Challenges in a gas golden age

China , Energy , Natural Gas Jun 08, 2012 No Comments

Shale gasThe golden age of gas has started and the whole world economy should be impacted. The International Energy Agency expects consumption to grow 50% by 2035. It is an energy revolution that no one anticipated five years ago.

The reason is known: by perfecting techniques for extracting unconventional gas, including shale gas, Americans have become in five years the world’s leading producers of gas.

This new technique changes everything. First for the Americans themselves. As producers have not yet allowed to export their gas, prices have collapsed due to overcapacity. At $2 (Btu), the U.S. gas is four times cheaper than in Europe and six times than in Asia. This renewed competitiveness of the United States has caused an economic boom on one hand, with the creation of over half a million direct jobs, and, on the other hand, the relocation of energy intensive industries, such as the chemical and steel industries.

The export of U.S. gas should start in 2015 and contribute to the collapse of world prices, particularly in Asia, especially since prices are not indexed to oil price, unlike in Russia or Qatar.

But this new technique is also changing the geopolitics of energy because China, Australia and Europe have considerable reserves of shale gas. The optimists dream of a cheaper fuel and to be less dependent on the Middle-East. They hope that by replacing coal power plants, it will even help to reduce the greenhouse effect. Pessimists point out the difficulty of shale gas extraction, the increased pollution, and the reduced incentive for countries to switch to alternative energy.

The truth is, as usual, in between. No country has the expertise, network, and the legal framework that enabled this American energy revolution. For now. But in ten years, the situation will have changed and at least two major new countries will have joined the energy revolution: Australia and especially China, the world’s largest consumer. This will be enough to change the face of the world.

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Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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