All aboard the shale train!
The shale oil and gas train is speeding along the track and no one knows quite where it will finish up. Yes, shale is transforming the world energy scene. Yes, also, it has been a shot in the arm for the United States, suddenly lessening the world’s No. 1 power’s dependence on imported fuel, and therefore vulnerability to any production hitches in the Middle East.
But it is also becoming a full-time job to keep on top of this story. So, to bring our readers right up to date, here are some of the latest developments (and repercussions) of the shale oil and gas story of the moment.
NIGERIA: President Goodluck Jonathan has admitted the exploitation of shale oil deposits around the world poses a challenge to Nigeria’s economic future. He has now called for an urgent diversification of the economy from such heavy reliance on crude oil and a broadening of the country’s agricultural sector. Nigeria, he said, could no longer depend on its oil industry to drive the economy.
SOUTH AFRICA: An energy workshop in Durban has been told that the country’s shale gas resource now stands at 390 trillion cubic feet. What is more, Energy Minister Dipuo Peters says that fracking for shale gas in the ecologically sensitive Karoo region will probably be allowed. The Gas Act is now being overhauled to take into account the shale story.
INDIA: GAIL (formerly the Gas Authority of India) will be importing American shale gas in the form of liquefied natural gas from 2017. India has been hit by its need to import rising quantities of gas, so much so that the government has now doubled the gas price in order to encourage more domestic production. The new domestic price is the equivalent of $8.40/mmBtu but the U.S. imports are likely to cost more than $US10/mmBtu. GAIL has executed an LNG offtake agreement with Houston-based Cheniere Energy Partners for importing 3.5 million tonnes a year. GAIL has also booked a 20-year terminal service agreement with Richmond, Virginia-based Dominion Resources for supplying 2.3 million tonnes of LNG, also from 2017. The Indian company has, furthermore, gone upstream and taken a 20% stake in an Eagle Ford shale project.
UNITED KINGDOM: The British Geological Survey estimates there is 1,300 trillion cu ft of natural gas stored within the shale rock deep beneath northern England. According to London’s Daily Telegraph if only 10% of northern England’s shale resources can be extracted, that would meet the UK’s current gas demand level for more than 40 years. And at today’s prices, it would have a market value of almost £1 trillion, without considering the gas and oil deposits elsewhere in the country. The Institute of Directors predicts shale gas development could create 74,000 new jobs, spanning geology, drilling, accounting, IT, and construction.
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URUGUAY: This South American nation lies above the same oil-producing basin system which extends into neighbouring Brazil and also produces oil for Bolivia and Argentina. But the Uruguayan shale section remains largely unexplored. Meanwhile, the country imports 40,000 barrels a day into its La Teja refinery in Montevideo. Next month, however, will see drilling begin to test some 14,000sq km (or 3.5 million acres) for shale oil. Australia’s Petrel Energy (ASX:PRL) has finally received government and landholder approvals. However managing director David Casey was philosophical about the approval delays, seeing it as having been a first-mover in Uruguay and needing to break new procedural ground. The first two holes starting next month represent the first deep onshore petroleum exploration in the country for more than 30 years.
CHINA: Slower than expected start-ups in the field mean China will likely miss its 2015 target for shale gas supply, reports The Financial Times. China has the world’s largest recoverable shale gas reserves, as much as the U.S. and Canada combined. However, the newspaper says the state-dominated sector has been slow off the mark. Beijing is targeting production of 6.5 billion cubic metres of shale gas output by 2015. China is anxious to reduce its energy dependence on imported oil.
SAUDI ARABIA: Meanwhile in a separate report in the London-based financial newspaper, it is argued that Saudi Arabia will remain a vital force in oil production even beyond the North American shale phenomenon. The kingdom remains committed to maintaining spare capacity while relationships with customers that make it possible for them to ask for more oil when the market is tight. “Even as U.S. output has surged, Saudi spare capacity have proved crucial in meeting supply shortages,” The Financial Times says. The kingdom lifted output during the Libyan civil war last year and has tried to fill the gap left by U.S. sanctions on Iranian oil.
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