Speaking at the Colorado Oil & Gas Association’s annual Rocky Mountain Energy Conference in Denver this week, several industry experts agreed that shale gas is transforming the North American gas market and that natural gas will eventually become a global commodity in the same way that oil is today.

Wood Mackenzie’s Robert Clarke, who serves as manager of unconventional gas services for the Scotland-based international consultancy, noted the emergence of LNG as a major source of gas has made getting supply to new markets feasible and cost-efficient. Clarke said that five years ago North American independents were virtually alone in the shale gas market. Now that market has seen a number of new players—including US super majors such as ExxonMobil, Chevron, and ConocoPhillips, and foreign producers and investors such as Statoil and BP eager to exploit knowledge acquired in US shale plays and take it to unconventional fields in other countries.

Clarke believes international shale gas development faces considerable challenges, including the lack of a competitive supply chain and a shortage of available rigs. “International growth will be slow,” he added.

Donald Hertzmark, principal at DMP Resources, said Europe and the United Kingdom want to develop their shale gas resources to minimize their current dependence on Russian gas. Russia has been accused of using its gas supply as a political weapon, and Russian leaders have threatened to withhold gas supplies or to sell them elsewhere – China, for example.

Shale gas extraction in Europe would face more regulatory scrutiny amid concerns about its impact on water quality. But Hertzmark said he sees a “bright future” for gas, which is relatively clean burning and is an obvious solution to power generation needs as older coal plants are shut down.

Technological advances have made shale gas production economical to produce, said Jen Snyder, principal analyst for North American gas research at Wood Mackenzie. At the current price of about $4 per MMBtu, natural gas is very competitive with coal as a fuel for electricity generation, she said.

By 2020, the decommissioning of older US coal plants will make natural gas the fuel of choice and could create about 4.7 to 5.0 billion cubic feet per day of incremental gas demand – good news for domestic gas producers and the associated value chain in the United States and Canada.

source: Oil and Gas Financial Journal