Consequences of The Shale Gas Revolution
A report published by Chatham House states that U.S. shale gas expansion has brought investment in many parts of the conventional gas sector to a halt, the result of which could be shortages in the next decade.
Paul Stevens, a senior fellow at the international affairs think tank, says that the 20-fold increase in unconventional gas output in the U.S. has impacted investment considerations for new pipelines, liquefied natural gas plants and storage and for climate friendly renewable energy initiatives worldwide.
Stevens says the low gas prices and the uncertainty caused by shale are making gas companies reticent to invest in new conventional gas wells or liquefied natural gas facilities, fearing that future shale supplies could render them redundant. Given the lengthy development cycle required to put gas projects online, a deferral of investment today, could lead to a shortfall of gas - and higher gas prices - by 2020.
Stevens believes the real concern comes if shale gas does not live up to its promise.
"If the shale gas revolution in the U.S. continues to flourish and is replicated elsewhere in the world, this inadequate level of investment will not matter. Consumers can look forward to a future, floating on unlimited clouds of cheap gas as unconventional gas is produced," said Stevens. "However, if shale gas fails to deliver on current expectations, then in ten years or so, gas supplies could face serious constraints."
Europeans are holding out high hopes for shale gas as means of reducing dependence on Russian sources of natural gas. However, Stevens writes that success in Europe may not be easy to replicate replicating as in the US.
He lists the challenges facing shale gas production, including concerns over the environmental impact of technologies such as hydraulic fracturing that have allowed for the dramatic growth of this unconventional resource. In addition, US explorers benefited from tax incentives, amenable environmental legislation, and readily available equipment and expertise.
Stevens points out that European shale gas deposits are geologically much harder to extract than those in the US and that drilling is quite land intensive, and this could be very disruptive in densely populated Europe.
Read the Report: The 'Shale Gas Revolution': Hype and Reality