Yergin on natural gas--the latest American revolution
Monday, November 9, 2009 at 11:48PM OPINION: "America's Natural Gas Revolution," by Daniel Yergin and Robert Ineson, Wall Street Journal, 3 November 2009.
The rise of "unconventional gas" in the U.S. What is unconventional? Gas from shales, coal-bed methane and so-called "tight formations" that are harder to access.
Twenty years ago, such unconventional sources accounted for only 10% of U.S. production. Now it's up to 40%, and the much-ballyhooed prediction about the U.S. suffering production shortages en masse appears to be averted--just like that. It looked like we'd be pulled into global LNG (liquid natural gas) markets, thus creating new dependencies, but now, we're looking at a huge resurgence of domestic production thanks to a few companies making a breakthrough on shale gas.
Ground zero of this experimentation is the Barnett Shale near Fort Worth, TX. The two new approaches are horizontal drilling and "fraccing" with injected water and sand. No great breakthrough moment: just constant incremental development of new extraction technologies. The result? Lots more gas at "much lower unit cost than previously though possible."
As these technologies were perfected, they spread around to other production sites across America.
So U.S. known reserves are climbing: 177 trillion cubic feet in 2000 to 245 Tcf last year. That rise is roughly equal to half of Qatar's known holdings. As drilling experience grows, estimates are likely to continue rising dramatically in the next few years, meaning we're likely to have a lot more than a century's supply (current known supplies project out 90 years).
This is a game changer, says Yergin and Ineson, when it comes to electricity generation going forward. Nat gas plants are easier to build and emit so much less CO2. Places that traditionally import energy for electricity, like PA and NY, will become serious producers.
The one hitch? Fears of ground-water contamination from the fraccing. Truth: thousands of feet separate these operations under ground from the water supplies.
The global impact: the U.S. doesn't need LNG now, which is getting diverted to Europe, which will change the equation with Russia's Gazprom.
Then there's the longer-term reality that, as this tech spreads, shale gas all over the world will become available, meaning the oil-and-gas rich Middle East becomes less crucial.
I got this message about a decade ago from Cantor Fitzgerald and Yergin's company at one of my Naval War College economic exercises atop World Trade Center 1: the assumption that gas is only to be found associated with oil is wrong, so assuming that the Middle East remains central to the global energy equation is wrong. Non-associated or unconventional gas would change everything.
And so it appears to be doing now.
Watch for a lot of stories on this subject. Yergin and Ineson say it will take another half decade to properly assess just how much new gas America has.
Alas, perhaps now we must cancel the resource wars over natural gas too, including the world war between NATO and Russia.
Bummer!
Reader Comments (6)
How soon before Russia's wielding gas as an economic weapon diminishes in importance?
Just call me the "Energy Czar" because it is so simple. Well not really. If only we were more like China... people in power could just dictate. Kidding....
I believe that oil reserves are also increasing.
Energy will be an issue in 2012, I hope the Rs can get on a page as an alternative to Obama's cap and tax.