Shale gas – a new player in the energy market

Monday December 10th, 2012 Popov Anatoliy News, Articles No Comments

Shale gas is a natural gas with methane as its bulk component. It is extracted from the slate rock which are widely spread in the sedimentary basins. Shale gas is contained in the rock in comparatively small amounts, as distinct from the conventional gas. That is why its extraction demands different technologies.

One of them is the so called “hydraulic fracturing of formation” technology, the essence of which is fracturing the rock, which opens the access to the gas accumulation contained in the rock. First, the hydraulic fracturing mixture is prepared; it consists of special chemical, sand and water. Under high pressure the mixture is pumped to a depth of up to three kilometers. Then the mixture reaches the slate formation, the well changes its position from vertical to horizontal one. This, in its turn, demands the application of another new technology, i.e. horizontal drilling, which is a more expensive technology, then the vertical one (but it doesn’t very much affect the final cost of shale gas). Further on the mixture under high pressure fractures the rock, and the sand grains leave the fractures open, letting the gas flow into the well. The gas in separated into dry gas, which is used for the electric energy generation at the industrial production, and liquid gas, which is used in petrochemistry. The hydraulic fracturing mixture can be purified and reused. 3D-seismic is one more technology without which the shale gas extraction wouldn’t have been profitable. It allows 3D modeling of rock formations, which makes the well drilling precise. Together with horizontal drilling, seismic technology helps highlight plots with a small amount of deposits contained, when the standard way of exploration is impossible. The conventional and gas extraction technology presupposes that 3D seismic allows find 3D fields in the closest vicinity to the mail field. The demand for the 3D seismic equipment is constantly growing all over the world, and the leader of 3D equipment manufacturing in the Russian Federation was purchased by Geospace corporation (the USA).

In 1821 in the USA, NY, the first commercial gas well was drilled in the slate formation. But it was only the beginning of the 2000s when Devon Energy Company started industrial production of the light tight gas. In 2002 in Texas, Devon Energy drilled the first horizontal well. Since then the USA have seen an active growth of shale gas extraction. Due to this fact the USA have gained leadership in gas extraction (611 billion cubic meters), 40% of which were accounted by by the shale gas. In 2010 only 23% of the whole natural gas production in the USA was shale gas production. Recently the international gas trade is being reconstructed. Evidently it is going to carry on slowly and will have been taking place for several decades. Still American pricing pattern for natural gas may influence the world market much faster than that. For a long period of time natural gas was being sold according to 20-year contracts, bound to prices for . Long-term contracts between Algeria and Gasprom in Europe also depend upon the prices for . Chinese energy concludes treaties bound to gas pricing in the USA, which have reached the lowest point for the current decade due to the slate revolution. The price for American gas on the Asian market at this state of affairs is 40% to 60% lower than that of the gas from other sources. It took the Chinese Company only 3 months to exploit their terminal at 90% capacity by way of concluding the treaties for gas delivery to South Korea, Britain, Spain and India. tHe creation of this new pricing pattern may lead to the dissatisfaction of das consumers under the long-term contracts bound to expensive .

Gas export from the USA may turn out cheap and present great volumes. Wood Mackenzie consulting company reports that there are about 8 projects of natural gas exporting terminals in the USA, general capacity of which is about 120 mln. tons per year. In case all the projects are complete and implemented, the USA may turn into one of the biggest gas suppliers in the world. Qatar, which occupies the 1st place for the volumes of gas supplied, exports about 77 mln. tons of liquid gas per year. Canada authorities also plan to enter this market, having agreed to build 2 export gas terminals with general capacity of 12 mln. tons. The experts suppose that the USA and Canada will have exported about 60 to 100 billion cubic meters of gas per year by the end of the decade. Due to this fact the world volumes of liquid gas trade will have grown by 20%.

In the meanwhile in the Russian Federation the shale gas extraction is not planned in the nearest future. In 2010 the Gosduma (State Duma) Committee for Energetic conducted a round table devoted to the perspective of shale gas extraction development. The Government of the Russian Federation was recommended to evaluate the gas potential of the country, to study out the up-to-date technologies of shale gas extraction, to study the possibility and perspectives of implementation of these technologies in Russia, as well as work out the possible problems connected with the influence of shale gas industry in the USA, and its arousal in China an Europe on the Russian gas export. The Deputee Chairman of Gasprom Alexander Medvedev has declared the conventional gas reserves many times more effective than shale gas fields development. Thus Gasprom has postponed the shale gas extraction and is not going to do it in the next 50-70 years. The high officials state that the shale gas revolution is just a mere PR-campaign aimed at the depletion of Russia’s interests. The Minister of Energetics Sergey Shmatko believes that the “unnecessary agitation” is growing in the world over the shale gas extraction. According to him the shale gas market development on the USA is unable to influence the world energy balance. Time will show.

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