Shale gas could soon be a global phenomenon

September 10 2012 - TI Staff

Today, shale gas is considered a largely US phenomenon. But, if shale gas is defined as economically recoverable gas obtained through a combination of horizontal drilling and hydraulic fracturing, then we may soon be on the verge of a global gas glut. More nations are ramping up their estimates of gas reserves that could potentially be recovered using new technologies.

Today gas prices vary across the board. In China, natural gas prices are eight to nine times more than in the US. But that could soon change if the now mature technology of hydraulic fracturing were to be used worldwide. 

Leading the shale gas charge is, of course, China. EIA estimates that China has at least one third more shale gas reserves than the US. These are not proven reserves, but dubbed "technically recoverable," as estimates of production costs have not been clearly marked out. Further explorations are required to arrive at an accurate estimate.

This year the Chinese government released a five-year shale gas plan. The production target for 2015 is 6.5 billion cubic meters and for 2020 -- 60 - 100 billion cubic meters. If China were to achieve the targets, it would still only be a modest achievement as the nation would be 10 years behind the US in terms of volumes. US shale gas production reached these numbers in 2010. But, given the size of its reserves, China may eventually catch up with the US and find its comfort level in the production of cheap, efficient and environmentally friendly source of fuel for power generation.

Other countries jumping on to the shale bandwagon include Mexico, Argentina, South Africa, Poland and Brazil. Of these, Argentina, by current estimates, has nearly the same amount of reserves as the US. The Poles see shale gas as helping them break Russian stranglehold over their fuel supplies. 

All this is good news for gas turbine suppliers. For instance, coal-based power accounts for 70% of all power generated in China. And the five-years shale gas plan has clearly laid out its intent to change that equation to bring down carbon emissions. 

But questions remain. Less-than-$3 gas is a reality in the US today. But that may not be the case in other nations. Shale geology is generally considered more complex in other nations, such as China, making shale gas production more expensive than the US.

The larger, bigger challenge may well be logistical, though. Other nations do not boast of the same extensive pipeline network as the US, and transporting the gas may require extraordinary investments unlike in the US.