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Unconventional Gas Maps New Global Trade Route

The well-worn paths for global natural gas, traditionally traced along the trade flows of liquefied natural gas (LNG) expansions, have been rerouted as unconventional gas -- and especially shale -- has washed out old bridges, according to the International Gas Union (IGU) and IHS Inc.

Four concepts, or directions, for the gas industry are outlined in an 18-page paper by IGU and IHS, all of which share one broad theme: the gas industry is poised for significant growth over the coming decades. Moreover, the technology that helped to burst open untold amounts of gas tightly held in sand and rock formations across North America is ready to burst open new trade routes around the world.

"Unconventional Gas: Transforming the Global Gas Industry" was produced with the assistance of the IGU and authored by IHS CERA's Michael Stoppard, Shankari Srinivasan, Laurent Ruseckas, Wolfgang Moehler, Mary Lashley Barcella, Xizhou Zhou and Andrew Ellis.

"Where the future models diverge is on whether the outcome is increased trade flows or more localization -- and that will have an impact on global and regional gas balances and prices, as well as the overall energy mix in different parts of the world," the authors said. The international unconventional resource base still is being analyzed, but the "traditional conceptual model for the global gas industry no longer applies."

Recoverable reserves of unconventional gas, including shale and coalbed methane (CBM), today are estimated conservatively at about 250 years at current consumption rates, "at variance with the Malthusian assumptions that underlie much policy concern around other primary commodities. And it is not simply that the gas resource base has expanded; it has also become more widely distributed, with far-reaching implications for security of supply and geopolitics."

U.S. gas output alone has jumped by 20% since 2007 and added more than 10 Bcf/d to reserves, the authors said.

According to the authors, the traditional international global gas framework "has broken down" because it basically relied on countries with limited conventional gas resources to import from countries with a lot of gas.

"First, unconventional gas has upended previous expectations about resource distribution and potential trade flows, with potential large-scale resources now located in what were previously seen as net importing regions," they said. "It is no longer obvious that international trade of gas will grow; instead there could be a reversal and a new trend of more self-sufficient local or regional markets. Market globalization could turn to market localization."

In addition, large conventional deepwater fields have opened source points for new gas exports in countries that once had to rely on gas imports: East Africa, the eastern Mediterranean and Brazil. Meanwhile, gas shortages across the Middle East have spread to North Africa, which begs the question of how important that region actually may be for exports.

A way out is possible, according to the authors, who offered "possible models" for a future global gas business:

"The transformation of the North American gas market by the production of shale gas in the past five years creates two possible outcomes for North America -- the market remains isolated as today...or the market is tied into the rest of the world via LNG exports from the United States and Canada," said the authors.

Over the long term North America's gas markets are, for the first time, "demand-constrained rather than supply-constrained." In either case, the search for new markets and demand growth "is well under way."

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ISSN © 2577-9877 | ISSN © 1532-1266
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