Shale Gas - Economics

Economics

Although shale gas has been produced for more than 100 years in the Appalachian Basin and the Illinois Basin of the United States, the wells were often marginally economical. Higher natural-gas prices in recent years and advances in hydraulic fracturing and horizontal completions have made shale-gas wells more profitable. As of June 2011, the validity of the claims of economic viability of these wells has begun to be publicly questioned. Shale gas tends to cost more to produce than gas from conventional wells, because of the expense of the massive hydraulic fracturing treatments required to produce shale gas, and of horizontal drilling.

Total published estimates for UK shale gas resources by companies holding shale gas (Cuadrilla, Igas, Dart, Eden) drilling licenses are approximately 255 trillion cubic feet (7.2 trillion cubic metres). However it is estimated that only around 10-15% of this is recoverable and can therefore be treated as reserves. There are further questions around the proportion which can be economically recovered. This compares to UK gas consumption of 3.5 trillion cubic feet (99 billion cubic metres) per year. However the cost of extracting this gas with existing technology would probably be more than $200 per barrel of oil equivalent (UK North Sea oil prices were about $120 per barrel in April 2012).

North America has been the leader in developing and producing shale gas. The great economic success of the Barnett Shale play in Texas in particular has spurred the search for other sources of shale gas across the United States and Canada.

Research has calculated the 2011 worth of the global shale-gas market as $26.66 billion.

However, a June 2011 New York Times investigation of industrial emails and internal documents found that the financial benefits of unconventional shale gas extraction may be less than previously thought, due to companies intentionally overstating the productivity of their wells and the size of their reserves. However, no criminal investigations have been made on these serious allegations.

In first quarter 2012, USA imported 840 Bcf (785 from Canada) while exporting 400 Bcf (mostly to Canada); both mainly by pipeline. Almost none is exported by ship as LNG, as that would require expensive facilities. Prices have gone down to $3/MMBtu due to shale gas.

One of the byproducts of shale gas exploration is the opening up of deep underground shale deposits to "tight oil" or shale oil production. By 2035, shale oil production could "boost the world economy by up to $2.7 trillion, a PricewaterhouseCoopers (PwC) report says. It has the potential to reach up to 12 percent of the world’s total oil production — touching 14 million barrels a day — “revolutionizing” the global energy markets over the next few decades."