From Drake To The Marcellus Shale Gas Play--Distribution Developments

The North American shale gas revolution is entering a new phase of activity with gas production in the “Big 7” shale gas plays: Antrim, Barnett, Devonian, Fayetteville, Woodford, Haynesville and Marcellus, now estimated to be on track to rise to between 27-39 Bcf/d over the next decade – with the Marcellus now singularly recognized as the largest unconventional natural gas reserve in the world.

The very presence of shale gas in the domestic supply is fundamentally altering the supply equation and conventional wisdom seems to suggest that change flowing from this robust domestic supply will not just be a ripple on the water, but a paradigm shift, one that will reach well beyond North America. Modeling from the Baker Institute, a think tank on the campus of Rice University and founded by former Secretary of State James A. Baker III, indicates that future growth in shale gas production in North America will also have significant and long-lasting effects on LNG redirection and U.S. national security, trends which may lead to a lessening of both supply and leverage from countries such as Russia and Iran, in part through the strengthening of European consumer markets. In 2009, shale gas production helped the U.S. overtake Russia as the world’s largest producer of natural gas.

In Canada, major pipeline companies: TransCanada Corp. and Union Gas Ltd, a subsidiary of Spectra Energy Corp., have announced “open season” calls to gauge interest in reversing the flow of their existing export pipelines to import shale gas from the Marcellus into the Ontario market, thus offering shippers access options through Dawn. With the Western Canadian Sedimentary Basin having been in decline for some time, and coupled with the emergence of shale gas both in Canada and the U.S., Canadian pipeline companies are clearly thinking through their options. A recent announcement detailing Korea Gas Corp.’s C$1.1 billion investment in the development of EnCana's shale gas acreage in British Columbia highlights that new Canadian supply options are not to be U.S. shale gas exports only.

On the world stage the shale gas effect has already taken leave of its North America base with major oil companies Royal Dutch Shell, BP and ExxonMobil moving headlong into the European shale gas revolution, buying up acreage and rights in France, Sweden, Hungary, Poland and Austria that potentially hold the keys to self-sufficiency. Witness ExxonMobil drilling a number of exploratory wells in Germany; Devon Energy teaming up with Total looking for approval to drill in France and a ConocoPhilips exploration initiative on a million acres in the Baltic Basin of Poland. Onshore rig deficits in Europe, likely environmental opposition as well as manpower and supplier shortages could hamper efforts, but those companies that have missed the onshore unconventional boat in North America might just catch this maiden launch overseas.