3 Disappointing Conclusions About The Shale Gas Revolution


The discovery of tremendous shale gas resources around the world has led many to proclaim the end of the world’s energy problems. But there has been one big problem: price.

Natural gas prices have been depressed since 2008. Among other reasons this is because the boom in supply.

In a presentation at the recent peak oil conference, former IEA director Jean-Marie Bourdaire discussed the economics of shale gas. Bourdaire drew three conclusions:

(1) In North America, aggressive shale exploration has created the infrastructure for a viable, but slow-growing industry.

(2) Europe lacks crucial legislation to develop shale gas — for instance, the French Parliament for instance voted yesterday to ban ‘fracking’. Bourdaire said: “If you try to drill for natural gas in France, I’m sure you will find a countryman who says I don’t want you to spoil my wine.” Meanwhile Europe lacks infrastructure and the economic incentive to build it.

(3) China and Australia won’t develop significant gas production for years, until the investment becomes more lucrative.

We’ve excerpted some key slides from Bourdaire’s presentation. You can see a video of it here.

The U.S. is said to have twice as much natural gas as Saudi Arabia has oil

Shale gas exploration took off after the discovery of the Barnett shale in the 1980s

Unconventional gas has gained significantly since then

Shale gas pushed dry natural gas production from 2008 on

Price collapsed in 2008

While U.S. production increased

Technological changes made drilling for shale gas easier

Haynesville, Barnett and Marcellus are some of the biggest shale basins in the U.S.

Horizontal shale wells surged in 2009

There have been over 218 gas prone rigs in the U.S. since mid-2009

The Fayetteville Shale is an unconventional natural gas reservoir located in Arkansas

Costs depend on depth of target shale, lease prices and existing infrastructure

High costs and limited infrastructure make drilling expensive

There have been major cost reductions since 2004

Haynesville shale is the largest in the U.S.

Haynesville's costs are significantly higher than a similar well in Marcellus shale

Geological consultant Arthur Berman thinks costs are too high

Wood Mackenzie disagrees

Here's a breakdown of some shale fields

Technological innovation is expected to continue for shale

But its global outlook is still weak

See more awesome presentations from the ASPO conference

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