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An Overview Of

The Global Shale Gas Market


Executive Summary

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Executive Summary

Global recoverable shale gas reserves are significant, amounting to more than 6,000 trillion cubic feet
(TCF) from just the 32 countries that were assessed in 2009. This amount is bound to increase
substantially when more regions, such as Russia and Sub-Saharan Africa, are assessed.
Natural gas (NG) constitutes approximately 27 percent of the global energy mix with around 90 percent
of this consumed as a fuel or for power generation. At present, only 6 percent is consumed as
feedstocks for chemicals.
Shale gas production is likely to shift natural gas trading patterns, with the United States becoming a
net exporter in the short term (5 to 10 years), with other countries, such as Brazil and Poland, exporting
in the mid-long term (less than 10 years). In North America, it has created regional disparities in natural
gas prices, with low prices in North America (approximately $4 per MBTU) and high prices in Europe
(approximately $9 per MBTU) and Asia (approximately $15 per MBTU).
An increase in natural gas production is expected to make it the preferred feedstock for chemicals and
materials in the future. However, this may impact products exclusively sourced from crude oil, such as
aromatics.
Advanced technologies are facilitating other routes to chemical feedstocks, including coal-to-chemicals
and bio-based sources. Such trends have shifted investment patterns for major companies for both the
chemicals and the oil and gas industry, in favour of the United States.

MBTU = million British thermal units


Source: Frost & Sullivan analysis.

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Executive Summary (continued)

Shale gas production is made economically possible by the combination of horizontal drilling and hydro-
fracturing techniques. The process is associated with environmental issues, such as air and water
pollution, and has attracted a fierce backlash with calls for strict regulations governing production.
The shale gas production value chain is dominated by major oil and gas players and energy service
companies. However, chemical and water treatment companies have tapped into the growing markets
for hydro-fracturing chemicals and wastewater treatment chemicals.
Development of shale resources in Europe will, in the long term, decrease the regions dependence on
supplies from Russia and the Middle East, thus reducing their dominance in energy markets. It is likely
to also give rise to new geopolitical alliances (Polish-German) at the expense of old ones (Franco-
German).
Most demand in Asia will come from China and Japan, following Chinas insatiable energy needs (as a
result of rapid growth) and Japans expected increased dependence on natural gas following the
Fukushima nuclear disaster. The large shale gas reserves in China will only temporarily ease the import
burden, even if one accounts for increased power generation capacity from other sources (hydro, solar,
wind, etc.).

Source: Frost & Sullivan analysis.

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Global Shale Gas Reserves

Of the global regions assessed, the United States and China have the largest known reserves, followed by
South America and Africa. Modest reserves exist in Europe and Australia.

Shale Gas Market: Shale Gas Reserves, Global, 2011

North
America Europe
1,931 696 China
1,275

Africa
1,042
South
America
1,225

Note: Only darkly shaded regions have assessed their shale gas reserves. Reserves may exist in other areas.
All units are in TCF.
Sources: Energy Information Administration (EIA) and Frost & Sullivan analysis.

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Major Natural Gas Trade Patterns

Major NG exporting regions are Russia and the Middle East, with Europe and the United States importing
the greatest volumes.
Further development of shale resources in the United States may turn it into a net exporter, thus rerouting
current imports to Europe and nations experiencing rapid growth (e.g., Brazil, China, and India).

Natural Gas Market: Major Trade Patterns in Natural Gas, Global, 2010

347.8

121.7

103.2
86.9 81.0 110.1 179.4
115.7
79.2

230.0
Key:
Major net exporters
Major net importers
Note: All values are in million tonnes. Trade data is limited to volumes of greater than 79.0 million tonnes only.
Sources: BP and Frost & Sullivan analysis.

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Effect of Shale Gas Production on Natural Gas Prices

A natural gas surplus in the United States has pushed prices down. In other global regions, prices remain high,
particularly in Asia, where demand is significant due to growth (China) and the recent nuclear disaster (Japan).

Asia
(Japan Spot$17 per
MBTU)
High NG demand
(China, Japan)
North America
Fukushima disaster
(Henry Hub$4 per MBTU)
Rapid growth of China
Surplus in NG supplies
Low NG prices
Disconnect from global NG prices
Europe
(Spot$8 to $10 per MBTU)
High NG prices
Competition from renewables
Disruption of Arab Spring
Linked to oil price Source: Frost & Sullivan analysis.

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Shale Gas Value Chain Analysis

After exploration and extraction, the shale gas value chain is similar to conventional gas and can therefore use
established infrastructure.

Shale Gas Market: Value Chain, Global, 2012

Distribution/
Exploration Extraction Processing Transportation
Marketing

Basin Well completion Separation of gas Pipeline To vendors:


assessment Hydro-fracking and fracking fluid contractors Commercial
Well-pad Gas flow to Removal of Delivery to Residential
preparation processing plants contaminants terminals Retail
Exploratory Separation of Storage receiver
drilling component gases Export stations
Gas compression
for transport
Wastewater
treatment and
recycling

Source: Frost & Sullivan analysis.

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Shale Gas Value Chain Analysis
Contact Us

Dr Michael Mbogoro | Consulting Analyst | Chemicals,


Materials & Food | Frost & Sullivan
michael.mbogoro@frost.com | P: +44 (0)1865.398.661 |
Shale Gas Value Chain Analysis
F: +44 (0)1865.398.601 | www.frost.com

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