If the United States is able to mass produce
shale gas, could not other countries with huge
deposits do the same? Not necessarily, says a new
study, which points to the technical challenges and
greater costs that may slow progress elsewhere.
The global consultancy
Deloitte Touche Tohmatsu Limited examined
whether the shale gas boom here could be copied
around the world. It found, in the short run, that
the United States will remain the dominant player --
with all the implications that they may hold for
exporting the fuel to Asia and to Europe.
“Each country is positioned differently on the
spectrum of shale gas development,” says Adi Karev,
global leader for energy and resources at Deloitte
Touche, in a document called ‘Oil and Gas Reality
Check 2013.’ “The mere existence of shale gas does
not immediately lead to energy independence or make
a major impact on the global energy market.”
The author then goes on to profile four nations with
shale gas reserves: Poland, China, Argentina and the
United States. Poland has potential but it has not
had positive -- initial -- results. China is working
hard but will not soon reach a point in which it
could be a net exporter. Argentina, meantime, is
having luck and is looking to scale up production.
In the United States, shale gas, or unconventional
natural gas, is expected to comprise a greater
percentage of the fuel used to power electric
generation. At the moment, the nation is awash in
the fuel, which has kept such prices relatively low
compared to competing sources such as coal. Many
expect that dynamic to change as demand increases,
not just by power plants but also by the
transportation sector.
The U.S. Energy Information Administration estimates
that world shale technically recoverable resources
outside this country are 5,760 trillion cubic feet.
That’s a big jump from studies done a few years, or
40 percent more.
“The U.S. shale gas revolution was three decades in
the making ...,” says Karev. “Although other
countries, particularly Poland, China and Argentina,
want to replicate this success, these countries
still have a long road ahead before they can begin
to see the gas volumes and supporting infrastructure
needed to dramatically lower domestic natural gas
prices and create export opportunities.”
Price Advantage
The author is upbeat on this country’s export
potential. Part of that is because Japan, which has
no oil or gas of its own, could buy natural gas from
the United States in the form of “liquefied natural
gas,” or LNG, which is fuel that is frozen before it
is shipped to where it is needed.
Here, natural gas is now about $4 per million Btu,
with futures not expected to go much higher. By
contrast, in Asia, it has been as high as $18 for
the same unit. Japan spent $65 billion on LNG
exports in 2012, the paper says. That’s 25 percent
more than in 2011, which is the year the tsunami and
earthquake wiped out its Fukushima nuclear plant and
caused it to rethink its generation portfolio.
Oil is a global commodity that is affected by those
conflicts in oil producing nations. Those prices
have remained high. Natural gas, meanwhile, is
largely a regional fuel that has been left unscathed
by recent events. Considering Japan: It has gotten
much of its LNG from Qatar, which links its prices
to oil.
“The anticipation of US LNG exports potentially
undermining oil-price indexation has heightened in
light of recently announced Henry Hub-linked
contracts,” says Karev. “BP, Cameron LNG partners,
and Cheniere have agreed to supply Asia Pacific
buyers with US LNG linked to Henry Hub gas prices,
which could see Japan’s import prices in the range
of $10-12/MMBtu compared to $14-16/MMBtu for
oil-linked contracts.”
While LNG has risen from 5 percent of the global
market to 10 percent, the author says that it has
some obstacles ahead. Namely, national governments
and their partners must figure out a way to beat the
high cost of production and transportation. In the
United States, meanwhile, the potential regulatory
environment is now under review. Further, the author
says that 12 liquefaction plants are under
construction around the world that will increase LNG
supplies by 84 million tons by 2017, which will
bring down prices of the commodity.
For the time being, the United States is
well-positioned to export its shale gas in the form
of LNG. But as other countries with high shale gas
reserves attract the capital and the technology to
access those natural resources, they could become
competitors and put downward pressure on global
prices.
EnergyBiz Insider has been awarded the Gold for
Original Web Commentary presented by the American
Society of Business Press Editors. The column is
also the Winner of the 2011 Online Column category
awarded by Media Industry News, MIN. Ken Silverstein
has been honored as one of MIN’s Most Intriguing
People in Media.
Twitter: @Ken_Silverstein
energybizinsider@energycentral.com
Copyright © 1996-2013 by
CyberTech,
Inc.
All rights reserved.
To subscribe or visit go to:
http://www.energycentral.com
To subscribe or visit go to:
http://www.energybiz.com
http://www.energybiz.com/article/13/06/us-could-be-dominant-lng-exporter