Caspian Report - Issue: 07 - Spring 2014

The expanded role for natural gas in the
world economy has prompted the IEA to
envisage a “Golden Age of Gas” era with
unconventional gas being a “game changer.”
Introduction
The U.S. shale gas development is not
a technical revolution, but rather an
evolution of modern techniques and
the combining of two key technologies
– horizontal drilling and “slick
water” hydraulic fracturing. Together
these can crack shale rock, and have
thus cracked the code with regard to
opening up major North American
shale gas resources.
The rapidly expanding production
of shale gas has transformed the U.S.
from the largest LNG import market
to a self-sustaining gas producer and
a net gas exporter. In 2009, the U.S.
even overtook Russia as the world’s
largest gas producer, and in 2010 it
exceeded Qatar as the world’s largest
LNG exporter by about 60%. In 2012,
U.S. natural gas production increased
to 681.4 billion cubic meters (bcm;
20.4% of the global production),
whereas Russia’s was just 592.3 bcm
(17.6% of global production).
The combination of three factors -
(1) a drop in demand linked to the
global economic recession, (2) a
unexpected dramatic increase in
incremental U.S. non-conventional
shale gas production, and (3) the
arrival of new LNG delivery capacity
- have created a sudden “gas glut”.
This stems from the overcapacity
of LNG, which made LNG in Europe
less expensive than pipeline gas
(based on long-term contracts), and
contributed to the de-linkage of the
gas prices from the oil prices in at
least Europe at present. This could
become a permanent feature of the
global energy market because the
remaining global unconventional
gas resources are considerably bigger
than conventional ones. The U.S.
could even overtake Russia as the
world’s largest combined oil and gas
producer by 2015.
The development of unconventional
gas in the U.S. since 2006 has not
only triggered a revolution in U.S.
energy markets, but has also laid the
groundwork for an expanded role
for natural gas in the world economy.
This has prompted the IEA to envisage
a “Golden Age of Gas” era with
unconventional gas being a “game
changer.” It has already transformed
the global gas markets, which were
in the past “sellers’ markets” rather
than “buyers’ markets.”
Meanwhile, some countries in Europe
(Poland, United Kingdom, Romania,
Lithuania, Spain and Ukraine)
have become very interested at the
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CASPIAN REPORT, SPRING 2014