Comments on: LNG v. Unconventional Gas Sources In North America http://www.energypolicyblog.com/2010/02/02/lng-v-unconventional-gas-sources-in-north-america/ Sustainable energy policy, more competition, better regulation, improved policies. Fri, 03 Feb 2012 13:54:12 +0000 hourly 1 http://wordpress.org/?v=3.3.1 By: Hamza Fawzi http://www.energypolicyblog.com/2010/02/02/lng-v-unconventional-gas-sources-in-north-america/comment-page-1/#comment-67574 Hamza Fawzi Fri, 16 Apr 2010 20:40:59 +0000 http://www.energypolicyblog.com/?p=938#comment-67574 The substantial increase in unconventional gas production in the US will very likely contribute to the reduction of LNG prices (with respect to the “business as usual” scenario), as it will help ease off the demand of LNG in the US, as Sophia Ruester shows in the post. This will certainly be good news for fast-developing countries in Asia (i.e. China and India) whose soaring gas demand over the past years has largely contributed to the increase of LNG prices (LNG prices increased by 180 percent from 2005 to 2008 [1]). Furthermore, the decline of LNG demand in the US will push LNG carrier ships towards Eurasia, which would benefit Europe to diversify its sources of natural gas: Indeed the recent disruptions of Europe’s gas supply as a result of political conflicts between Russia and Ukraine, is worrying the EU in terms of security of supply. LNG would be one way to help Europe diversify its natural gas sources and reduce its dependence on gas pipelines from Russia. This would require Europe to invest in LNG infrastructure in order to have the capacity to process and regasify larger amounts of liquefied natural gas. In fact, Europe already plans to more than double its current LNG regasification infrastructure by 2015 to around 25 billion cubic feet per day from its current 11 billion cubic feet per day [1]. Following the US, the EU is also starting to invest in unconventional gas, and is seeing it as a potential means to diversify even more its supply of natural gas. Indeed, shale gas exploration is under way in southern France, Germany and Poland. European producers are engaging in joint ventures with American companies that operate shale gas in order to acquire the necessary technology, expertise and experience. Total has paid out US$2.25bn for a 25 per cent stake in Chesapeake’s Barnett assets, with US$1.44bn of this sum to be spent on financing drilling in the Barnett shale in Texas to 2012 [2]. Norwegian company Statoil has also entered a joint venture with Chesapeake Energy to produce shale gas this time in eastern US. But the potential benefits and fruits of these joint ventures (i.e. drilling shale gas in Europe en masse) are likely to take some time: In fact, there was a lag of about 16 years between the beginning of massive R&D investments (early 1980s) by US gas producers, and substantial increase in unconventional gas production in the US (late 1990s) [3]. Europe can however benefit from existing US experience and technology in the field, in order to reduce this lag. [1] Energy Tribune, Europe looks to LNG by Andres Cala http://www.energytribune.com/articles.cfm?aid=830 (March 20th, 2008) [2] Industrial fuels & power, The rise of unconventional gas by Samuel Fenwick http://www.ifandp.com/article/003225.html (March 26th, 2010) [3] Energy Bulletin, US natural gas: the role of unconventional gas by Gail Tverberg http://www.energybulletin.net/node/44389 (May 18th 2008) The substantial increase in unconventional gas production in the US will very likely contribute to the reduction of LNG prices (with respect to the “business as usual” scenario), as it will help ease off the demand of LNG in the US, as Sophia Ruester shows in the post. This will certainly be good news for fast-developing countries in Asia (i.e. China and India) whose soaring gas demand over the past years has largely contributed to the increase of LNG prices (LNG prices increased by 180 percent from 2005 to 2008 [1]).

Furthermore, the decline of LNG demand in the US will push LNG carrier ships towards Eurasia, which would benefit Europe to diversify its sources of natural gas: Indeed the recent disruptions of Europe’s gas supply as a result of political conflicts between Russia and Ukraine, is worrying the EU in terms of security of supply. LNG would be one way to help Europe diversify its natural gas sources and reduce its dependence on gas pipelines from Russia.
This would require Europe to invest in LNG infrastructure in order to have the capacity to process and regasify larger amounts of liquefied natural gas. In fact, Europe already plans to more than double its current LNG regasification infrastructure by 2015 to around 25 billion cubic feet per day from its current 11 billion cubic feet per day [1].

Following the US, the EU is also starting to invest in unconventional gas, and is seeing it as a potential means to diversify even more its supply of natural gas. Indeed, shale gas exploration is under way in southern France, Germany and Poland. European producers are engaging in joint ventures with American companies that operate shale gas in order to acquire the necessary technology, expertise and experience. Total has paid out US$2.25bn for a 25 per cent stake in Chesapeake’s Barnett assets, with US$1.44bn of this sum to be spent on financing drilling in the Barnett shale in Texas to 2012 [2]. Norwegian company Statoil has also entered a joint venture with Chesapeake Energy to produce shale gas this time in eastern US.
But the potential benefits and fruits of these joint ventures (i.e. drilling shale gas in Europe en masse) are likely to take some time: In fact, there was a lag of about 16 years between the beginning of massive R&D investments (early 1980s) by US gas producers, and substantial increase in unconventional gas production in the US (late 1990s) [3]. Europe can however benefit from existing US experience and technology in the field, in order to reduce this lag.

[1] Energy Tribune, Europe looks to LNG by Andres Cala http://www.energytribune.com/articles.cfm?aid=830 (March 20th, 2008)
[2] Industrial fuels & power, The rise of unconventional gas by Samuel Fenwick http://www.ifandp.com/article/003225.html (March 26th, 2010)
[3] Energy Bulletin, US natural gas: the role of unconventional gas by Gail Tverberg http://www.energybulletin.net/node/44389 (May 18th 2008)

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