Shale gas development will have a “significant impact on the dynamics and prices” of future natural gas markets – according to a report entitled “Unconventional gas, a global phenomenon” produced by World Energy Council in collaboration with Accenture.
The report – published at the Africa Gas Forum during the Africa Energy Indaba on Monday 15th February – demonstrates how a rapid growth in unconventional gas has already significantly disrupted trade flows globally.
The rapid growth of unconventional gas is demonstrated by the U.S. – in December 2015 49 percent of its gas supplies came from unconventional gas and by 2019 it is predicted that U.S. LNG supplies will account for one fifth of global capacity and that the U.S. will be the third largest LNG exporter.
With concerns about affordability and security driving exploration into unconventional resources outside of North America, unconventional gas will continue to be a driving factor in how the market evolves. In particular, continued growth in the US, Australia, and China will significantly influence the balance of supply and demand out to 2020. Argentina and Saudi Arabia may also emerge as commercial unconventional resource suppliers before 2020.
Most other frontier markets are at least five to ten years away and will face competition from large conventional projects in sub-Saharan Africa and the Middle East.
Effective and sustainable development of unconventional resources will require several elements to come together in a given market. For one, it will require long-term strategies and investments and the financial resources to explore and develop basins as well as to develop infrastructure and a local supplier network. It will also require relationships with the local communities to garner support for the development, minimise surface disruption, and ensure that the local communities share in the benefits. It will also require collaboration with government and policymakers to ensure fit for purpose and environmentally sound regulations.
National Oil Companies (NOCs) will have many advantages in meeting these requirements over an international or foreign oil company. Therefore, the fact that NOCs are leading unconventional developments in countries like Argentina, China and Saudi Arabia is not surprising and sets the stage for a new model that may be stronger in addressing societal and environmental concerns associated with unconventional gas operations.
Many nations with shale gas resources also face water stress and their NOCs have many incentives to deploy new technologies that overcome water related operational risks and constraints. For example, Saudi Aramco’s breakthroughs in reducing water usage through the use of CO2 for stimulation in the shale gas fracturing process would create significant advantages for the future energy mix. It would reduce water needs, a crucial target in countries facing water scarcity and competition for water between energy and food. It would also create a potential new use for CO2, which creates economic incentives to capture more emissions.
Christoph Frei, Secretary General, World Energy Council, said: “Unconventional gas is causing a shift in the dynamics of the natural gas market which will be felt for many decades to come. Its spread around the world is being accelerated because it can make gas more affordable to consumers and reduce concerns about the security of supply.
“So far, the surprising resilience of the U.S. shale gas market has led the way in the shale gas boom, and whilst other countries may not have the unique characteristics of the U.S., they will learn how to become LNG producers or exporters which will change the global dynamics of energy.”
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