The US energy renaissance is a well-documented phenomenon: crude oil output has surged 50 per cent since 2010 and it has recently overtaken Saudi Arabia and Russia in terms of liquids production. In addition, the IEA has estimated that US shale gas resources could last another 92 years. As climate change competes with energy security on the global agenda, many countries outside of the US are attracted to unconventional resources as a panacea to dirty coal, costly nuclear options and uncompetitive renewable alternatives.
China is one such country: it has the world’s largest technically recoverable shale gas resources at 1,115 trillion cubic feet and its first hydraulically fractured well was completed in 2009. Under a plan to substitute gas for coal, the Government aims to ramp up production to 230 billion cubic feet by 2015. What these plans fail to incorporate is water scarcity, aggravated by the competing demands from agriculture and vast urban centres. A further impediment is the domination of NOCs – CNPC, Sinopec, CNOOC and Yangchang – who control four fifths of the resources and lack the leading edge technology to effectively develop them.
In a number of European countries, including France and the Netherlands, moratoria are in place as they are in municipalities within the states of New Mexico and California. NIMBY concerns can be found in places where IOCs have expressed interest, such as Chevron in Romania, and, closer to home over Cuadrilla’s activities in the UK. The disquiet centres around the contamination of water tables, but other obstacles exist, such as a human capital deficit, higher population densities, methane emissions, lack of infrastructure and, perhaps most importantly of all, the ownership of mineral rights which lie with the state. The future of shale will hinge on the balance which eventually emerges between these conflicting objectives.
Nick Patience, Douglas-Westwood Aberdeen
+44 1224 264974 or Nick.Patience@douglaswestwood.com