world’s appetite, or will deepwater exploration be the longer-term solution?

Bobby Tudor, chairman of investment banker Tudor, Pickering, Holt & Co., sees shale as unbeatable in the global arena, at least in the near term. With big projects around the world needing at least $40-per-barrel breakevens, and in most cases a lot more, the U.S. has lower breakevens than almost anywhere else in the world.

“In the U.S. the energy industry works at $50 WTI and $2.50 Henry Hub,” he said. “Returns aren’t fantastic, but they’re good enough to attract capital. The question is, at those levels, are returns good enough in other parts of the world to attract enough capital that those parts of the world can grow production to what’s needed to meet global demand?”

In contrast, he pointedly noted that results from big ticket offshore exploration over the past decade have been awful, fewer than 10 large discoveries. “The amount of capital that has been destroyed in this venture is mind-blowing. You’ve seen an explosion of capital go into the U.S. business, and away from other parts of the world. Remember, you never drill a dry hole in the Permian Basin.”

Hess Corp. invests its capital in both camps and Greg Hill, president and COO, likes both. To the question of shale sustainability, he pointed to Hess’ success in driving down well costs by 60% in its Bakken Shale play since 2014 while productivity leapt by 300%.

But while U.S. tight oil production is a major force on the supply side, he said, “If you look at how much it’s really going to grow, it’s maybe going to grow 700,000 bbl/d per year. Maybe a million.” Compare that to estimated demand growth of 1.4 to 1.6 MMbbl/d and offshore productivity declines of 2 to 3 MMbbl/d at current investment levels, and thus “there is going to be a supply shortage.

“What this means is the world is going to have to invest in other things besides shale. Offshore will be the next cab off the rack that will meet that supply need.”

With the lack of investment going into that sector, the offshore has been “effectively decimated,” said Hill. “There is going to have to be a rapid pickup in investment in the offshore.” Offshore investment plays “an absolutely critical part in avoiding another supply shock” to the downside, he said. “It’s inevitable and it’s coming.”

Along with partners ExxonMobil Corp. and Nexen, Hess has discovered 2.5 billion barrels of oil offshore Guyana with a breakeven of about $35/bbl. “Is that competing for capital inside Hess with the Bakken? Absolutely. Will it compete with the Permian? Absolutely.”

Even Tudor conceded that the slowing of capital flowing into U.S. unconventional plays is tamping production growth. Investors are concerned returns aren’t as good as advertised, he said.

“There are signs of caution in financial markets. The dirty little secret of the onshore shale business is that it doesn’t generate hardly any free cash flow. Public companies are under constant pressure to grow, and there are open issues about the sector’s ability to attract the amount of capital needed.

“That being said, if you’re a capital provider, where would you rather spend it? There, or to a deepwater exploration program where, if you’re lucky, you get one out of four [successful wells].”

Hill said investors will have to once again get comfortable with the offshore sector before money will flow there, and that’s a matter of price.

However, Schlumberger executive vice president of corporate engagement, Jean-François Poupeau, offered a step change on the cost side. “We firmly believe that we can take the price of deepwater wells down by 50%,” he said, using automation and integration. “The size of the prize is enormous.”

Additionally, the use of cloud computing combined with seismic advances is a technological breakthrough for exploration geologists, he said. “Our ability to identify targets is now going to go in quantum steps because of this adoption of the cloud as a vehicle.”

So while shale is advantaged in the near term, it seems offshore development is critical to the out years. Offshore’s bounty, and the commodity price, will come roaring back. In time.