Shale gas accounts for less than one per cent of worldwide energy use at present. But fracking is a growth business, and shale oil prospects are also altering the global hydrocarbon equation. The additional supply could change the geo-political and geo-financial landscape.
To date, the gas extracted from previously inaccessible formations is almost exclusively American. Statistics of the International Energy Agency show that only three per cent of the world’s gas comes from shale, accounting for less than 1 percent of the world’s total energy production. But fully 20 per cent of US natural gas came from shale in 2011. That has proved a price-changing experience. The price of US gas has fallen by two-thirds in the last two years. The shale gas price effect could eventually go global. Reserves appear to be plentiful in many countries, and the extraction technology is likely to become safer and more effective. The additional supply may not revolutionise the world’s energy industry. But the market is pretty finely balanced, and sensitive to even small shifts.
If plans to export US natural gas go ahead, shale could have large regional effects fairly soon. The prospect of an alternate supply of 10-15 per cent of western European needs might cut into Russian gas hegemony. Buyers will have a stronger negotiating position, even before Poland, which has some of the biggest shale gas reserves in Europe - produce in earnest. Shale gas production might eventually grow enough to shrink the net energy deficits of the United States and China, two of the three largest net importers.
The IEA reckons that shale will account for about 10 per cent of global gas supplies in 2035. But the advent of American shale gas exports could have an impact much sooner — if it separates gas and oil prices. Cheniere Energy, set to be the first shale gas exporter from the United States, will use domestic gas — rather than oil — as a price base. With new sources of supply, it makes sense now to sell gas on its own, at a discount. The financial and political ramifications of fracking may yet be almost earth-shaking.
