Natural Gas Boom in the US
Natural Gas prices are at historical lows in the US. Thanks to the investments in Shale Gas Technologies and new found gas reserves across the US.Let us briefly look at what Shale Gas is, Shale gas refers to natural gas that is trapped within shale formations. Shales are fine-grained sedimentary rocks that can be rich sources of petroleum and natural gas. In layman terms this involves cracking rock formations by pumping fluid into wells at a very high pressure which forces oil or natural gas out of the rock. This technique is called 'Fracking' or Hydraulic fracturing. Fracking squeezes natural gas from layers of rock which normally requires very costly effort using conventional technologies.
Shale gas has become an increasingly important source of natural gas in the United States over the past decade, and interest has spread to potential gas shales in the rest of the world. In 2000 shale gas provided only 1% of U.S. natural gas production; by 2010 it was over 20% and the U.S. government's Energy Information Administration predicts that by 2035 46% of the United States' natural gas supply will come from shale gas.
Total marketed US production in Jan-2010 was 50 BCF per day, by Jan-2012 it went up to 69.37 BCF. Gas prices have collapsed from 4.49$ per MBTU in Jan-2011 to 1.95$ per MBTU by April 2012.(Source: Henry Hub Natural Gas Price).
This trend has huge prospects for US natural gas Industry.
Incremental production is expected to go into producing electricity. At current prices, natural gas is easily more than 20% cheaper compared to other electricity producing alternatives like coal
Given the capability of US to be able to abundantly supply natural gas at cheap rates, shale gas could also transform the US automobile industry. Trucks and cars can be equipped to run on natural gas that would cost anywhere between 1/3 to 50% less than gasoline. Electrical motors powered by batteries present technological and cost related challenges. Compared to this, engines burning natural gas (either compressed (CNG) or Liquefied (LNG) are relatively older and cheaper technologies. Of course, there are several challenges that need to be handled to take advantage of this natural gas boom. It requires huge investments by the utilities, other players and by the govt. in terms of creating a nationwide infrastructure of refueling stations. Some of the initiatives are already underway. America's Natural Gas Highway project is underway in the US.150 LNG truck fuelling stations are anticipated by the end of 2013 as part of this project. US's Largest truck-stop operator is in the process of installing natural-gas pumps at 150 of its 450 fueling stations over the next 2 years.
The shale gas boom has high potential in terms of impacting US exports market.it will also help US's goal of becoming energy independent nation as they become less and less dependent on imports. The prices roughly vary between 2.5$ to 4$ per thousand cubic feet in the US. Compare that with the prices in other parts of the world - Europe 10$, Asia 15$. In the next few years,
This boom has the potential to make US a net exporter of energy, reducing its dependency on energy on other countries. US govt. is mulling on granting export licenses to the natural gas companies to export gas to places like Europe, this potentially can change the geo-political equations within Europe. This is based on the current situation where some of the European countries ban fracking , its banned in France and suspended in UK.
This poses a challenge for the Gas utilities to scale up and have systems in place to serve the needs of other industries. Some of the aspects of the natural gas supply value chain that will have to undergo transformational changes in the coming few years. Gas distribution network and the operations systems needs to be upgraded to be able to appropriately transport gas to the fuelling stations.
Shale gas development industry presents various challenges to regulators. Regulators are finding it difficult to keep pace with the shale gas boom. Environmental Protection Agency (EPA) reported issues with conducting inspections and enforcement activities for shale gas development from unconventional reservoirs due to the dispersed nature of the industry.All in all, these are interesting times ahead for the natural gas industry in the US.