A European Perspective on the U.S. Shale Energy Revolution

Mark Green
Posted July 19, 2012

The Economist has an interesting set of articles in a recent special report on U.S. energy and in particular, energy from shale. Though the primary audience is European, the report makes a number of important points about shale energy and the hydraulic fracturing methods used to collect it.

Natural gas, much of it unconventional, is changing the global energy picture

The Economist notes that shale gas has transformed the U.S. energy outlook, and that unconventional gas has roughly doubled the global natural gas resource base:

"In 2009 the IEA estimated the 'long-term global recoverable gas resource base' at 850 trillion cubic metres (tcm), against 400tcm only a year earlier. The main reason for the rethink was shale gas and other unconventionals. Not just America but parts of Europe, China, Argentina, Brazil, Mexico, Canada and several African countries, among others, sit atop as yet unknown quantities of gas that could transform their energy outlook."

The article concludes:

"If the 'shale gale' blowing through America can be replicated worldwide, the huge surpluses it would bring could hasten the advent of a global market. Just as the 20th century was the age of oil, the 21st could prove to be the century of gas."

Shale gas is providing a big boost to the U.S. economy

(H/T to energy/economics blogger Mark J. Perry) Noting that shale currently contributes a third of America’s natural gas supply, the magazine says that figure could climb to nearly half by 2035. The U.S. could have a century’s worth of natural gas in reserve. As a feedstock and a fuel, natural gas is lifting specific economic sectors, including petrochemicals:

"The biggest winner might be the petrochemicals industry. It gobbles up gas as feedstock to make chemicals such as methanol and ammonia, a vital ingredient of fertiliser. Switching feedstock from naphtha, derived from oil, to ethane, derived from gas, has kept petrochemicals cheap even as oil prices have peaked. These chemicals in turn provide cheaper raw materials for carmakers, agriculture, household goods and builders, or go for export at prices to compete with the world’s lowest-cost producers, the state-owned petrochemicals firms in the Middle East."

And manufacturing:

"The fossil-fuel industry is only a small slice of America’s economy, but the relative drop in gas prices is so dramatic that it could boost a manufacturing renaissance. That might add 0.5% a year to GDP over the next five years, says UBS, a Swiss bank."

Attacks on fracking are mostly fiction

Frack fiction is present in Europe, as it is in the U.S. The magazine notes that chief European concerns include whether there’s a fracking-earthquake link, water supply contamination and emissions. In each case, the magazine writes, the U.S. experience indicates the concerns are mostly unsupported by fact. Its take on emissions:

"Research published by America’s Environmental Protection Agency (EPA) around the same time put the figure at 2.2%, only a little more than conventional gas. And methane emissions are probably falling because of 'green completion', a method used on most new wells that avoids venting or flaring methane. The EPA is now conducting the biggest study ever into all aspects of shale exploration, likely to be published next year, which might help allay public fears."

The article adds that problems with traffic and road maintenance also are being addressed in the U.S.:

"In the Marcellus there are agreements that traffic will be suspended at weekends and on holidays, or even when the school bus is running. Moreover, operators are obliged to upgrade potholed roads and rickety bridges that otherwise might wait years for repair. And if necessary, water could be piped in at additional cost to cut down on the traffic."

The point here, as noted by The Economist, is that the United States is on the cutting edge of shale energy development through hydraulic fracturing. Generally, there’s support for this kind of energy development from the public, government (see here and here) and our way of life – private property, entrepreneurship and a history of pioneering energy development. Still, there are some who want to stop the revolution in its tracks. Instead of safe and responsible natural gas development, they want to halt development altogether – while offering little in the way of realistic alternatives to abundant, reliable natural gas.