American Gas - June 2014 - (Page 26)

on the right track: more promisinG is mexico, Which holds the World's sixth larGest shale reserves. exporter of LNG after Qatar and Australia, and Tanzania could emerge as a major exporter, though that's unlikely before 2025. In the meantime, gas could transform the nations' economic outlook. In fact, PwC predicts that Tanzania will become one of the world's fastest-growing economies. Mozambique and Tanzania aren't the only developing nations that could become big gas exporters. Argentina holds the thirdlargest shale gas reserves after the U.S. and China. And demand for gas among its Latin American neighbors will grow 29 percent between 2011 and 2017, the EIA projects. Its promise is hampered, however, by a restrictive regulatory environment. In fact, Argentina is currently a net importer of gas. More promising is Mexico. At 545 Tcf of gas, Mexico holds the world's sixth-largest shale reserves. "In the past, Mexico has failed to provide an investment environment that would help it develop its shale plays," Varro explained. "But increasingly, it's on the right track." Recent government reforms have eased investment restrictions and tax burdens for state-owned Pemex. Now, for example, the company plans to spend $1.4 billion on pipelines to move gas from the Gulf Coast to the Pacific in a bid to one day serve Asian markets, GlobalPost reports. And foreign companies such as France's GDF Suez are investing in Mexican gas development. In the short term, Mexico will continue to import gas from the United States. Going forward, so will Latin America, Asia, and Europe. America's shale gas revolution means better energy security not just for U.S. utilities, manufacturers, and end consumers but for the entire world. "The best answer to energy security is diversity of supply, including domestic gas, pipeline imports, and LNG imports from multiple sources," Benschop concluded. "What's interesting today is that wherever you are in the world, diversity of supply is improving. That should make energy supply less volatile and geopolitics less volatile. It's a very positive development." u 26 AmericAn GAs june 2014 the north aMerican advantage d oes shale gas give north America an advantage in global exports? yes, say many experts. America's shale-gas revolution has been building for eight years. canada has been producing shale gas for nearly as long. "The U.s. and canada have the technology, infrastructure, markets, service companies, and understanding of their geology that other countries lack," says David carroll, president of the Gas Technology institute. Another potential advantage for the U.s. has to do with mineral rights. "if you drill on someone's land in the U.s., the landowner can get rich," carroll observes. "Almost everywhere else in the world, the money goes to the government." it's no surprise, then, that "nearly 100 percent of global shale gas production has been in the U.s. and canada," says Laszlo varro, head of gas, coal, and power markets for the international energy Agency. in fact, china is the only other nation to produce commercially viable shale gas, and in tiny quantities. The U.s. produced 25.7 Bcf/day of dry shale gas in 2012, 39 percent of its total dry gas production, the eiA reports. canada produced a little more than 2 Bcf/day, or 14 percent of its total dry gas production. china is the world's largest holder of recoverable shale gas, but only 1 percent of its 10.44 Bcf/d production is shale gas. in the U.s., industry and consumers also enjoy some of the lowest gas prices. But what will happen to prices at home and abroad as more countries enter the market? A few studies suggest domestic gas prices could rise slightly as the U.s. ships gas overseas. But some experts dispute those projections. "even after LnG exports begin, we don't anticipate any significant domestic price increase, because more production will quickly come online," says Katie Pipkin, senior vice president of business development and communications for cheniere energy. how prices play out in other regions is harder to predict. natural gas isn't traded as a global commodity the way oil is. instead, gas prices vary by country or region. As a consequence, in many regions gas contracts are tied to the price of crude oil. That's beginning to change. For example, in April France's largest gas company, GDF suez, signed a 25-year contract to buy gas from BP and partners in Azerbaijan with prices tied to those in Western europe's domestic gas market, Bloomberg reported. in the U.s., contract prices are linked to the price at the henry hub, a major distribution waypoint in Louisiana. The U.K. has the national Balancing Point, or nBP hub. now other nations and regions, particularly Asia, are considering hubs, Pipkin says. As gas from the U.s., canada, Australia, and other newly exporting nations comes online, prices might fall somewhat, some experts predict. But that will be limited by logistical realities. For U.s. exports, for example, "even if the henry hub price is low, once you add liquefaction, transportation, and regasification, the price goes up," carroll explains. For the U.s., affordable prices and abundant resources will mean a leadership position for the next five to 10 years, experts say. "many observers underestimate the strategic advantage of the U.s. gas industry," varro says. "other countries will try to replicate the U.s. shale gas revolution. But the U.s. has significant advantages other countries will never be able to match."

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American Gas - June 2014