CERA: Recreating U.S. shale gale overseas faces challenges

Eni CEO Paolo Scaroni said the natural gas boom in the United States is unlikely to happen in other parts of the world.

During his keynote address at the CERA Week energy conference Tuesday, Scaroni said the shale gas drilling boom that has put the United States back on the road to energy independence won’t easily take hold in other countries because of differences in mineral ownership rules.

Scaroni’s statements echo a theme among speakers at the 31st annual conference being held at the Hilton Americas this week.

While many U.S. landowners control the gas or oil rights on their property, foreign governments often own those minerals in other countries.

“The farmer in Louisiana who is sitting on shale is a happy farmer,” Scaroni said. “A farmer in France who discovers he’s sitting on shale gas that is going to be exploited would be straight out the door to join a march on the Elysee.”

Other energy leaders expressed similar challenges in recreating the U.S. shale boom abroad.

Apache chief G. Steven Farris said the United States benefits from a wealth of oil field services and pipelines that other countries don’t have. Farris said drilling Argentina’s first horizontal multi-frack well last year required “Schlumberger and Halliburton and all of the services they had in Argentina.”

The often discussed option of exporting U.S. natural gas is just as uncertain as a worldwide shale boom, Scaroni said.

“It remains to be seen whether American citizens, who accept shale gas activity for reasons of energy independence, will willingly accept it to benefit the bank accounts of a few exporters,” Scaroni said.

The glut of natural gas that the shale rush unleashed on the U.S. market has created massive differentials in the commodity price globally.

“The exact same stupid molecule of gas that trades hands for less than $3 here in the U.S. is sold in Europe at $9 and for $15 in the far east,” Scaroni said.

He noted that a similar gap exists between natural gas and oil prices in the U.S. When comparing the cost per unit of energy provided, natural gas trades at one-sixth the price of oil, Scaroni said.

Because of that gap, Scaroni said it seems natural to convert the nation’s trucking industry from gasoline to natural gas.

“Gas prices need to narrow the gap with oil prices,” he said. “Either gas prices will go up or oil prices will go down. But there is no economic reason to keep a differential like we see every day in the U.S.”