The past decade has yielded dramatic change in the natural gas industry. Specifically, there has been rapid development of technology allowing the recovery of natural gas bound up in shale formations. By some estimates, there is as much as 1,000 trillion cubic feet (tcf) of technically recoverable shale gas in North America alone, which is enough to supply the nation’s natural-gas needs for the next 45 years. Shale gas revelations are also occurring elsewhere in the world, with potential in Europe estimated to be as high as 400 tcf and shale gas discoveries being discussed in China, Australia and elsewhere.
In the U.S., the impact of shale gas is already apparent. Import terminals for liquefied natural gas (LNG) are scarcely utilized, and the prospects that the U.S. will become highly dependent on foreign imports in the coming years are receding. Rising shale gas production in the U.S. is also having an impact on markets in Europe and Asia, as LNG exports previously destined for the United States become available for sale to other markets. LNG supplies present consumers in Europe with an alternative to Russian pipeline supplies, and a potential surplus of available global natural gas will exert pressure on the status quo of indexing gas sales in both Europe and Asia to a premium marker determined by the price of petroleum products. To be sure, the enormity of the global shale gas potential will have significant geopolitical ramifications and exert a powerful influence on U.S. energy and foreign policy.
Study Aims and Scenarios
Shale gas developments have broad implications for the United States and the Baker Institute is embarked on a new study to analyze the impact of U.S. domestic shale gas development on energy security and U.S. national security under a new program funded by the U.S. Department of Energy. The study will examine the geopolitical consequences of rising supplies of U.S. natural gas from shale and the implications for U.S. energy and foreign policy.
Utilizing the Rice World Gas Trade Model, Baker Institute researchers will investigate how development of extensive global shale gas resources could alter geopolitical relations over the coming decades and map out the implications for U.S. national security.
The study approach will be scenario analysis that compares outcomes under different case studies. To begin, three scenarios will be tested. These scenarios are described below:
Scenario One: Baker Institute researchers will create a reference modeling case describing the U.S. natural gas market and global flows of natural gas in a scenario in which all known global shale gas resources can be developed given prevailing commercial technologies and open tendering practices.
Scenario Two: A second scenario will be developed in which the exploitation and use of shale gas resources are confined to the state of knowledge that existed prior to the late 1990s before the boom in shale gas development gained momentum in the United States. By comparing this scenario result to the base case, researchers will be able to identify a clear delineation of the importance of shale resources to U.S. energy security.
Scenario Three: A third scenario will be developed where specific U.S. shale plays located in the northern United States are blocked from development by environmental and/or political factors. By comparing this third scenario to the first two scenarios, U.S. policy makers will have the benefit of understanding the costs to U.S. energy security if all or some American shale gas resources cannot be developed to their fullest extent.
Proposed Working Paper
This study will conclude with a white paper study exploring the changing geopolitics of energy that result from greatly expanded shale gas production in the coming decades and the implications for U.S. energy security.
Click here to see the study presentation "The Impacts of the Natural Gas Shale Boom on U.S. Energy Security - The Rice World Gas Trade Model: A Discussion of the Reference Case (Unconstrained) Results"