The political world has not quite caught up with the industrial and financial worlds when it comes to the vast increase of energy supplies of gas. For years that commodity from which a growing portion of stationary power (heating and electrical) is generated has been influential in European development. Since the nineties the Russians have manipulated that lifeline, which provides Western Europe with 25% of its energy. Those days would appear to be over. The next forty years are projected to bring a massive increase in natural gas availability thanks to the commercially competitive development of shale gas.
Gazprom, the Russian energy giant, has had to rethink its entire future operational development and export revenue plan. It is not alone among the major gas suppliers such as Qatar and Algeria. (Iran is second only to Qatar in proven gas reserves, but it is not one of the top suppliers.) The United States has returned as one of the world's major gas producers through the unlocking of the technological mysteries of shale rock gas exploitation.
The key to the growth of natural gas availability has been the development of horizontal drilling. This system allows deep vertical drilling literally to turn horizontally to penetrate the layers of shale. A mixture is injected of water, chemicals, and small amounts of fine sand, fracturing ("fracking") the gas-laden shale rock deposits. This action releases the gas that then pools and is recovered.
In recent years the United States has ceased being a net gas importer and is now on the brink of self-sufficiency, with the expectation of being export capable in ten years. Internationally the impact of domestic gas development through shale exploitation has created the potential of serious alteration of strategic circumstance. Poland, for example, has the possibility of major development of its extensive shale deposits and the creation of eventual satisfaction of all its gas needs. This reduction of Warsaw's dependence on Moscow's energy sources fits well with Poland's strategic objectives.
The Russians in general and Gazprom in particular had great plans to develop a large scale liquefied natural gas (LNG) program to compete with the vast LNG operation of Qatar by shipping Russian Arctic gas worldwide. The drop of price as a result of what most industry observers refer to as a "gas glut" has prompted feverish behind-the-scenes effort to create a gas cartel.
Algeria led the way; Iran, eager to gain any device to expand exploitation of its own vast untapped gas reserves, quickly joined with the Algerians. However, neither Qatar nor Russia took well to the idea of extra-national interference in what has been for them a freewheeling moneymaker.
Strong arguments have been put forth that shale gas exploration is too expensive and that, in any case, there are serious environmental risks. The cost factor is easily countered by pointing to the extensive drilling underway from Texas to the Northeast United States. The prospects are for a cost of $2 per million BTU by 2015. That makes it far more than competitive. The real problem is that the newly developed shale gas sources seriously complicate the future of the U.S. coal industry. Gas is about 30% less carbon intensive than oil and about 50% less than coal.
The major argument against shale gas operations from an environmental standpoint would appear to be in the possible contamination of aquifers. The dangers referred to center primarily on the use of toxic drilling fluids. The industry insists, however, that it can absorb the increased costs of tightened safety regulations and the development of non-toxic drilling fluids.
None of these negative factors have inhibited European shale gas development now going on in Poland, Austria, Germany, Sweden, France and Romania. Ukraine's shale gas development has been hindered by Russia's efforts to continue to control the political and economic life of its neighbor and former member of the Soviet Union. Nonetheless even if Ukraine continues to restrict foreign investment in its energy industry, it is only a matter of time before Kiev succumbs to the financial blandishments of such major energy industries as ExxonMobil and ConocoPhillips that are already test drilling in Eastern Europe.
Advocates of shale gas development point optimistically toward its possibility as a domestic energy source for China that would allow that country to find itself more energy independent and less committed to imports from the Middle East. The availability of relatively low cost and plentiful natural gas shifts the weight of political influence in general terms away from energy exporting countries such as Iran and Venezuela, to say nothing of Russia.
Until such time when renewable energy sources come into competitive fruition, shale gas may act as an economic and environmentally advantageous bridge. Dr. Daniel Yergin, the dean of American independent energy experts, put the development of shale gas simply and accurately as "the most significant energy innovation so far this century." Shale gas may not be the panacea its supporters suggest, but it certainly can be a large step in helping to cut back on energy imports.
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