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Page added on September 24, 2013

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Shale gas, oil reshape world energy landscape

Shale gas, oil reshape world energy landscape thumbnail

After unleashing an energy revolution in the United States, shale gas and oil are now becoming energy game-changers worldwide, a break with the past whose ramifications are still unclear.

Thanks to the advent of hydraulic fracturing technology — used to extract oil and gas locked in sedimentary shale rock — the United States is on track to become the world-number-one oil producer by 2017 and a net exporter by 2030, according to the International Energy Agency (IEA).

Besides radically changing the US energy landscape, this “fracking” revolution is also reshaping markets overseas.

Thanks to the sudden abundance of cheap natural gas, American electricity suppliers are shunning domestic coal — leading producers to export it at low prices to Europe and Asia.

That trend has revived the appeal of coal-fired power plants in Europe and taken a toll on plans to transition toward gas-burning plants, despite the air-pollution concerns around coal.

Energy experts say the United States will also likely begin exporting liquefied natural gas (LNG) to Europe and Asia in the next several years.

US authorities have already greenlighted four LNG export terminals.

View gallery.”

Graphic showing the policy of selected countries on …

Graphic showing the policy of selected countries on shale gas and oil extraction. (AFP Photo/dp mhc/ …

“We anticipate that from around 2016, we are really going to see volumes of LNG coming out of the United States and they are going to change the way that markets connect over the coming decades,” said IEA analyst Tim Gould at a recent conference.

“The United States won’t export a huge amount of gas, because they’ll be looking to keep domestic price levels as low as possible, but eventually there will undoubtedly be more than 10 export terminals geared toward Europe and Asia,” said Jerome Ferrier, head of the International Gas Union.

With all its new non-conventional output, the United States is now producing more than seven million barrels of oil per day, returning to the level of 25 years ago, said Olivier Appert, head of the French institute for oil and new energies (IFPEN).

“The fact that the United States is set to become the top oil producer by 2020, ahead of Saudi Arabia, changes everything,” said Appert.

While the size and longevity of the American boom are up for debate, it will redraw the world energy-trade map at least temporarily by making North America less dependant on Middle Eastern oil.

China is on track to take the United States’ place as the world’s top oil importer in 2017, its oil bill soaring to $500 billion in 2020, the Wood Mackenzie consultancy calculated last month.

The United States’ bill for oil imports is meanwhile set to fall from a peak of $335 billion in 2008 to $160 billion in 2020.

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Workers change pipes at a rig exploring the Marcellus …

Workers change pipes at a rig exploring the Marcellus Shale outside the town of Waynesburg in Pennsy …

This unexpected turn of events is shaking up the global oil market.

At first the world’s top crude producers, Saudi Arabia and Russia, considered the fracking boom “a speculative bubble that was about to burst”, said Appert.

“But today it’s becoming a major problem for them,” to the point that the Organisation of Petroleum Exporting Countries launched a study on the issue in June, he added.

Keen to emulate the American boom, more than a dozen other countries around the world are currently exploring for shale hydrocarbons or moving in that direction.

But environmental fears around fracking — in which a high-pressure mixture of water, sand and chemicals is blasted deep underground to release hydrocarbons trapped between layers of rock — may stop other countries from embracing the shale revolution with the same fervour as the United States.

“The United States is atypical because landowners hold the underground rights to their property, and despite all the local protests, they’re encouraged to drill,” said Ferrier of the International Gas Union.

“It’s clear that in Poland, Romania, Great Britain, that won’t happen as easily.”

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British police watch an anti-shale gas and fracking …

British police watch an anti-shale gas and fracking protest outside parliament in London. (AFP Photo …

Energy-hungry China has the world’s largest shale-gas reserves, according to preliminary estimates, but recently began exploration returned disappointing initial results.

However, “the energy challenges in China are such that the country needs every exploitable resource, and if there’s shale gas there, it will probably be tapped,” said Ferrier.

“The problem will be finding the water for fracking.”

Europe also faces tricky questions on shale gas.

The continent depends heavily on Russian gas, with North Sea deposits quickly running out.

The European Union has so far failed to adopt a unified gas strategy, but policymakers consider the issue strategically vital.

EU Energy Commissioner Guenther Oettinger said in May that shale gas could be a good bargaining chip in reaching new deals with Russian energy giant Gazprom.

“I am sure (that) to have some shale gas option is a good instrument for our long-term negotiations (with) Gazprom and Russia,” he said.

AFP



9 Comments on "Shale gas, oil reshape world energy landscape"

  1. BillT on Tue, 24th Sep 2013 12:47 pm 

    Gas is a bubble, pun intended, and the Russians know it.

  2. bobinget on Tue, 24th Sep 2013 2:31 pm 

    I’ll never forget the so called Tech (internet) bubble of the late nineties. It seemed to go on forever while I waited on the sidelines for prices to ‘get real’
    When that bubble burst in “99 one could buy APPL for six dollars a share. This hour Apple is $491.82. and half the country are on line at some point in the day.

    WHEN this tight gas ‘bubble’ bursts we will have already evolved to something different….

    Practically speaking every developing or developed nation in the world won’t embrace ‘H’ drilling and hydraulic fracturing at once.
    While US gas production may lag at some point,
    like Microsoft was once King of operating systems,
    better, faster, easier, browsers did in fact come along.

    Computers WILL improve as will 3/D ‘Look Down’ tech.
    A few short days ago we were flaring gas because it was a nuisance. We avoided known gas deposits.
    If gas becomes a replacement for light oil, we will go
    seek, find and retrieve that gas if profitable.

    WE see the UK, arguably once the master of the planet, now shrinking into conservatism, rejecting
    ‘fracking’ or aspects of biotechnology, GMO, out of fear. OR.. what we are led to believe, caution.
    (follow the money, it’s big oil or big pharm. financing this sort of hysteria)

  3. bobinget on Tue, 24th Sep 2013 2:49 pm 

    The point I clumsily tried to make was that when the first adopters begin to exhaust lower cost gas deposits, other nations will be just beginning to adopt later, more advanced, tech.

    Wait till the UK and one of its gas supplies get into a political rough patch and valves are turned off or prices hike to ruinous levels.

    I always ask anti science types if one of their children’s lives were threatened by sickness that could be cured with some genetically engineered drug would they put aside superstition and give docs permission?

    Saving one’s child’s life or indeed one’s own, may not compare with sitting in a dark, ice cold flat eating from a can.

  4. westexas on Tue, 24th Sep 2013 3:11 pm 

    “Thanks to the sudden abundance of cheap natural gas, American electricity suppliers are shunning domestic coal — leading producers to export it at low prices to Europe and Asia.”

    Of course, as of 2012, the US was still a net natural gas importer.

    The very slow increase in global crude oil production since 2005, combined with a material post-2005 decline in Global net oil exports, have provided considerable incentives for US oil companies to make money in tight/shale plays. But I think that the assertion by many in the Cornucopian camp that shale plays will result in a virtually infinite rate of increase in global crude oil production is wildly unrealistic.
 We are still facing high–and increasing–overall decline rates from existing oil wells in the US. At a 10%/year overall decline rate, which in my opinion is conservative, the US oil industry, in order to just maintain the 2013 crude oil production rate, would have to put online the productive equivalent of the current production from every oil field in the United States of America over the next 10 years, from the Gulf of Mexico to the Eagle Ford, to the Permian Basin, to the Bakken to Alaska. Or, at a 10%/year decline rate from existing wells, we would need the current productive equivalent of 10 Bakken Plays over the next 10 years, just to maintain current production.



    On the natural gas side, a recent Citi Research report (estimating a 24%/year decline rate in US natural gas production from existing wells), implies that the industry has to replace virtually 100% of current US gas production in four years, just to maintain a dry natural gas production rate of 66 BCF/day. Or, at a 24%/year decline rate, we would need the productive equivalent of the peak production rate of 30 Barnett Shale Plays over the next 10 years, just to maintain current production.

  5. rockman on Tue, 24th Sep 2013 3:50 pm 

    Just a few minor picky points. First :” Thanks to the advent of hydraulic fracturing technology — used to extract oil and gas locked in sedimentary shale rock — the United States is on track to become the world-number-one oil producer by 2017 and a net exporter by 2030, according to the International Energy Agency (IEA).” Frac’d wells have produced billions of bbls of oil and TCF’s on NG over the last 50 years. Frac’d horizontal wells have produced hundreds of millions of bbls of oil and hundreds of billion cu ft of NG before the current shale boom began. The hottest oil play on the planet in the 90’s was the horizontally drilled and frac’d Austin Chalk formation in Texas.

    Second, the US has been one of the top three oil producers on the planet for decades. Typically we’ve produced 80% of what Russia and the KSA have produced. So jumping to #1, if it ever happens, is not exactly a huge leap. As far as NG goes the US has been the largest producer of NG on the planet for the majority of the time since the beginning of the petroleum age. Even today we’re more or less tied with Russia as the #1 NG producer. The US and Russia produce about half of all the NG on the planet.

    LNG exports – We’ve actually already begun export LNG but only a very small amount. More may be exported eventually but that will take quite a few years before it approaches a significant level IMHO. OTOH we’ve been exporting NG via pipelines for decades.

    In Part I of this series, we saw how Mexican demand for U.S. gas exports has surged by 92% over the last 5 years. And with proposed new export projects slated to take up to 10% of U.S. production, Mexico could be the surprise driver of marginal demand and gas prices. There are currently 14 pipeline systems carrying US NG to Mexico. Currently about 7 bcf/day is exported to Mexico, or about 2.5 trillion cu ft per year. A typical LNG export facility can do about 1 bcf per day so it will take a significant expansion of LNG export terminals to even match what we are now shipping to Mexico. So yes…the US will be exporting a fair bit of NG in the near future but it will continue to be done, as it has for decades, via pipelines as opposed to LNG tankers. In fact, according to the U.S. Energy Information Administration, all of the in-progress pipeline projects on the U.S.-Mexico border could result in a doubling of American natural gas exports to Mexico by the end of 2014. The primary future of US NG imports is tied to pipeline systems and not LNG.

    And finally: ““But today it’s becoming a major problem for them,” to the point that the Organization of Petroleum Exporting Countries launched a study on the issue in June, he added.”. Utter bullsh*t. Since the US shale oil boom began the oil export revenue for Saudi Arabia has increased from $60 billion/year to over $300 billion/year. I’m still waiting for anyone to describe exactly what problems are being created. The US oil shale boom and the huge increase in OPEC revenue are due to the very same factor: $100+/bbl oil. I’m still of the opinion that the boom in oil production from US shales is one of the best proofs we have of the effect of limited global oil production capacity. If it were for our energy situation we wouldn’t have expensive oil. And if we didn’t have expensive oil the shales wouldn’t be booming.

    BTW the shale gas bubble burst several years ago when the price dropped from over $11/mcf to almost $2/mcf. That resulted in an almost 80% decrease of rigs drilling for NG in the US. Our current NG production is a carry over from that boom time and the continued developed of DW GOM NG.

  6. J-Gav on Tue, 24th Sep 2013 4:13 pm 

    I agree with much of what Rockman says but my own reaction to this article is from a different angle, something like: “Ri-i-ight – Europe should sacrifice its farmland, ecosystems and water quality so that “tight this” and “shale that” can prolong the fossil fuel age for a few more years. And all the while, in the U.S., most of the companies involved have been “losing their shirts” in these plays. The quote is from Rex Tillerson, CEO of Exxon, who’s been pulling his investments out of the sector.

  7. BillT on Wed, 25th Sep 2013 3:08 am 

    Tech is killing the planet …

  8. Harquebus on Wed, 25th Sep 2013 5:59 am 

    I got this from the comments section in the AFP link above.

    “Lets be smart about this America. Lets pay our debt off entirely with this revolution.”

    If the situation wasn’t so serious, this would be very funny.

  9. rockman on Wed, 25th Sep 2013 1:46 pm 

    J-Gav: the reality is that the EU doesn’t have to sacrifice anything if they conduct business properly.

    And Rex is pulling out because XOM is not capable of functioning well in such plays. Never has been and never will IMHO.

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