Global Shale Gas Reserves

Brian Hicks

Written By Brian Hicks

Posted June 12, 2013

An updated assessment from the Energy Information Administration increased global shale reserves to 7,299 trillion cubic feet of technically recoverable shale gas – an increase from the EIA’s previous figure of 6,622 tcf in 2011.

lng tankerOverall, the report added 11% to world shale gas and oil reserves. Global oil reserves shot to 345 billion barrels in the new report.

The data was gathered from 137 shale plays in 41 countries beyond U.S. shores. The top three countries in the shale gas domain are China with 1,115 tcf, Argentina with 802 tcf, and Algeria at 707 tcf. The U.S. came in fourth place with 665 tcf, and Canada followed in fifth at 573 tcf, according to data by the EIA. Data from Advanced Resources International (ARI) pegged U.S. natural gas reserves at 1,161 tcf.

The EIA is making a strong distinction between what is recoverable with current technology and what is economically viable under current market conditions. Natural gas drillers are undergoing high drilling and well completion costs. Other factors that will come into play will be geology and attaining mineral rights from landowners, a factor more applicable to U.S. drilling.

However, market conditions can change, and shale gas drillers have a bright horizon ahead, as there are plenty of reserves to be had.

Global Shale Gas

If more shale gas reserves are reached, we may see a global decrease in natural gas prices. Economies around the world could get a slight boost through job creation and lower energy prices, putting more money in people’s wallets. Manufacturing companies could also become more productive, since natural gas is needed to make products and fuel power plants.

Mongolia is looking to developing its shale reserves to improve its manufacturing sector and steer away from Russian imports. Poland is doing the same, but the lack of drilling success forced many energy companies to pull out. Britain also wants to attract more energy companies to develop shale regions on the mainland.

President Christina Fernandez de Kirchner of Argentina is doing her best to spawn more advancement in the country’s Vaca Muerta, which is said to hold the world’s largest untapped reserves. However, investors have been unsettled by the nationalization of YPF SA (NYSE: YPF) and Argentina’s past struggle with debt.

Algeria, an OPEC member, has long contended with social and political instability, which affects oil production and will most likely stymie commercial shale extraction.

The direction of worldwide shale gas production will be hard to pinpoint. It will be based on multiple factors, including geology, fracking laws, investment, and economic conditions.

But there is a strong possibility that more nations will join North America in commercial gas exploration sooner than anticipated. Many nations have been inspired to engage in domestic production as a way of breaking free from foreign imports.

Russia, for example, has a virtual monopoly over the European natural gas market, and many nations like Poland and Mongolia are forced to deal with high import prices. To date, Gazprom (MM: GAZP) is the only energy company in Russia that can export liquefied natural gas abroad, but President Vladimir Putin is signaling that other Russian giants like Rosneft (MM: ROSN) and Novatek OAO (MM: NVTK) could compete against Gazprom as a way to boost the Russian economy, which has been hard-hit by western Europe’s debt woes and lower import demands.

And European nations like Germany, France, and Belgium have been importing cheaper coal from the United States as way to meet energy needs on a budget.

But most of all, the fracking issue remains a weighted topic.

Wider use of horizontal drilling and hydraulic fracturing (fracking) is paramount to unlocking shale reserves. The fracking issue alone may be enough to slow down worldwide production, since parts of Europe and the British Isles still hold a relatively dispassionate view of the drilling practice. However, British and European governments are slowly easing restrictions on hydraulic fracturing.

And fracking may be a contentious issue in parts of the third world, since the practice requires heavy water usage to extract oil and gas resources. If oil and gas companies expand operations into the third world on a heavier basis, there is a risk of being implicated for draining and contaminating valuable water resources in more vulnerable parts of the world.

But the news of increased reserves alone may be enough to spur investment around the world – giving up and coming nations a chance to enter the energy arena.

Natural Gas Investing

The increase in reserve estimates may draw more interest in less explored areas of the world – potentially unlocking more shale discoveries and keeping the natural gas sector healthy and exciting.

Only the U.S. and Canada are commercially producing from shale regions, but this could change if more nations begin to adopt fracking or any other future drilling technology that could reach shale reserves.

For the past two years, China has been getting closer to commercially developing its shale regions. Chinese companies Sinopec (NYSE: SHI) and CNOOC (NYSE: CEO) have expressed interest in purchasing a 30% stake in Texas company Frac Tech International – a move that would allow the Chinese to gain the necessary fracking experience to begin domestic production.

However, many shale plays throughout China are concentrated in areas undergoing water crises. It would be foolish for the Chinese to begin fracking operations when drinking water is so scarce in many villages.

But test wells have been conducted, the Chinese government has examined frackable regions, and companies like Royal Dutch Shell (NYSE: RDS-A) and Exxon Mobil (NYSE: XOM) are interested in China’s fracking goals.

Exxon Mobil also forged a deal with Rosneft to begin fracking operations in the Bazhenov shale oil region of West Siberia, an area known for its thick, black clay. But Russians are concentrating fracking energies on oil production, and there is little indication of a shale gas boom to the East, at least in the short-term.

For now, natural gas investors only have the U.S. and Canada to worry about. In the past, Putin has expressed worry about the U.S. shale gas boom creeping into Russia’s export domain. So far, Cheniere Energy, Inc. (NYSE: LNG) is the only company to win approval from the Department of Energy to export natural gas to countries with no free trade agreements with the U.S., and the company already has plans to export LNG to Britain.


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