Unconventional gas – pockets of underground natural gas found in hard-to-reach places – comes from several sources, coalbed methane (CBM) and tight gas sands among them. None, however, are raising expectations of energy independence, improved security and reduced emissions for consumer countries more so than shale gas. Can it deliver?
Global estimates of shale gas reserves remain highly tentative.
Notwithstanding, the US alone enjoys anywhere from roughly 17 trillion cubic meters (tcm) to an eye-popping 108 tcm, depending on what projections you look at and how convincing you find their production potentials to be. Americans consume approximately 650 billion cubic meters (bcm) of natural gas per year.
One of the largest shale gas plays in the US is the Marcellus Formation, which stretches across southern New York state, western Pennsylvania, West Virginia and eastern Ohio. In 2009, the US Department of Energy estimated that the formation could contain 7.4 tcm of recoverable natural gas.
Europe may also have shale gas reserves to tap. Estimates here are even flakier as exploration and drilling initiatives, unlike in the US, are just now starting to take off. But in countries as varied as Poland, Germany, Hungary and the UK, up to 15 tcm of trapped natural gas might be underground.
According to Statoil, the Norwegian energy group, prospectors are also likely to find large shale gas plays in China, Australia, the Middle East and North Africa region, and Latin America.
The US sweet on shale
When it comes to shale gas, the US has blazed the trail. US production took off in the mid to late 2000s. According to the independent US Energy Information Administration, US wells produced 34 bcm in 2007, a figure that jumped 70 percent to 57 bcm in 2008, comprising approximately 9 percent of US gas consumption.
The growth continues. In2009 the US surpassed Russia to become the number one gas producer in the world. The US, counting its conventional gas production, is now effectively self-sufficient in natural gas.
Advances in technology – horizontal drilling and hydraulic fracturing in particular – and an elevated secular price for natural gas are the principal factors that have made complex shale gas drilling operations possible and economical.
Horizontal drilling improves gas recoverability by better intersecting the myriad fissures between shale slabs. To expedite the process and to increase the amount of gas captured, water mixed with sand and other drilling chemicals is pumped into the well at high pressures to prop open the shale slabs in a practice known as hydraulic fracturing or 'hydro-fracking.'
The corporate leader in the shale gas bonanza is Oklahoma City-based Chesapeake Energy, a company that has stakes in the Barnett (Texas), Fayetteville (Arkansas), Bossier and Haynesville (Northwest Louisiana and East Texas), and Marcellus natural gas shale plays. Other interested parties include familiar energy multinationals BP, Royal Dutch Shell, Total and Statoil. Beijing and Washington are also cooperating in the development of shale gas resources in China.
A 'shale' game
During the past two or three years a conflagration of adverse developments has put traditional natural gas producers on the defensive. The Great Recession tangibly dampened global gas demand. And shale gas especially, but also liquefied natural gas (LNG), started coming online in significant quantities.
Speaking with ISN Security Watch, Matthew Hulbert, a senior researcher and energy expert at the Center for Security Studies in Zürich, Switzerland, explains, “The main countries to lose out,at least for now, are the major gas producers,or what we traditionally think of as gas producers, Russia, Algeria, Iran, Bolivia the most obvious ones, Qatar and some smaller Gulf producers the others. West Africa comes into the mix a bit, but LNG developments are relatively small at this stage.
“The main example you have is [shale gas] production in the US. This has totally scuppered any prospects that North America would be the LNG export market of choice. The result is that Europe and much of Asia finds itself swamped in gas. China stands to gain from this considerably as it now has a number of strong supply options to hand rather than being picked off in a sellers market. The real concern now for producers is if unconventional gas takes off in Asia and Europe.”
But Hulbert counsels prudence. “The world will need lots of gas, the market could well tighten, especially once economic growth returns, and consumers better hope they are either well prepared or shale gas is a real runner. Otherwise the world could look very different again, and pretty quickly.”
Hulbert argues that a hard-hitting international gas cartel along the lines of OPEC or a troika of powerful, price-fiddling producers (Russia, Iran, Qatar) is unlikely. That said, some sort of backlash could be in the offing should producers feel their margins are squeezed too far too fast and sanguine shale gas projections fail to materialize.
For Washington, shale gas is a much-welcomed stepping stone in the decades-long, seemingly elusive pursuit of energy independence. European capitals equally welcome any opportunity to chip away at their energy dependence on equivocal Russia.
But energy independence in natural gas will not alleviate the US’s national security predicament in the Middle East, whereby a US military presence in the Muslim world and US financial and diplomatic backing for local autocrats to guarantee oil supplies and the free flow of commerce creates domestic tensions that in part manifest themselves as Islamic terrorism.
“The sea lane issues from the Gulf of Aden, to the Indian Ocean and beyond is still about maritime power and oil supplies – hence the game is still on,” Hulbert notes.
An inconvenient catch
Natural gas combustion results in roughly sixty percent the greenhouse gas emissions from coal.
Using more natural gas could help copious emitters like the US achieve yet unstated reduction targets, but there's a catch. Professor Robert Howarth from Cornell University cautions in a March 2010 preliminary assessment of the environmental impacts of shale gas production that methane leakage from drilling and distribution could negate any anticipated environmental benefits. Methane, over a 100-year period, has 25 times the warming potential of carbon dioxide. The outcome could thus be a wash.
What is more, as reported by National Public Radio (NPR) and experienced by the residents of rural Dimock, Pennsylvania, shale gas drilling and hydraulic fracturing are anything but risk-free undertakings.
The top secret solutions used in hydro-fracking are highly toxic. The contamination of local water wells and underground aquifers, although much of the drilling occurs far below the water table, remains a concern. The US Environmental Protection Agency is considering updating the outdated and likely deficient regulatory framework.
In Europe, environmental concerns could delay shale gas drilling operations, as population densities tend to be higher and regulations more stringent.
In sum: An energy, environment and security panacea? Hardly. A boon for consumers? Probably, but only if the numbers hold.
By. Claudio Guler