Some of the success factors behind North America's rapid growth in developing unconventional natural gas resources are missing outside the United States and Canada, but the long-term impact of global resources "could be profound," Wood Mackenzie energy consultants said in a new report.
The report, "Local Supply with Global Implications," details the UK-based firm's long-term forecast for unconventional gas worldwide and the implications of growing supplies for stakeholders.
"The sharp growth in unconventional gas production in North America has turned the gas market on its head," said Noel Tomnay and Rhodri Thomas, who authored the report. "In addition to making North America increasingly self sufficient in gas, it has also removed the need to import LNG [liquefied natural gas] and, in so doing, has contributed to the surplus of LNG available to European and Asian markets. This has helped depress spot prices globally."
Unconventional gas coalbed methane (CBM), tight gas and shale gas is "present in large volumes throughout the world and offers the potential to continue to reshape global gas dynamics."
But can North America's success in tapping into unconventional gas resources be repeated elsewhere? To date, noted the authors, North America and eastern Australia are the only two areas in the world where unconventional gas is produced in "substantial" volumes. And the resources have been exploited in remarkable time.
Many are aware of the rapid success by North America's gas producers in exploiting the shale and tight gas plays. However, eastern Australia also has seen unconventional gas supplies soar in a short period of time. CBM there contributed only 2% to the local gas market in 2003, noted Wood Mackenzie. Today CBM "is expected to contribute over 50% of eastern Australia's gas demand by 2015" and the region is set to become a major LNG exporter, with nine LNG trains now proposed.
"Unconventional gas success need not be confined to just North America and eastern Australia," said the duo. Because these resources are distributed worldwide, Wood Mackenzie now is modeling 1,400 Tcf of resource potential in plays across six continents.
However, the economics and logistics of undertaking large-scale unconventional gas operations "have yet to be proven," noted the authors. "Even if the economics and logistics can be proven, the pace of growth is likely to be slower."
For instance, the quality of coals, shales and tight gas plays is largely untested outside North America, the report noted. Progress also will depend on companies being able to transfer technologies from proven plays and adapt them to local conditions.
In addition, low recoveries per well in the unconventional plays "mean that companies often need to drill hundreds of wells in a material project," which impacts the service sector and leads to initial higher costs.
Besides, noted the report, "the money that land owners receive in the U.S. through their mineral rights have played an important role in facilitating land access" -- outside of North America, mineral rights often are held by the state.
Domestically, U.S. gas suppliers also have access to a "vast liberalized pipeline transmission system," which is not the norm globally, noted the report.
Finally, "high gas prices in the U.S. ($6-9/MMBtu between 2003 and 2008) were key in driving the technology and process improvements that underpinned the dramatic increase in shale gas extraction..." Encouraged by the availability of acreage and the positive gas market outlook, many producers have "rushed to license large areas of land in Europe...but much still needs to be done to overcome the issues..."
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