US shale gas fast emerging as new focus area
US shale gas is fast emerging as a new focus area for global hydrocarbon players. RIL alone has made acquisitions in three shale acreages in a span of just a few months. This marks a global shift away from offshore drilling in the wake of the oil spill in the Gulf of Mexico. By one estimate, BP will have to spend about $30 billion on cleaning up the spill and paying compensation. The company has been forced to sell its upstream assets in various countries. Its stock prices have fallen drastically, bringing forth the serious risks of deep and ultra-deep sea drilling. Meanwhile, there is a fear that governments across the world might tighten regulations for offshore drilling and insurers their risk premiums, further raising the cost of oil and gas production from the sea. Shale gas is a non-conventional natural gas, which entails a higher cost of production. But cost economics of US shale gas acreages compare well with conventional gas sources, which explains the scramble among international oil companies to get a piece of the US shale gas exploration business pie.
Plus, the growing interest of oil companies in the US shale gas market stems from the fact that the US is the only country to have made a breakthrough in the large-scale commercial production of shale gas. This was made possible because of advancements in drilling technology. The technology is still evolving, which means cost of production can further come down. Perhaps that is the reason international companies are betting on the US shale gas market. Companies entering the shale gas business at this stage will also get first mover advantage in technology and cost economics. This is what will give them a competitive edge when exploration begins there. Projections are that the share of shale gas in the US energy basket will rise steadily in the coming decades. This has encouraged the US power sector to plan a shift toward natural gas and cut emissions. Encouraged by the US’ success, India is also planning to explore and exploit its shale gas reserves. The country remains dependent on coal to meet its primary energy requirements. If India can find a big shale gas reserve, that would dramatically transform its energy landscape.
Why not go for shale gas…Noor Mohammad / The Financial Express
