Never mind that hydraulic fracturing was once again linked to an earthquake, this time a 4.0 tremor in Ohio on New Year’s Eve, the year 2012 kicked off in impressive fashion for the shale industry, which has been revolutionized by the controversial drilling practice.

Undaunted by the environmental and geological challenges, two oil giants signed shale deals in the United States for a combined US$4.5-billion ($4.58-billion) in one day. On January 3, France’s Total SA bought a 25% interest in Chesapeake Energy’s Utica shale play worth US$2.3-billion, while China Petroleum & Chemical Corp., or Sinopec, took up a one-third interest in Devon Energy’s shale projects for US$2.2-billion.

It’s a trend that’s set to continue and go beyond North American borders, says Moody’s Investor Services, as majors catch up with independent developers.

“Independent E&Ps have led the way in shale drilling, developing expertise in natural gas,” Moody’s said in a note. “The majors came late to the game in North America, but have begun pursuing E&Ps for their expertise in the new development techniques.”

Shale activity took off in earnest in 2011: ExxonMobil Corp. bought two companies in the Marcellus basin in Pennsylvania, and Marathon Oil Co. acquired Eagle Ford properties in south Texas from Hilcorp Resources Holdings LP. Mining giant BHP Billiton Ltd. acquired Petrohawk Energy Corp., a major player in the Haynesville and Eagle Ford, plus some Fayetteville shale properties, for US$15.1-billion. Norway’s Statoil ASA spent US$4.7-billion to buy Brigham Exploration Co. with operations concentrated in North Dakota’s Bakken Shale and Three Forks in Montana. Overall, shale acquisitions helped push overseas offers for U.S. oil and gas fields to US$51-billion last year, the most in at least 12 years, according to data compiled by Bloomberg.

“In Canada, the Montney Shale — a large natural gas basin in British Columbia and Alberta — has sparked interest for its proximity to a number of proposed projects to export LNG to Asia, and for potential gas-to-liquids (GTL) plants,” Moody’s says. “Sasol has two JVs with Talisman Energy and has begun studying a future GTL plant in western Canada that would use its proprietary technology. Petronas, Malaysia’s state oil company, created its first Montney JV with Progress Energy Resources — possibly with an eye on exporting LNG to Asia.”

GOING GLOBAL

Despite the ban in promising jurisdictions such as France, major companies are looking outside North America for growth. “These companies will strive to apply their expertise and mature cash flows toward other basins— particularly in Argentina, Brazil, China, Mexico, Poland and South Africa. The NOCs also hope shale development will help them improve energy security and self-sufficiency,” Moody’s says.

On Wednesday, China approved shale gas as an independent mining resource, a legal status that it hopes will encourage smaller Chinese energy firms to develop the unconventional energy source. The energy-hungry giant is expected to announce a new round of shale-gas tenders in early 2012, and although foreign companies can’t participate directly, they can team up with local firms.

Poland, which holds the most active and best areas geologically for shale in Europe, where governments want to diversify their natural-gas supplies away from Russia, is another promising play. The country has drawn investment from JVs involving ExxonMobil/Total, Marathon/Nexen, ConocoPhillips and OMV Petrom, among others.

But Moody’s says the development of these shale resources will not be quick or straightforward, and will face numerous obstacles similar to those seen in North America.

“Hydraulic fracturing has led to widespread environmental concerns over such issues as water contamination, wastewater disposal, land subsidence, earthquakes, and noise pollution. Areas more densely populated than sparsely inhabited North Dakota will present further challenges — particularly in Europe, where resistance to shale development has emerged,” the ratings agency says.

Source: Financial Post

The deal will provide Statoil with unconventional or ‘tight’ oil production via Brigham’s 375,000 acre holding in the Bakken shale region in North Dakota.

“Entering the Bakken and Three Forks tight-oil plays and taking on operatorship represents a significant step for Statoil,” said Helge Lund, chief executive. “We are positioning ourselves as a leading player in the fast-growing US onshore oil and gas industry.”

Statoil is involved in shale gas operations in partnerships with Chesapeake Energy in the Marcellus Formation, which runs under the Appalachians in West Virginia, Pennsylvania, parts of Ohio and New York, and with Talisman Energy in the Eagle Ford shale formation in south-west Texas.

“We believe we are pretty well positioned now,” said Mr Lund, adding, “the beauty of these projects is in their flexibility in terms of gearing”.

Are we surprised? The answer is no — students of hydrocarbon bonanzas know that, going back to the 19th-century frenzies of Baku and Pennsylvania, reserve assertions in the heat of the boom are not reliable. Such outbreaks of exuberance, regardless of whether fundamentally legitimate, include con artists (hence suckers), cooked books (more suckers), and out-and-out fraud (ditto). In the Caspian era of the 1990s, for instance, the Clinton administration, relying on lobbying reports from Amoco, justified a supercharged policy effort with estimates of 200 billion barrels of oil; the actual figure as of today is closer to 50 billion barrels. Yet companies and individual investors proceed anyway because they do not want to potentially miss out.

Which is what makes one puzzled by the war-like reaction to two long, ambitious, but fairly run-of-the-mill pieces in the New York Times (“Insiders Sound an Alarm Amid a Natural Gas Rush” and “Behind Veneer, Doubt on Future of Natural Gas“) by Ian Urbina. In 5,300 words, plus a splash of leaked memos and emails, Urbina reports that U.S. natural gas prices are too low to justify much of the drilling and that companies have been possibly permitted by the Securities and Exchange Commission to overstate their gas reserves (the latter by far the best of the three pieces). Today, Urbina adds a piece with federal lawmakers calling for an investigation.

I have weighed in on how the very real volumes of shale gas being extracted from Texas, Oklahoma, and elsewhere are already transforming geopolitics, weakening Russia’s hold on Europe, for instance. Yet we also know about the nightmare (for drillers) of low natural gas prices (this piece by Jack Smith at the Fort Worth Star-Telegram is excellent). The industry’s full potential is being put in jeopardy by the interesting PR policies of industry hands like Chesapeake Energy CEO Aubrey McClendon. In addition, as noted above, wise hands have understood they must discount promotional estimates and characterizations by the shale gas marching band.

Yet Urbina seemed to strike a sensitive nerve. McClendon issued a special statement in which he said Urbina is “obviously motivated by an anti-natural gas agenda,” and “chose not to interview a single reliable source.” Similarly, the ultra-sober Michael Levi at the Council on Foreign Relations dismissed the pieces as just another salvo in the Times’ “war on shale gas.” The Energy Information Administration released an explanatory letter it had written to Urbina in advance of publication. Over at Forbes, Christopher Helman, calling Urbina’s reporting “absurd on its face,” posed the question, “Would drillers be investing billions a year in new wells if they weren’t getting some return out of it?” (Answer: yes. The reason is that many of the leases require drilling in order to keep possession of the fields).

So what is going on with this storm? Is it a slow news cycle? Do we have a Shakespearean denial? Parenthetically, one observes that the much-reported demise of the impact of mainstream newspapers is premature. More to the point, shale gas may be exaggerated, but it is being produced in substantial volumes. And it is shaking up the status quo.

Ultimately, we get a fairly mundane conclusion. Which is that, with much at stake, booms tend to make people hot under the collar.

With our thanks to Steve LeVine

Steve LeVine is the author of The Oil and the Glory and a longtime foreign correspondent.

In this past Sunday’s edition, the Times accused the Chesapeake of exaggerating the productivity of shale gas wells and industry reserve estimates of future well performance.

Aubrey K. McClendon, Chesapeake’s Chief Executive Officer, commented, “Chesapeake stands behind all of its statements to shareholders, partners and the public regarding our natural gas discoveries and production.”

McClendon claimed the story was motivated by an anti-natural gas agenda.

“It is telling that the reporter chose not to interview a single reliable source and instead selectively quoted emails from unnamed sources or well-known industry critics dating back to as early as 2007 to invent a series of inaccurate and misleading allegations,” said McClendon

“If the Times was interested in reporting the facts and advancing the debate about the prospective benefits of natural gas usage to energy consumers, it could easily have contacted respected independent reservoir evaluation and consulting firms that annually provide reserve certifications to the U.S. Securities and Exchange Commission or contacted experts at the U.S. Energy Information Administration, the Colorado School of Mines’ Potential Gas Committee, the Massachusetts Institute of Technology, Navigant Consulting and others who would gladly have gone on record to confirm the abundant resources that have been made available thanks to the horizontal drilling and hydraulic fracturing techniques that Chesapeake and other industry peers have pioneered in deep shale formations across the U.S.”

“The Times questioned the economic merits of shale gas production in complete disregard and/or ignorance of supply and demand fundamentals as well as recent and forward market natural gas prices,” Chesapeake’s CEO continued.

McClendon listed companies active in shale gas development in the U.S. including Anadarko, BG, BHP, BP, Chevron, CNOOC, Conoco Phillips, Devon, EnCana, ENI, EOG, ExxonMobil, KNOC, Marathon, Mitsubishi, Mitsui, PetroChina, Reliance, Shell, Statoil, Talisman, and Total.

“Consider whether it could really be possible that all of these well-respected energy leaders, with a combined market cap of almost $2 trillion, know less about the economics of shale gas production than a single New York Times reporter, a few environmental activists and a handful of shale gas doubters?”

McClendon said that the industry continues to have learning-curve benefits that make U.S. shale gas projects attractive to the global energy industry.

Read the Full Statement from Chesapeake HERE

Read: The New York Times Is All Hot Air On Shale Gas from Forbes HERE

But not everyone was keen to congratulate Norway’s biggest company. Instead, angry residents in the eastern United States believe Statoil’s much-touted shale gas extraction is contaminating their drinking water, leaving Statoil with another environmental problem.

Statoil already has been under harsh criticism over its involvement in oil sands projects in Alberta, Canada. Environmental organizations and even a group of grandparents in Norway are among those urging Statoil to pull out of the oil sands. Now a group of mothers representing worried residents of Pennsylvania are campaigning against another major energy project in which Statoil has invested billions: Shale gas extraction.

Statoil’s chief executive, Helge Lund, and a large contingent of top managment were in New York on Monday for a Capital Markets Day at the New York Stock Exchange and to mark the company’s 10th anniversary on the NYSE. Lund seized the opportunity to meet investors and analysts and announce that Statoil intended to boost its oil and gas production dramatically, from 1.9 million to 2.5 million barrels a day of oil and gas or their equivalents.

Source: News and Views from Norway

The amalgamation of hydraulic fracturing and horizontal drilling technologies in the 1980s enabled the US to become the pioneers of commercial shale gas production. Although the first shale gas well was drilled in 1821, the technical and economic feasibility of producing from deep-lying horizontally planed shale formations has inhibited their development. These two fundamental technologies have provided the key to unlocking this troublesome hydrocarbon, and the US has quietly gone about expanding the industry from the late 1980s onwards.

US shale gas production had crept up to 300 billion ft³ by 1996 and then more than tripled to 1.1 trillion ft³ by 2006. In 2010, according to the US Energy Information Administration, production of shale gas in 2010 stood at 4.9 trillion ft³. This expeditious expansion in US shale gas production in the 21^st Century has sparked enormous attraction from overseas nations looking to see whether they too have the resources and capabilities of producing shale gas on home soil.

The attractions of doing so are multifarious, but most importantly it reduces energy dependency on a resource that is expected to play an ever increasing role in the energy mix of nations. The recent turbulence in the Middle East, ongoing terrorist concerns post 2001, and political disputes with key producing nations have led to more concerted efforts by the US government to increase national oil & gas production.

For natural gas, there is also a growing fear that the Gas Exporting Countries Forum (GECF) will create a cartel similar to OPEC, allowing them to dictate future production levels and prices. The prospect of a gas cartel may put a dampener on the natural gas sector and projected growth in natural gas consumption over the coming years. Shale gas is thus a very real opportunity to circumnavigate any unfavourable future dependencies. And while a cartel in the short-term may be unlikely, simply the prospect of one will drive shale gas development.

According to the World Energy Council (WEC), there is approximately 16,110 trillion ft³ of global shale gas resources, of which around 40% is thought to be recoverable. These figures are, however, preliminary and with more extensive investment in exploration activity the recoverable reserve estimate is likely to expand.

Countries outside of North America that have already carried out exploratory activity into viable shale gas reserves include Australia, China, South Africa, New Zealand, the UK, France, Sweden, Germany, Poland, Hungary, Argentina, Ukraine, Algeria, Indonesia and India.

As it currently stands only the US and to a lesser extent Canada have managed to produce commercial levels of shale gas. But the mounting interest from nations and international companies, as well as mushrooming investment in exploratory drilling, is now palpable. All of the supermajors and many of the world’s largest oil & gas companies have made their first steps into large-scale shale gas projects – most of the US and Canadian production being conducted by local independent energy firms to date.

In China, the three largest energy companies – China National Petroleum Corporation (CNPC), Sinopec and China National Offshore Oil Corporation (CNOOC) – have all invested billions of dollars in North American shale gas projects, including CNPC’s $5.4bn joint venture deal with Canada’s Encana Corporation. Australian mining giant BHP Billiton also invested approximately $4.75bn in a deal with Chesapeake Energy for shale gas interests in the US, while France’s Total spent $2.25bn for 25% of Chesapeake’s shale plays.

The shale gas market has also seen the largest acquisition made by an energy company since the 2008 recession, with ExxonMobil acquiring shale gas specialists XTO Energy in a deal worth approximately $41bn. In a time when major acquisitions and investments have fallen across the oil & gas industry, shale gas projects have bucked the trend.

According to Visiongain, the global shale gas market is expected to grow at a strong rate from 2011-2021, with a gathering momentum towards the end of this time-frame. The US and Canada are both expected to increase production over the next decade, with the former looking to supply 26% of domestic gas consumption from shale gas by 2035. But it is in the fledgling national shale gas markets where the most significant growth will take place.

China is one nation which is looking to develop shale gas from national resources estimated to be around 1,000 trillion ft³. China’s Ministry of Land and Resources (MLR) has set a target for the country to locate 35 trillion ft³ of recoverable shale gas and to build 500 billion ft³ to 1.1 trillion ft³ of production capacity by 2020.

As previously noted, the three largest Chinese energy companies have made substantial investments in the US shale gas market, in the perceived interest of acquiring skills, experience and technical know-how to develop resources in China. IOCs such as Shell, Chevron Corp. and Statoil ASA have all either signed or have been linked with shale gas projects in China. Indeed, Shell’s Peter Voser recently claiming the company would invest $1bn per year over the next five years should appraisal wells prove to be producers.

Countries in the EU have also been attracted to developing untapped shale gas resources, with dwindling reserves in the North Sea and a growing reliance on natural gas imports from Russia and the Middle East. Drilling has begun in nations such as Poland, the Netherlands, the UK, Germany, France, Hungary, Sweden and Austria. The consensus among many experts is that it is too early to know with any certainty whether commercial shale gas production will be achieved within the coming ten years. However, Visiongain forecasts a significant increase in investment in exploratory and appraisal drilling in this time-frame, with commercial production achieved in Poland and to a lesser degree in the other EU states mentioned above.

Other national shale gas markets that are forecasted to expand rapidly over the next ten years are the Indian, Australian and Argentinean markets. In India there have been talks by government members with the US Geological Survey (USGS) over the development of Indian shale gas, while the largest energy firm, Reliance Industries Limited, has invested over $3bn on acquisitions in the US shale gas market. Shale gas acreages are expected to be auctioned in India in August 2011.

Australia is on the cusp of realising shale gas production from the highly prospective Cooper Basin, where companies have recorded positive appraisal tests – local firm Beach Energy declaring commercial production would commence in 2015. The country is also keen to develop its LNG industry to enable it to export natural gas to the vast and expanding Asian market.

In Argentina, there are numerous basins believed to hold commercial levels of shale gas, with local energy company YPF (part of Repsol-YPF) claiming that a single deposit in the Loma de la Lata in the Neuquén Province of Patagonia may hold as much as 257 trillion ft³. The company has chalked up 11,412 exploratory wells for drilling over the forthcoming years, and has recently signed a $140m contract with Brazil’s Vale SA to develop 4.5 trillion ft³ of reserves encountered at a discovery in the Neuquén basin. France’s Total has also acquired four six-year shale licenses in partnership with YPF, as well as 85% of two additional Neuquén shale blocks.

Visiongain also forecasts strong growth in the Ukrainian shale gas market, which has been identified by US supermajor ExxonMobil as having high potential, with an MoU signed with local Naftogaz to explore for shale gas deposits in the nation. According to the Deputy Director of the Ukrainian Department of Technology Policy at the National Agency of Effective use of Energy Resources, Aleksandr Semchenko, Ukraine has between 2-32 trillion m³ (70-1,130 trillion ft³) of recoverable shale gas reserves.

In June 2010, Deputy Prime Minister Adrey Klyuyev stated that Ukraine planned to double natural gas production to 1.4 trillion ft³ per year, with a large percentage of this coming from unconventional coalbed methane and shale gas. According to the national bank company Nadra Ukraine, the nation has the largest shale gas reserves in Europe.

It is clear, therefore, that while the oil & gas industry has distanced itself from achieving large-scale production in nations outside of North America over the coming ten years, some in fact may achieve this inside this time-frame, and potentially within five years. The booming levels of investment in exploration and appraisal activity will ensure market growth over the next ten years is strong, and providing wellhead natural gas prices can climb to around the $6 per million Btu mark, production will be sought more rapidly than has been predicted.

There have also been fears raised in media over the safety of using hydraulic fracturing, despite over 50 years of the technology being used across the US. A recent report by Robert Howarth from Cornell University in the US has also suggested that shale gas has a far more harmful impact on the environment as methane is a considerably more powerful greenhouse gas, with a footprint of around 20% greater than coal. However, if the industry can, as it should, prove that both fears are overstated if not inaccurate, then shale gas development will abound unaffected.

Natural gas prices will of course play a major role in the direction of the shale gas market, as will natural gas consumption levels and public sector involvement. However, the signs all lead to first commercial shale gas production from nations outside of North America within ten years. To what degree is the only question.

The Shale Gas Market 2011-2021 report is published by Visiongain, an independent business intelligence provider for the Telecoms, Pharmaceutical, Defence, Aviation, Energy and Materials industries.

The Shale Gas Market 2011-2021 provides a comprehensive analysis of the global shale gas market and addresses evolving opportunities and risks. More information on The Shale Gas Market 2011-2021, including a download sample, can be found HERE

He noted that the Haynesville and Marcellus were also very significant.

“In 2013, shale gas will make up 34% of gas production,” he said.

The biggest deal activity, according to Rathan, was in the Fayetteville in 2008. He said the Marcellus had peaked from a deal perspective in 2009: “That’s when we entered the marketplace providing strategic advice. This year we feel there will be a lot of activity in the Niobrara.”

He added, “We prioritize them according to the peak level of interest for our clients.’

Rathan said that in developing production of shales, there were two parts: 1) the nature part, which concerned the quality of the shale, and 2) the nurture part, which was all about applying technology to make them produce, “In applying lessons, understanding the geology, interpreting the logs and understanding the surface aspects of developing the shale play.”

His slide told that it was about “Maximizing the right characteristics,” namely, depth, thickness, porosity, TOCs, the pressure regime, etc. “These describe the natural aspects of the play,” he explained “and ultimately you move to certain areas of that play.”

Mr. Rathan spoke about joint venture activity in the Marcellus, including players like Total SA, BG Group and Statoil ASA. “The Canadians came a little later,” he recalled, “and more recently there has been Japanese and Chinese interest. Following them are the BRIC countries.”

He said that in the last six months Tudor Pickering Holt & Co had been very involved in a transactions in the Niobrara and Eagle Ford shale plays involving top Chinese offshore oil producer CNOOC Ltd and Chesapeake Energy Corp.

“They asked us to help them with the technical analysis and the ultimate deal structuring,” he explained. “Working with the Chinese one has an expectation that working with Asian countries can be a lengthy process, but these moved extremely quickly and that’s a critical requirement. In the Niobrara we conducted it on the basis of only two wells in the Powder River basin.”

According to Rathan, the attraction into the US shale plays was also from the perspective of the economics, not just from a learning perspective.

“We believe that the long term gas price will be $6 – the short term price ($4) is not realistic, for shale plays to provide attractive rates of return.”

He said activity was moving to more economic plays. “The sustainable gas price is about the midpoint of his chart,” Rathan showed. “That ultimately is where we expect the gas price to come back to. The shale plays is a good place for the operators to be.”

He noted the move into liquid rich plays. “In oily areas the rates of return are 50-100%. They are cropping up all over the country, signalling a big shift in activity.”

“The emerging plays, particularly the oily ones, have been rising with the rig count and companies are aggressively shifting their capital there. So the activity is shifting to the west, in places like the Niobrara and the Bakken. It’s just applying the same technologies,” he said.

Rathan discussed the value evolution of land acreage at places like Niobrara and emerging oil plays.

“You can’t sell these assets until you have plenty of science, plenty of logs of fracture stimulation,” he explained, “knowing how far out the fractures go. Seismic is extremely important information to build a position, and there’s constant evolution and learnings in this area.”

He explained that the Barnett shale provided a laboratory of sorts for learning. “We realized it wasn’t all equal,” he said of the shale. “A partner purchased the wrong acreage in the Barnett. We try to understand immediately where the sweet spots area.”

From an operational perspective, Rathan spoke of drilling in an urban environment. He showed a photograph of drilling being done right in a university at Fort Worth, saying it was doable via long laterals closely spaced, maximizing an area. He also spoke of stacked pad drilling.

He emphasized the importance of seismic for certain shale plays, like in the Barnett for avoiding the viola limestone in the Barnett, or skirting natural faults.

“Coupled with that is the application of microseismic to understand where we’re stimulating and where we’re not,” said Rathan. “It helps with the drainage area, therefore with spacing and completion optimization.”

He said that minimization of the surface footprint was receiving a lot of attention.

“Enormous quantities of proppant and water volume are required, he explained.

“You can gain a lot of resource out of one location, drilling 3000 foot laterals and achieving enormous quantities of resource from one location. The aim is stimulating as much rock volume as possible via the spacing of frack events.”

He continued: “Engineers are modifying the number of frack stages, and more proppant can lead to higher recovery. As we get longer laterals we get more stages and should get higher EURs. We think we can get a million barrels on a per well basis.”

Rathan posed the question whether too much money was being spent on completions. “It’s not a blind process doing more things,” he answered. “It’s doing things smarter.”

“The type of fluid you use can impact the kind of stimulation you have. We’re finding that a hybrid fluid treatment can give us the best of both worlds.”

Rathan offered up a “Top Ten List” of the factors that had made US shales a success.

“It began with identifying organic rich foreland sedimentary basins –understanding them was one of the first requirements,” he said. “It took decades of legacy vertical well drilling. Vertical well activity in the Barnett led to cracking the code.

Among others, he said that accessible and accommodating land owners were key, as well as a pragmatic and transparent regulatory environment, scientific advances in formation analysis, an investment climate attracted to energy, a declining domestic gas supply and high gas prices, advances in horizontal drilling, and isolated mult-stage fracking.

He said that so much had been learned in North America about this process.

In terms of land he offered advice: “Move early and gather both a contiguous and diverse position, to ensure you don’t miss a sweet spot.”

In terms of regulatory issues, he said: “Focus on areas with oil friendly regulatory regimes. Poland is going to be like the Oklahoma or Texas of the US. Once you’re there you should communicate, be transparent, having town halls and making the economic case.

“US O&Gs need to make their case much more forcefully,” added Rathan.

“Don’t skimp on science,” he said of technical issues. “Get cores, shale petrophysics, etc.”

“From a capital perspective, have a good balance sheet,” he encouraged. “Understand how to fund your company in an appropriate way through the debt markets, equity, non core asset sales, and through joint ventures to develop the plays and stay strong.”

In terms of operations, Rathan emphasized being flexible. “Rig mobility is important in the US, from the less competitive gas plays to the more, and now to the liquid rich plays. The ability of companies to move their operations around is important and we hope that in Europe there won’t be certification boundaries.”

Statoil and Talisman have formed a 50-50 joint venture to buy 97,000 acres of Eagle Ford assets from Enduring.

In addition, Statoil will acquire half of Talisman’s existing 37,000 acres of Eagle Ford properties, leaving the Norwegian group with total net control over 67,000 acres.

“The magnitude of the shale resources in North America and the significant role these resources are expected to play in the future energy mix make this an attractive opportunity,” said John Knight, head of Statoil’s unconventional energy business.

In 2008 Statoil bought a stake in the Marcellus shale gas acreage in the US north-east from Chesapeake Energy Corporation.

While Washington dithers, Pennsylvania rolls up its sleeves and gets busy.

Recent headlines are trumpeting the global promise of shale gas, while closer to home, the “big boys” are jumping into the shale pool with both feet. And their efforts are finding endorsement. None other than Ernest J. Moniz, director of MIT Energy Initiative, declared, “Much has been said about natural gas as a bridge to a low-carbon future, with little underlying analysis to back up this contention. The analysis in our study provides this confirmation – natural gas truly is a bridge to a low-carbon future.”   
 
A voice cries in the wilderness

In an article in the Wall Street Journal, Houston’s own Amy Myers Jaffe foretold that in her well-researched opinion, shale gas is poised to rock the world. Strong words, even from a petroleum optimist. Yet Jaffe, as always, has done her homework.

There are still plenty of detractors who maintain that shale plays simply are the “fad-du-jour,” capturing the imagination of a few bold independents, but certainly nothing to get excited about. But facts are facts. And the facts that purportedly will tilt this old globe on its axis are formidable. Natural gas is both abundant and economical. Natural gas emits half the carbon of coal for the same number of Btus of energy. Natural gas has the potential to defang the foreign oil cartel that has attempted to hold America hostage for years.

Natural gas is not uniquely American, so other energy-starved countries can look for the prize in their own backyards – countries like Poland, Romania, Sweden, Austria, Germany, and Ukraine, according to Jaffe. Everyone remembers the gas stranglehold Russia applied to Ukraine in the dead of winter to force its former ally to accept its terms. With widespread shale gas development, these countries and many others will not be forced to kowtow to energy blackmail again.

Interestingly, Jaffe points to China, arguing that if the country is able to develop its own domestic energy resource in the form of shale gas, it may be less beholden to the petroleum overlords on issues like human rights. The idea is that when a nation is purchasing its life blood from a bad actor, it is understandable to turn a blind eye to conditions in the vendor’s country. Seems like I have heard this argument before, only applied to America’s own insatiable thirst for illegal drugs. If we could cut off the demand, the cartels and all the coca and poppy seed growers would be out of business in a heartbeat. What a concept!

Someone is listening

Apparently, articles like Jaffe’s have not fallen on deaf ears. Another famous northeastern journal, the venerable New York Times, published a story on July 8, 2010, announcing the big boys of the business are placing their bets on the Marcellus shale. Using the opportunity to report Halliburton’s major commitment to the Pennsylvania prize in the form of a new field operations center on a 24-acre site near Williamsport, Pa., the Times developed a story on recent major shale play investments by household names here in Texas.

According to the story, the recent shift to shale gas surprised the US government, which had been resigned to importing LNG from God knows where to make up for declining supplies from our continental neighbors. After the events of the last few months, it is no surprise to me that the US government is surprised about anything. Simply tune in to C-SPAN and watch the deer-in-headlights expressions on our congressional delegates’ and administration functionaries’ faces.



While the government prefers to act on hypotheses and speculation, look at a few facts. Big Boy No. 1, who needs no further introduction, started the ball rolling with the purchase of XTO Energy Inc. for US $31 billion. Shell recently announced it would purchase East Resources Inc. for $4.7 billion. Norwegian “Krone jewel” Statoil palled up with Chesapeake Energy Corp. in a deal for $5.5 billion, and today, the companies control 1.6 million Marcellus acres. India’s giant, Reliance Industries, plunged into the pool with a $1.6 billion investment to match its partner, Atlas Energy Inc., which reportedly contributed $1.7 billion. The dominoes are falling, and despite low commodity prices, the Marcellus is starting to resemble an Oklahoma land rush.



Natural gas represents a giant step toward reduced carbon emissions and less greenhouse gas effects on our climate. If the environmental people really are serious about their cause, they could do their part to rock the world by endorsing natural gas as the fuel of the present. Endorse switching power generation to gas, along with residential heating and industrial energy use. This could have an immediate effect on our nation’s economy while starting the process of weaning us away from foreign oil. And maybe, just maybe, lead us down the path to renewable energy resources.

Source: E&P