Overview of the global shale gas market

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Executive Summary

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Executive Summary

• Global recoverable shale gas reserves are significant, amounting to more than 6,000 trillion cubic feet (TCF) from just the 32 countries that were assessed in 2009. This amount is bound to increase substantially when more regions, such as Russia and Sub-Saharan Africa, are assessed.

• Natural gas (NG) constitutes approximately 27 percent of the global energy mix with around 90 percent of this consumed as a fuel or for power generation. At present, only 6 percent is consumed as feedstocks for chemicals.

• Shale gas production is likely to shift natural gas trading patterns, with the United States becoming a net exporter in the short term (5 to 10 years), with other countries, such as Brazil and Poland, exporting in the mid-long term (less than 10 years). In North America, it has created regional disparities in natural gas prices, with low prices in North America (approximately $4 per MBTU) and high prices in Europe (approximately $9 per MBTU) and Asia (approximately $15 per MBTU).

• An increase in natural gas production is expected to make it the preferred feedstock for chemicals and materials in the future. However, this may impact products exclusively sourced from crude oil, such as aromatics.

• Advanced technologies are facilitating other routes to chemical feedstocks, including coal-to-chemicals and bio-based sources. Such trends have shifted investment patterns for major companies for both the chemicals and the oil and gas industry, in favour of the United States.

MBTU = million British thermal unitsSource: Frost & Sullivan analysis.

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Executive Summary (continued)

• Shale gas production is made economically possible by the combination of horizontal drilling and hydro-fracturing techniques. The process is associated with environmental issues, such as air and water pollution, and has attracted a fierce backlash with calls for strict regulations governing production.

• The shale gas production value chain is dominated by major oil and gas players and energy service companies. However, chemical and water treatment companies have tapped into the growing markets for hydro-fracturing chemicals and wastewater treatment chemicals.

• Development of shale resources in Europe will, in the long term, decrease the region’s dependence on supplies from Russia and the Middle East, thus reducing their dominance in energy markets. It is likely to also give rise to new geopolitical alliances (Polish-German) at the expense of old ones (Franco-German).

• Most demand in Asia will come from China and Japan, following China’s insatiable energy needs (as a result of rapid growth) and Japan’s expected increased dependence on natural gas following the Fukushima nuclear disaster. The large shale gas reserves in China will only temporarily ease the import burden, even if one accounts for increased power generation capacity from other sources (hydro, solar, wind, etc.).

Source: Frost & Sullivan analysis.

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Note: Only darkly shaded regions have assessed their shale gas reserves. Reserves may exist in other areas. All units are in TCF.

Sources: Energy Information Administration (EIA) and Frost & Sullivan analysis.

Global Shale Gas Reserves

Shale Gas Market: Shale Gas Reserves, Global, 2011

North America

1,931Europe

696

SouthAmerica

1,225

Africa1,042

China1,275

Of the global regions assessed, the United States and China have the largest known reserves, followed by South America and Africa. Modest reserves exist in Europe and Australia.

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Major Natural Gas Trade Patterns

Note: All values are in million tonnes. Trade data is limited to volumes of greater than 79.0 million tonnes only.Sources: BP and Frost & Sullivan analysis.

• Major NG exporting regions are Russia and the Middle East, with Europe and the United States importing the greatest volumes.

• Further development of shale resources in the United States may turn it into a net exporter, thus rerouting current imports to Europe and nations experiencing rapid growth (e.g., Brazil, China, and India).

Key:

Major net exporters

Major net importers

347.8

110.1

103.2

179.486.9 81.0

230.0

121.7

79.2115.7

Natural Gas Market: Major Trade Patterns in Natural Gas, Global, 2010

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Asia (Japan Spot—$17 per

MBTU)• High NG demand

(China, Japan)• Fukushima disaster• Rapid growth of China

North America (Henry Hub–$4 per MBTU)•Surplus in NG supplies•Low NG prices•Disconnect from global NG prices

Europe (Spot—$8 to $10 per MBTU)•High NG prices•Competition from renewables•Disruption of Arab Spring•Linked to oil price

Effect of Shale Gas Production on Natural Gas Prices


A natural gas surplus in the United States has pushed prices down. In other global regions, prices remain high, particularly in Asia, where demand is significant due to growth (China) and the recent nuclear disaster (Japan).

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Shale Gas Value Chain Analysis

• Basin assessment

• Well-pad preparation

• Exploratory drilling

• Well completion• Hydro-fracking• Gas flow to

processing plants

• Separation of gas and fracking fluid

• Removal of contaminants

• Separation of component gases

• Gas compression for transport

• Wastewater treatment and recycling

• Pipeline contractors

• Delivery to terminals

• Storage• Export

Exploration Extraction TransportationProcessingDistribution/

Marketing

To vendors:• Commercial• Residential • Retail

receiver stations


After exploration and extraction, the shale gas value chain is similar to conventional gas and can therefore use established infrastructure.

Shale Gas Market: Value Chain, Global, 2012

Overview of the global shale gas market

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