u.s. shale gas and global energy dr. james l. smith, southern methodist university hong kong baptist...
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U.S. Shale Gas and Global Energy Dr. James L. Smith, Southern Methodist University
Hong Kong Baptist University
Workshop on Electricity Reliability, Environment, and CostJune 10, 2014
Today’s Presentation:
• What is shale gas?
• How is it affecting the US energy scene?
• How will it affect global energy markets?
• What are the benefits for Asian consumers and industry?
U.S. Gas Production (tcf)
Shale Beds are the Original Source of Gas
Fracking and Horizontal Drilling are the Keys
Chesapeake Energy Gas Rig -- Pennsylvania
Click to Play Video
Shale Basins are Widespread
Global Shale Basins
Source: U.S. Energy Information Administration
China1,115
Argentina802
Algeria707
U.S.665
Canada573
R.O.W.3,437
Technically Recoverable Shale Gas Resources
Total = 7,299 TCF
Source: U.S. EIA, June 10, 2013
The Contribution of Horizontal Wells
Source: U.S. Energy Information Administration
U.S. Shale Plays Also Attract Foreign Investors
Source: U.S. Energy Information Administration
KNOC Upstream Oil & Gas Projects
Source: U.S. Energy Information Administration
Dramatic Rise of U.S. Shale Gas Production
Potential Future Impact on U.S. Gas Price
Shale Gas Impact on U.S. Price
Source: K. Medlock, “U.S. LNG Exports: Truth and Consequence”
U.S. Coal Consumption for Electricity
Source: U.S. Energy Information Administration, Deutsche Bank
U.S. Coal Exports (net)
0
20,000
40,000
60,000
80,000
100,000
120,000
140,000
2005 2006 2007 2008 2009 2010 2011 2012
Net Exports
1,000 short tons
Source: U.S. Energy Information Administration
Shale Gas Pushes Coal into Export Channel
… and depresses the price.
Source: U.S. Energy Information Admin., U.S. Bureau of Labor Statistics
Europe & Asia Receive More U.S. Coal
Source: U.S. Bureau of Labor Statistics
Potential Impact on GHG Emissions
Gas Consumption Represents a GHG Tradeoff
As gas-based emissions rise, emissions from other fuels fall by more.
Source: U.S. Energy Information Administration
How to Replace Nuclear: Coal or Gas?
Global LNG Market Imbalance
Source: K. Medlock, “U.S. LNG Exports: Truth and Consequence”
Profitability of U.S. LNG Exports
2011 2011-2020 2021-2030 2031-2040Feed Gas Cost $3.80 $3.98 $4.69 $5.26Liquefaction $2.92 $2.92 $2.92 $2.92Transport Cost UK $1.07 $1.07 $1.07 $1.07 Japan $2.15 $2.15 $2.15 $2.15Landed Cost UK $7.79 $7.97 $8.68 $9.25 Japan $8.87 $9.05 $9.76 $10.33Market Price NBP $8.84 $7.47 $7.44 $8.09 JKM $11.73 $8.08 $7.98 $8.46Export Margin UK $1.05 -$0.50 -$1.24 -$1.16 Japan $2.86 -$0.97 -$1.78 -$1.87
(all figures in $/mcf)
Source: K. Medlock, “U.S. LNG Exports: Truth and Consequence”
Shale Gas: Focus on China
China Primary Energy Consumption
China: Power Generation
China: LNG Imports are Diversified
The New Russian-Chinese Pipeline Gas Deal
• 38 billion cubic meters/year @ $10/mmbtu
• ≈ 25% of Russian gas exports to Europe
• ≈ 10-15% of total Chinese gas supply by 2020
China’s Shale Gas Upside Potential
Source: U.S. Energy Information Administration
China’s Primary Shale Gas Basins
Source: U.S. Energy Information Administration
China Electric Power: Coal vs. Everything Else
Concluding Thoughts
• Expanding supplies of US shale gas are pushing energy prices down, in the US and abroad.
• Global arbitrage will tend to reduce (but not eliminate) the wedge between U.S. and Asian gas prices.
• Shale gas is pushing coal out of U.S. power generation and into the export stream—resulting in lower coal prices but increased carbon emissions in Europe.
• The U.S. shale gas revolution represents only the tip of the iceberg, with impacts likely to grow as the global abundance of shale resources is recognized and exploited.
• All energy consumers (especially import-dependent consumers like Japan, Taiwan, and Korea) will benefit from the abundance of gas. Producers of competing fuels (coal and oil) will not.
