The surge in natural gas production via shale developments and massive liquefied natural gas projects continues to change the dynamics of the global energy industry, according to a report released this morning by IHS-CERA and the World Economic Forum.
Energy Vision 2011: A New Era for Gas, affirms what many in the energy industry have been saying for a while now — new gas drilling technologies and numerous LNG export projects coming on line are making natural gas a more abundant and attractively priced hydrocarbon.
Natural gas provides about 24 percent of all global energy needs, but the refinement of drilling technologies — namely hydraulic fracturing and horizontal drilling — has nearly doubled the estimates for world gas reserves by making unconventional sources more accessible.
“Natural gas, proudly labelled ‘the Prince of Hydrocarbons,’ may be about to inherit its kingdom,” says Simon Blakey, Belgium’s special envoy to the Eurogas consortium in a piece included in the CERA/WEF report. “Gas is likely to be the main means of reducing the carbon footprint of mankind’s energy use in the coming years.”
In North America, shale gale has made the continent much less reliant on LNG than was expected just a few years ago, the report notes, slowing the anticipated development of a global gas market via LNG.
“Shale has essentially made the U.S. an island market,” said Samantha Gross, director of integrated research with IHS-CERA and an author of the report.
The success of shale gas drilling and its potential be exported to other regions is also changing the dynamics of long established relationships between supply and demand, particularly in Europe.
The abundance of natural gas has the potential to help Europe meet many of its greenhouse gas reduction goals through switching from coal-fired plants to natural gas fired, the report notes.
But the switch to natural gas won’t be a quick one, the report says.
Europe may not be so eager to switch to gas as a power source because the mandates there tend to be for zero emission sources, not simply reduced emissions.
“The primary uses for gas are expected to remain the same — space and water heating in residential and commercial applications, fuel and feedstock for industrial applications and power generation,” the report says. “In OECD countries with mature gas distribution networks, the most robust growth is expected to come from power generation.”
The report does address the backlash that is being seen in a number of U.S. markets to the potential environmental threats from natural gas drilling. It largely concludes the risks can be managed by industry and aren’t all that different from earlier generations of oil and gas development.
“Some of [the backlash] has been due to not very good ground work by some of these companies in developing a relationship and trust with the local communities,” Gross said. “One would hope that companies move forward having learned from the experience and be more engaged in working in Europe.”
Pawzel Konzal, the head of the World Economic Forum’s Oil & Gas Industry group, notes that the outlook on shale gas is very different in ‘Old Europe’ versus the newer members of the European Union. Countries like Poland are more likely to see shale gas production first as a new means of energy security.
In a letter included in the report, Wojciech Jasinski, the chairman of the Polish Parliament’s Economic Committee, notes that LNG shipments and the development of domestic shale gas resources would help diversify beyond a 60 percent reliance of coal and lignite and ties to a single gas supply — the Siberian gas fields.