The Future Of Shale Development Worldwide, In Three Charts

world shale map

You may have seen the above map showing worldwide shale basins. It seems like a lot of other nations could replicate America’s shale boom if they only put their minds to it.

But while Mother Earth may have generously distributed her deposits of unconventional resources, she and Man have also conspired to make them not all equally accessible.

Scott Gruber at AllianceBernstein has created three annotated charts showing the amount of known shale reserves for all major countries, and the barriers to companies’ ability to drill there.

Check it out:

Europe, who arguably needs it most as it faces an energy cost crisis, has put in place the greatest restrictions to accessing its reserves.

  world shale scene

Latin America, led by Argentina, will likely be runner-up to the North American boom. 

world shale scene

Asia, especially China, has great potential, but, for now at least, the rocks there are a bit more difficult to drill.

world shale scene

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Case For Exporting Marcellus Shale Gas

Q&A: Industry Economist Makes the Case for Exports

JUNE 18, 2013 | 3:26 PM
BY 

Liquefied natural gas (LNG) storage tanks and a membrane-type tanker are seen at Tokyo Electric Power Co.'s Futtsu Thermal Power Station in Futtsu, east of Tokyo February 20, 2013. Japan's imports of LNG hit a monthly record of 8.23 million tonnes in January, on an increased need for fuel to generate electricity after the nuclear sector was hit by the Fukushima crisis.

ISSEI KATO / REUTERS/LANDOV

Liquefied natural gas (LNG) storage tanks and a membrane-type tanker are seen at Tokyo Electric Power Co.’s Futtsu Thermal Power Station in Futtsu, east of Tokyo February 20, 2013. Japan’s imports of LNG hit a monthly record of 8.23 million tonnes in January, on an increased need for fuel to generate electricity after the nuclear sector was hit by the Fukushima crisis.

The nation’s new energy secretary Ernest Moniz spoke at an energy conference Monday, where he told the audience that applications for new natural gas export facilities would be decided upon by the end of the year. Gas producers want to sell their fuel overseas where it fetches a higher price. But before it gets shipped abroad, it has to be converted to its liquid form known as LNG – or liquefied natural gas. Building those facilities is expensive. The closest proposed LNG export terminal to the Marcellus Shale deposit is in Cove Point, Maryland. That could cost more than $3 billion dollars to convert from its former role as a natural gas import terminal. But domestic manufacturers and those who say U.S. security depends on keeping the fossil fuel stateside are pushing back. Environmentalists worry that exports will stimulate more production in states like Pennsylvania, where activists have been pushing to implement a drilling moratorium. StateImpact spoke to the chief economist of the American Petroleum Institute, John Felmy, about the future uses of natural gas, and the export issues.

A: Felmy: Well, Marcellus Shale could play a tremendous opportunity in terms of exports, because it’s such a vast deposit. Developing it can of course be used to supply other states, as we are doing now. But there is likely to be so much of it, that exporting it at a very good price would help in terms of keeping production going.

Q:  Phillips: Right now we have the price of natural gas at about $4 per million btu [British Thermal Units] here domestically. And what are we seeing oversees?

A: Felmy: Well in Europe, it’s about $12 per million BTU. But in Asia, it’s as much as $17 or $18 because of the challenges that Japan faces with the Fukushima plants.

Q: Phillips: And I know that the industry is getting a lot of push back from manufacturers who are concerned that if you start exporting natural gas the price for them is going to be too high. And what they have been saying the low price in natural gas has allowed them to come back to the US, and that they are seeing a manufacturing renaissance, because of natural gas prices being so low.

A: Felmy: I think there is enough to go around because all indications are, as the economists would say, is that the supply curve is really flat. In other words, when you have an increase in demand from exports you don’t kind of have a sharp increase in price. And if you look at the drilling data, you see that it tends to support that conclusion.

Q: Phillips: And why is that?

A: Felmy: It is because it is a huge resource, and the industry has been so creative at improving technology, such that we have gotten so much more gas from areas that we’ve never dreamed of. Where ten years ago we were talking about building all these LNG import terminals, and you had all these terminals built and so that was the consensus and everyone from Alan Greenspan on down.

Q: Phillips: The price of natural gas has gone up and down and up and down. And when you think about how much it costs to build an export facility, The Dominion proposal at Cove Point, Maryland is about $3.4 billion dollars, how do you manage that risk? It seems like a pretty risky thing.

A: Felmy: Lets let the market work. Lets not have government intervention. It’s the investors who are going to be taking the risk and things could change, but right now the U.S. is so far ahead of other countries, even though many other countries have huge deposits of shale gas, that we are going to have that opportunity for quite a while.

And so, if you look at the major competition internationally, right now it’s Australia and their costs have increased significantly. And if you look at the deposits in other areas like China, Argentina, and Russia they are large, but because of issues of rule of law, and ownership of the resource, because in most countries except for the United States, the government owns that gas. Here in the US private individuals can [own that gas]. Such factors are reasons why we are ahead and why we are likely to stay ahead.

Q: Phillips: So talk to me about the end user here, how feasible is it that we are going to be seeing cars run on natural gas?

A: Felmy: Well, only 3% of natural gas supply is being used in cars right now. It’s primarily fleets, busses, things like that. So you can expand the car fleet with natural gas, but it is very expensive.  So, it’s about $8,000 to convert car, at that level of expense the car will expire before you get your money back.

But for heavy duty trucks and fleets of cabs, that is a very viable option. We are also going to see a lot of growth in electric power generation. And because of emission restrictions we are already seeing a huge shift from coal to natural gas. We’re incidentally seeing a shift from nuclear to natural gas. For example, there’s a [nuclear] plant out in California, the San Onofre, they decided not to restart. Well, the only other alternative to supply that electricity is with natural gas.

Marcellus Shale Exports Could Transform Global LNG Market

Marcellus Shale Exports Could Transform Global LNG Market

JULY 25, 2013 | 10:14 AM
BY 

The offshore loading pier at Dominion has not received a ship importing liquefied natural gas since January 2011.

LINDSAY LAZARSKI / WHYY/NEWSWORKS

The offshore loading pier at Dominion has not received a ship importing liquefied natural gas since January 2011.

In energy-hungry countries, all eyes are on Pennsylvania’s Marcellus Shale gas. In a dramatic shift from just five years ago, the U.S. is looking to export, instead of import natural gas. And if more natural gas starts getting shipped abroad, Pennsylvania’s Marcellus Shale could help change the global market for natural gas, and lighting homes in Tokyo.

The U.S. currently has two export terminals, one in Sabine Pass, Louisiana, and the ConocoPhillips LNG export terminal in North Cook Inlet, Alaska. The U.S. Department of Energy just gave preliminary approval for ConocoPhillips to expand its Freeport, Texas import terminal to export liquefied natural gas. About 17 other export proposals now await approval by the DOE, including the Cove Point liquefied natural gas import terminal operated by Dominion Resources.

 

Lindsay Lazarski / WHYY/Newsworks permalink

The offshore loading platform (background) as seen from the Cove Point Lighthouse.

THE “SWEET SPOT” YIELDS A GLUT

In areas of northeast Pennsylvania, drillers say they’ve hit the “sweet spot.” In a drill rig several stories up above a Susquehanna County forest, gas workers guide a giant diamond drill bit, about the size of a basketball, as it cuts through the rock thousands of feet below. Steve MacDonald is in charge of this operation for Cabot Oil and Gas.

Cabot Oil and Gas public relations officer George Stark with a drill rig worker outside of the "dog house."

SUSAN PHILLIPS / STATEIMPACT PENNSYLVANIA

Cabot Oil and Gas public relations officer George Stark with a drill rig worker outside of the “dog house.”

“This is what we call our dog house, this is the command center of our operations up here,” says MacDonald. “This is our driller Mr. Reed here. He shows you how fast we’re drilling, how fast we’re pumping so he understands what’s going on downhole.”

Downhole in places like this Cabot Oil and Gas well, the company has struck gold, so to speak. Cabot’s natural gasproduction volumes and profits soared in 2012, exceeding all expectations.

And because of wells like these in Pennsylvania’s Marcellus Shale formation, a glut of natural gas has developed nationwide.  Domestic prices for natural gas have dropped about one-third, since July, 2008 before the shale boom really took off.

But overseas, prices are three or four times that.  So drillers here want to ship their gas abroad. The economist for the American Petroleum Institute, John Felmy says exporting Marcellus Shale gas makes sense.

“Because it’s such a vast deposit,” says Felmy, “and developing it, of course, can be used to supply other states as we’re doing now. But there’s likely to be so much of it that exporting it at a very good price would help in terms of keeping production going.”

API’s John Felmy talks to StateImpact Pennsylvania about exports.

As the price has dropped, production in some of Pennsylvania’s gas fields has tailed off.

PIPELINES LEAD TO IDLED IMPORT TERMINAL

In what some call a stroke of luck, the wells across Pennsylvania could easily be connected to an existing interstate pipeline system, which links up to a nearby import terminal.

One of seven holding tanks at Dominion's Cove Point Liquefied Natural Gas Terminal.

LINDSAY LAZARSKI / WHYY/NEWSWORKS

One of seven holding tanks at Dominion’s Cove Point Liquefied Natural Gas Terminal.

That import facility lies about 320 miles south of Susquehanna County, on a spit of land jutting out into the Chesapeake Bay, where large white cylindrical tanks are surrounded by a network of 32-inch pipes. The Cove Point liquefaction plant is operated by Dominion Resources. And Dominion also owns and operates a pipeline system that connects these tanks to Pennsylvania’s gas fields. It was only a couple of years ago when plans for that system were to use it for storage and transport between different markets on the East Coast. Today, the company wants to reverse the flow, transporting shale gas to their export facility in Lusby, Md.

The onshore liquefaction plant sits surrounded by a nature preserve. To get to the offshore dock, visitors have to head down into a tunnel and use a bicycle to travel beneath the water to the pier that lies out in the middle of the Chesapeake Bay.

Before any natural gas gets shipped overseas, it has to be cooled to minus-260 degrees Fahrenheit, the point where it becomes liquid. Export plants that liquefy the gas cost billions of dollars to build. So what they want to do at Cove Point’s idled import facility is spend the relatively bargain basement price of $4 billion converting it to an export facility.

The last time a ship docked at this pier was on New Years Day of 2011. Since then, the seagulls have moved in and made it home.  Hideaways beneath large pipes hold nests with chirping chicks. A nearby dump provides scraps of food, which the nesting birds bring back safely to this deserted pier, leaving the white-washed dock littered with chicken bones and bird poop.

Liquefied natural gas technician Ernest Ortiz monitors the process from the offshore control center.  Ortiz says he would love to start seeing ships coming to the dock. The last one to unload LNG was on New Years Day, 2011.

LINDSAY LAZARSKI / WHYY/NEWSWORKS

Liquefied natural gas technician Ernest Ortiz monitors the process from the offshore control center. Ortiz says he would love to start seeing ships coming to the dock. The last one to unload LNG was on New Years Day, 2011.

Dominion Resources spokesman Dan Donovan says this facility would make one of the best places in the U.S. to export natural gas.

“We have a world class dock and pier,” says Donovan. “We have the storage, we have a pipeline into what is now the second largest natural gas field in the world.”

Donovan’s point about the pipelines is key.

The company’s plan for their pipeline system used to be to pump imported natural gas to states like New York, New Jersey and Ohio. But their plans have changed almost overnight.

“No one saw this coming,” says Donovan.

FUKUSHIMA AND THE SHALE GAS REVERSAL

And Dominion wasn’t the only industry player surprised by Marcellus Shale production.

Wolfgang Moehler is the director of global LNG, the shorthand for liquefied natural gas, for the firm IHS Global.

“[The years] 2007, 2008, the assumption was that the U.S. would become, in the next ten years, the largest gas importers in the world,” says Moehler.

But today, that assumption has been turned on its head, thanks in part to all those productive Marcellus Shale wells, and the March, 2011 nuclear disaster in Japan.

Japan’s energy situation changed dramatically back in March 2011. Before the meltdown at the Fukushima Daiichi plant, nuclear energy supplied a third of Japan’s needs. Where it once had 50 nuclear reactors, today the country is down to just two.

Photo taken from a Kyodo News helicopter over the town of Okuma, Fukushima Prefecture, shows the Fukushima Daiichi Nuclear Power Station on July 9, 2013. Tokyo Electric Power Co., the operator of the crippled plant, said the same day that the density of radioactive cesium in groundwater by the sea at the plant has soared to around 90 times higher than three days ago.

KYODO/LANDOV

Photo taken from a Kyodo News helicopter over the town of Okuma, Fukushima Prefecture, shows the Fukushima Daiichi Nuclear Power Station on Tuesday, July 9, 2013, more than two years after the meltdown. Tokyo Electric Power Co., the operator of the crippled plant, said the same day that the density of radioactive cesium in groundwater by the sea at the plant has soared to around 90 times higher than three days previous.

Analyst Wolfgang Moehler is watching a dramatic shift in the global LNG market, partly due to increasing energy needs in developing countries like India, and the loss of nuclear energy in Japan.

“So a significant amount of that electricity production had to be substituted from fossil fuel generation,” says Moehler.

Japan was already the world’s largest importer of natural gas, but since Fukushima, the pace has increased steadily. Moehler says Japan would love to snag some of that cheaper American gas coming from Pennsylvania’s gas fields. And Pennsylvania’s gas producers would love to sell at a higher price.

He explains that importing nations like Japan are locked into long-term natural gas contracts tied to the price of oil.

“The emergence of the U.S. now as a potential exporter opened up a competition,” said Moehler. [Energy companies in countries like Japan] could also go back to their traditional producers and say well we have a different opportunity, we have to renegotiate the price. So Fukushima has a very very strong impact on Japan’s decision making in that regard.”

SHIFTING GLOBAL LNG MARKETS

Photo shows the inside of the world's largest liquefied natural gas tank in Yokohama near Tokyo, unveiled by Tokyo Gas Co. on March 13, 2013.

KYODO/LANDOV

Photo shows the inside of the world’s largest liquefied natural gas tank in Yokohama near Tokyo, unveiled by Tokyo Gas Co. on March 13, 2013. Japan’s imports of LNG hit a monthly record of 8.23 million tons in January.

But Dominion Resources still has a number of hoops to jump through before it starts piping in Marcellus gas, liquefying it, and shipping it out. IHS analyst Wolfgang Moehler says despite current contracts with neighboring countries like Australia and Indonesia, it may still be cheaper for Japanese energy companies to pay for the Cove Point conversion, and the extra transportation costs of shipping LNG through the Panama Canal to the Pacific rim. This is how good a deal Marcellus Shale gas seems to companies in Japan. Sumitomo Corporation, a Japanese trading company and its U.S. affiliate Pacific Summit Energy, has agreed to help foot the almost $4 billion bill to convert Cove Point to a natural gas export terminal. That company, along with the U.S. affiliate of India’s GAIL Ltd., have signed 20-year service agreements with Dominion to provide natural gas. Sumitomo has since announced that the exported gas would be sold to Tokyo Gas and Kansai Electric Power.

First, the U.S. Department of Energy has to approve any deals with non-free-trade countries, and determine if they’re in the public good. Dominion’s Dan Donovan says they’re pretty confident their proposal will gain approval from the DOE. The Federal Energy Regulatory Commission also has to weigh in. The state of Maryland has to issue about 30 different permits.

LNG EXPORT OPPONENTS

And not everyone is thrilled with LNG exports. American manufacturers don’t like the plan, because cheap natural gas has helped domestic factories become more cost-efficient.  They say exports would raise prices at home.

Listen to StateImpact’s interview with George Biltz of Dow Chemical.

On the environmental front the Sierra Club is challenging the Cove Point plan in court.

Sierra Club attorney Craig Segall says regulators should not turn a blind eye toward the impact of increased production in natural gas fields like Pennsylvania.

Cove Point Lighthouse sits within sight of the Cove Point LNG terminal.

LINDSAY LAZARSKI / WHYY/NEWSWORKS

Cove Point Lighthouse sits within sight of the Cove Point LNG terminal.

“So if that continues, you wind up making these really large national energy policy decisions,” says Segall, “not just here [in Cove Point] but cumulatively across all these terminals and never ask this serious question. This implies x percent increased methane emissions, y percent increased wastewater production, and as a result, increased wastewater capacity in the fracking states.”

Segall wants the federal government to study the larger upstream impacts.

Natural gas exports may be a good deal for drillers, their investors, and  landowners who leased their mineral rights. But Segall thinks more thought should be given to Pennsylvanians who get few of the benefits of drilling but most of the burdens.

So what would Segall say to someone living in Tokyo, facing rising energy costs?

“I think that’s absolutely the hardest question,” he told StateImpact.

Segall says renewables should be pursued. But in the meantime, he has no easy answer.

“But there’s always this question of equity,” he says. “There’s a question about how do we provide energy globally. And there’s the question about who suffers where energy is produced and who wins, upstream in Pennsylvania or anywhere along the supply chain.”

Segall also says the increased tanker traffic in the Chesapeake Bay could upset its already threatened ecosystem.

Dominion Resources says converting the Cove Point plant will create thousands of new jobs in Maryland and upstream in Pennsylvania.

The company expects the Department of Energy to make a decision on its application by the end of the year.

Energy’s unexpected jobs boom

Energy’s unexpected jobs boom

September 5, 2013: 10:17 AM ET

How America’s oil and gas revolution is helping consumers and workers.

By Daniel Yergin

<> on January 18, 2012 in Dimock, Pennsylvania.

FORTUNE — The rapid rise in shale gas and tight oil in the United States constitutes nothing less than a revolution in oil and natural gas. No longer can there be any doubt about the dramatic change in America’s energy position. U.S. oil production is up 50% since 2008, when we were supposedly slated to run out of oil. Natural gas production has increased by 33% since 2005, and shale gas alone now constitutes about 45% of total natural gas production.

This revolution is not just about energy production; it’s an economic story along several dimensions, whether measured in consumers’ pocketbooks, jobs, U.S. manufacturing output, or America’s increased competitiveness in the world economy. This has occurred amid a half-decade of deep recession and high unemployment. Indeed, without the boost from the unconventional oil and gas development, the U.S. economic picture would have looked even worse over the last few years.

According to a new study from my organization, IHS, entitled “America’s New Energy Future: the Unconventional Oil and Gas Revolution and the Economy — A Manufacturing Renaissance,” the unconventional energy boom increased average household disposable income in 2012 by $1,200 — a figure that is expected to grow to $2,700 by 2020. That boost is mainly the result of two factors. First, households are spending less of their total income on utilities, whether directly for less-expensive natural gas or by lowering the cost of electricity generated with natural gas. Secondly, lower energy costs have led to a reduction in the cost of goods and services within the broader economy.

MORE: 100 Fastest-Growing Companies

Government revenues are also seeing a boost on account of the rise of new energy production. The value chain associated with shale gas and tight oil contributed over $74 billion in additional federal and state government revenues in 2012 — that figure is expected to reach over $125 billion by 2020.

The unconventional energy employment picture is equally impressive. Unconventional oil and gas (this does not include conventional oil and gas) supported 2.1 million jobs in 2012 along the entire value chain. That number is expected to rise to 3.3 million by 2020. These jobs include people working in the shale gas and tight oil industry, in related industries such as oil services and information technology, and people whose jobs are supported by the increase in spending that has flowed through the economy.

These additional jobs are spread throughout the United States. New York State may count itself a holdout with its ban on hydraulic fracturing, or “fracking.” Notwithstanding the ban, almost 50,000 jobs in New York result from shale gas and tight oil activity in other states.

Abundant, low-cost natural gas — brought on by the emergence of shale gas — is also transforming America’s position as a manufacturer. It is boosting companies that make products that this new oil and gas industry needs, such as steel and pipes. It is important on an even larger scale for businesses that rely heavily on natural gas or electricity generated with natural gas — ranging from petrochemicals and fertilizer, to food producers and glass manufacturers. For these companies, low-cost natural gas is a game changer and will stimulate an estimated $350 billion of new investment in the United States over the next dozen years. Such growth would have seemed inconceivable half a decade ago, when the expectation was that American manufacturers — and the entire U.S. economy — would have to depend increasingly on high-cost imports of liquefied natural gas as well as high-cost domestic gas.

The price of energy is, of course, only one component in a company’s investment decisions, along with such other factors as market forces, competition, and regulatory and litigation risks. But energy costs are critical just the same, and have made the United States much more competitive in the world economy. In Europe, natural gas costs three times as much as in the United States; in Japan, it’s more than four times as costly.

Business leaders in Europe are aware of America’s current energy advantage, and they are sounding the alarm. The chief executive of Austrian steel company Voestalpine, Wolfgang Eder, declared that “the exodus” from Europe has already “started in the chemical, automotive, and steel industries.” Indeed, Voestalpine announced plans to build a half-billion-dollar plant in Texas to produce iron that it would ship back to Austria for fabrication into steel. European suppliers will follow their customers across the Atlantic, building new factories in the United States to be near their customers’ new factories.

MORE: America’s historic gusher

This summer, I asked IMF managing director Christine Lagarde what the development of shale gas means for Europe’s troubled economy. “Shale gas and the reduction in energy prices,” she said, is “certainly to the advantage of the U.S. relative to Europe.”

This advantage will be measured in growing exports of manufactured products from the United States — and more jobs. For Europe, this development only adds to its angst. For the United States, this demonstrates the widening opportunity resulting from the rise of unconventional oil and gas.

Daniel Yergin, vice chairman of IHS, is author of The Quest: Energy, Security, and the Remaking of the Modern World.

Posted in: Daniel Yergin, economy, energy, fracking, jobs, Shale gas, The Quest, Tight oil