#379. Shale Gas – A Game Changer? Part II

Posted on | The Agurban
Shale Gas-A Game Changer? Part II
Last week we told you about upsurge in production of natural gas due to advancements in finding and releasing the product from deep in the earth. Read on to learn more about the advantages of natural gas.
The biggest difference in cost advantage is when compared to Asia, where natural gas costs remain at around $15/mm Btu compared to under $3 in the USA. And, while oil prices have increased by 75% in the past five years, natural gas has decreased by 75%. See graphic on the following page. Currently, $3/mm Btu natural gas is the energy equivalent to about $25/barrel oil compared to over $100 for oil, indicating that either one is too low or the other too high. We are convinced the free market will sort out this large discrepancy, shifting current oil users to the lower cost of natural gas over time.

Unlike the traditional domestic oil industry which is somewhat mature, the shale gas industry appears to be in the first or second inning of a nine inning game. The US Energy Information Administration (EIA) has done an estimate of the potential of only five (Marcellus, Haynesville, Fayetteville, Eagle Ford and Woodford) of the dozens ofnatural gas plays in the USA. As you can see from this graphic, they’ve been bringing their estimate up in each of their annual assessments.

 In their 2012 report on theenergy market, the EIA estimated that growing US energy production from shale gas, oil shale and other sources would cut our imports from 60% in 2005, already down to 49% in 2010, down even more to 36% in 2035. A quote from this report, “The U. S. is projected to become a net exporter of liquefied natural gas (LNG) in 2016, a net pipeline exporter in 2025, and an overall net exporter of natural gas in 2021.”
Assuming that the EPA or some other governmental body doesn’t find some reason to throw a wrench into the works, the potential for shale gas could be a major game changer for US energy and manufacturing long into the future.