Aquastrat

Strategies for water and renewables

Why shale gas matters

22nd September 2011, 10:38

Development of Shale Gas reserves is going to be the hot energy issue in the immediate future. It seems at first sight that the battle will be on the familiar territory of oil companies vs environmentalists, but there's more to this than meets the eye.

Certainly the signs are that key players are doing all they can to ensure the US continues with expansion of this controversial resource: the Gas Sub committee of the US Dept of Energy recently opined that the risk to water resources was remote, and the Senate this summer approved legislation denying the EPA rights to overrule States' local water protection regulations. 

More strangely, Republican Governor Rick Perry in shale gas-rich Texas enacted a law compelling shale gas companies to be more open about their operations - in other words "smarten yourselves up, boys, we need you at this dance". Other moves in this charm offensive include Gas companies frantically pointing out that domestic shale gas will combat climate change (which now apparently exists) by reducing dependence on coal, and even protect polar bears by forestalling exploitation of Arctic hydrocarbons. My, my; they must want shale Gas bad.

They do - and it's not just the money. What makes shale gas so important is the increasing internationalisation of the gas market through growth of LNG; gas can now be liquefied and tankered across the world, rather than limited to the reach of a pipeline. This phenomenon of the past ten years has simultaneously given gas reserve holders wider markets and more market power, while also threatening to increase US and European dependence on them. US LNG import capacity increased from 2bcf/d to almost 18bcf/d in the decade, and Europe now has similar import capacity.

All this gives the big gas holders - the Middle East, Russia, Iran and Venezuela significant leverage, and none of them are top of any President's Christmas card list.  Shale gas could be America's counterbalance.

Estimates of recoverable US shale gas reserves vary widely, but some suggest that they could provide all of the US's gas needs for the next 45 years. Little wonder that shale gas development is seen as the most important diplomatic weapon the US now has, reducing import dependency and even lowering worldwide gas prices, weakening these unfriendly hydrocarbon economies.  Sadly, the US renewables industry, which could do much the same job, and for the long term, looks like being just as much a casualty of what is now very much a geopolitical play.