Earlier this month, the U.S. Energy Information Administration (EIA) released a major report assessing the potential for shale gas development in 48 basins in 32 countries around the world. (See map.) According to the report, the assessed basins, when added to previously published estimates in the United States, could contain 6,622 trillion cubic feet (Tcf) of gas contained in shale. Until recently, many shale formations were thought to contain natural gas but could not be developed economically. Now, producers in the U.S. and Canada have demonstrated that the application of horizontal drilling and hydraulic fracturing can produce natural gas from shale at acceptable costs, causing countries around the world to wonder what resources these technologies could unlock under their land.
How much is 6,622 Tcf? It is equivalent to 40 percent of previous global estimates of all technically recoverable natural gas, estimates which largely excluded shale gas resources, as their extent had not been well-established. And the figure doesn’t even include the massive shale gas resources that are thought to reside in Russia and the Middle East, where sizable amounts of conventional natural gas will likely delay any investment in unconventional gas for the foreseeable future.
The basins analyzed in the report were selected based on geologic data availability, on the suspected size of the gas resource, and on a country’s likelihood of near-term shale gas development. As a result, some basins that are suspected to hold large natural gas resources were not included. The shale gas estimates will likely change as more data become available, but for now, the sheer magnitude of the resource—as well as its existence in some unexpected locations—is newsworthy. (See Table.)
Within Europe, for example, France is estimated to have comparable shale gas resources to Poland, which is widely believed to hold the most promising shale gas plays on the continent. Poland has traditionally depended heavily on Russian natural gas imports, so it has been briskly issuing shale gas exploration licenses. On March 8, Polish Prime Minister Donald Tusk said, “[Shale gas development] has to be safe for the environment, technologically feasible on a large scale, and it must be profitable. But our determination is clear: every cubic meter of gas in Poland must be used if possible.”
The French government, by contrast, has placed a moratorium on shale gas exploration in response to widespread concerns about the environmental impacts of horizontal drilling and hydraulic fracturing, two techniques used in shale gas extraction. This moratorium was recently extended until June, when two government reports on the environmental and economic effects of shale gas development are due.
The greenhouse gas implications of tapping into major shale gas reserves are very different for Poland and France as well. Poland depends on coal for nearly 60 percent of its primary energy use, suggesting that a shift to natural gas usage could significantly reduce domestic emissions. In France, however, coal comprises only 10 percent of primary energy use, compared to 40 percent for nuclear power.
Natural Gas Statistics and Estimated Shale Gas Resource, Selected Countries
|Natural Gas Production (2009)||Natural Gas Consumption (2009)||Natural Gas Net Imports (Exports) as % of Consumption (2009)||Proved Natural Gas Reserves||Technically Recoverable Shale Gas Resource|
|trillion cubic feet||percent||trillion cubic feet|
Source: Based on EIA/ARI, http://www.eia.gov/analysis/studies/worldshalegas/.
Argentina and Mexico have notable shale gas resources as well. But because natural gas production and use are currently modest in South America, the development of (and debate surrounding) shale gas potential in these countries is some years behind that of Europe.
Perhaps the biggest surprise is China—a country whose suspected shale gas resource is large enough for the National Energy Administration to announce that it is drafting a Shale Gas Development Plan. The EIA’s estimate for China of 1,275 Tcf of technically recoverable shale gas is a third higher than the estimate for the United States, the current world leader in shale gas production. The China National Petroleum Company completed the first horizontal shale gas test well on March 25 and is moving quickly to explore China’s shale reserves in partnership with international gas producers such as Royal Dutch Shell and Chevron. Energy-hungry China is unlikely to hesitate to develop what now seems to be a truly staggering domestic unconventional gas resource.
Despite the magnitude of EIA’s estimates, commercial shale gas development outside of North America is likely at least 5 to 10 years away. Most countries lack the specialized horizontal drilling equipment and hydraulic fracturing expertise to exploit unconventional gas resources. Moreover, residents of many countries, especially in Europe, are raising concerns about the environmental safety of shale gas development and are closely monitoring stories about associated water and air pollution.
If the United States fails to demonstrate that shale gas can be extracted safely by ensuring that development is adequately regulated and best practices are adopted throughout the industry, then more countries will follow the French example and put a halt to such activity. The EIA’s report shows that shale gas has the potential to drastically alter the landscape of global energy markets, and in countries like Poland it could contribute significantly to emissions reductions. But whether and when this change comes will hinge on public confidence in the natural gas industry.