"Natural gas may end up having a much bigger role in power generation in Europe than people were expecting a couple of years ago," says Mr. Yergin.That's partly because there is a lot of it about. The development of technology to extract so-called unconventional or shale gas out of sedimentary rock has resulted in a sharp increase in U.S. production of natural gas.This has displaced liquefied natural gas from other parts of the world, including the Middle East, that would have gone to the U.S. but now has to find buyers in other parts of the world. World spot prices have, partly as a result, fallen sharply in recent years.Europe is also looking to increase pipelined supplies of natural gas from the east, to diversify away from its current dependence on Russia.And there's a joker in the pack: Europe's own, as yet untapped, supplies of unconventional gas. One industry insider says companies that have found such gas are not advertising it, but Mr. Yergin says his organization has done a study of 55 potential unconventional gas plays "that shows Europe has almost as much unconventional gas as North America."
Both shale gas and oil portend a dramatic shift in US economic geography. The growing concerns about nuclear power almost certainly take that option off the table for the near term. Even prior to the shale gas boom, the fuel was seen as an attractive alternative to coal for generating electricity:
Paul Smith, vice chairman of Tenaska Energy, said his company predicted four years ago that natural gas would become the dominant fuel in the power sector. At that point, company forecasts put the price of natural gas at between $7 and $8 per thousand cubic feet, he said. Today, amid abundant supplies, the price is roughly half that level.
Such low prices make fracking less profitable, yet the end of the glut is nowhere in sight:
With the natural gas trading below $4 per million British thermal units, the standard volume measure for the industry, there’s pressure to drive costs lower. The company currently spends between $8m and $11m on a well that should provide gas for about 30 years.“The most time-honoured way to reduce your drilling costs is to reduce your cycle time,” Carpenter says. Shell doesn’t disclose whether it’s currently making money from its North American shale operations. But like rivals that are gambling on shale, Shell will be hoping that new regulations force the closure of more coal-fired power stations, lifting both demand and prices for natural gas. The US Energy Department forecasts that shale will account for 45pc of all natural gas production in the US by 2035 compared with 14pc in 2009.
One of the cheapest places to drill is in the Marcellus Shale. Rock bottom prices aren't scaring away energy companies:
National Fuel Gas Co. has agreed to sell its oil and natural gas wells in the Gulf of Mexico in a $70 million deal that will raise additional money for the Amherst energy company’s accelerated drilling plans in the Marcellus Shale in Pennsylvania.
Moving from one to play to another is big news. Everyone is heading for Pennsylvania. The main threat to this talent flow is regulation:
“The industry is definitely under attack,” said Stacy Schusterman, CEO of Samson Investment Company, during a panel on the third day of IHS Cambridge Energy Research Associates’ CERAWeek conference in Houston. “But I think the bulk of that is happening in states like Pennsylvania and New York, where the amount of drilling growth is something they haven’t seen before and the system is not really set up to handle the volume of activity from the public’s perspective.”
I have the sense that the entire world is watching and waiting for political events to unfold in Pennsylvania. Is the extraction of shale gas safe? There are similar questions about any energy source. The more important consideration:
How does shale gas compare to nuclear power?