Shale gas revolution impact may be limited in Asia

Panel participants said on 15 October that shale gas is a significant game changer, particularly in North America, but those in Asia who hope it will transform energy pricing are unlikely to be satisfied because the pace and scale of the shale gas revolution in North America will be difficult to replicate.

China has vast deposits and shale gas will be developed in other countries, such as Algeria. “Natural gas is the fuel of the 21st Century,” said Abdelhamid Zerguine, CEO of the country’s largest oil and gas company, Sonatrach. However, “the pace and scale of what we see in North America will not and probably cannot be replicated anywhere else,” said Martin Houston, COO & Executive Director of the BG Group.

Jean-Marie Dauger, Senior Executive Vice President of GDF Suez, listed several special conditions that had made the North American shale gas boom possible, including a “unique” system of property rights, an established world-class oil service industry, and a huge capital market. “It is very unlikely that anywhere else in the world all these conditions will be met,” he said.

Jang Seok-hyo, President & CEO of KOGAS, expressed the hope that the shale gas development can help Asian buyers. “We do not want to pay the extra cost under the so-called Asia premium,” he said, referring to the current system under which Korea, Japan, and other Asian countries are locked into long-term contracts that tie the prices they pay to higher oil prices.

Houston noted that “only one project is in construction to export LNG from the US,” adding that oil will continue to dominate Asia’s energy supply. That’s not necessarily a bad thing, he suggested, because “oil has provided long-term stability” in the energy market - while gas prices will have to rise in coming years to reflect the investment needs of explorers and producers. “North America is not going to be a price setter,” said Russell Girling, President & CEO of pipeline company TransCanada.

This news story is based on the session Game Changer, “Natural gas markets and geopolitics: A map in transition” at 2013 World Energy Congress.