ACCORDING to a report in British weekly The Economist, new drilling technologies in America allow gas to be extracted from various new types of rocks, most notably shale.
Because of this success, North America has an unforeseen surfeit of natural gas. In 2008, Russia was the biggest producer of gas at 650bn cubic metres, but last year the US overhauled Russia.
The result was that North American gas prices slumped in 2009 by more than $13 per million BTUs to less than $5. The International Energy Agency estimates global reserves of shale gas to be some 921tr cubic metres which is more than five times proven conventional natural gas reserves.
Shale is ubiquitous and North America’s success can be repeated globally. In fact, China has set its companies a target of 30bn cubic metres from shale, i.e. ½ of the country’s 2008 demand of conventional gas. Shale gas is proving to be seriously embarrassing for Russia as Gazprom’s forecast in 2008 that its gas price to Europe would triple to $1,500 per 1m000 cu.mtrs. has seen actual prices drop to $350 last year with expectations of a further fall in 2010.
A global gas glut appears to be forming with the world demand down three per cent last year and European demand down seven per cent. This surfeit is set to transform the battle against carbon emission, threaten coal domination of electricity generation and reduce the power of exports of oil and conventional gas. Pakistan would do well to postpone the risk of building coal plants, invite major oil companies to look for shale gas here and take the full benefit of a new sub-terranean revolution shifting the geopolitics of global energy supply.
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