Global shale gas market: North America still the top region in the industry

Press Release   •   Jul 12, 2013 12:11 BST

The global shale gas market is suggested to have reached a value of around $33.2 billion by the beginning of 2013. The industry has seen dynamic growth in the last few years, especially in North America, and is changing the dynamics of natural gas trading. Horizontal drilling and hydraulic fracturing has presented a major new energy source which has reduced the need for natural gas imports in the United States.

Investment in shale gas exploration outside of North America is expected to grow strongly over the next decade while the US and Canadian markets will maintain their position as the epicentre of shale gas investment.

Natural gas prices in North America, where all commercial shale gas production currently resides, are slowly recovering from a ten year low. The low gas price of the last two years has been inhibiting development of a number of shale gas plays as it has dipped under the break even point of the dry gas plays. The substantial drop in the natural gas price throughout the second half of 2011 and the first half of 2012 has made a number of dry gas developments uneconomical, and a number of companies have suspended or slowed drilling operations. In the majority of cases, the shale gas industry will need gas prices of over $4.50MMbtu in order to break even on dry gas plays. The EIA's latest short term gas price forecast does not envisage this to happen in the next 18 months if the traditional rise in prices during the winter season is discounted.

There is however some positive news with many market indicators pointing towards a rise in the price of natural gas. Firstly, the main cause of the low gas price is related to the glut of the resource in the US and its lack of ability to export excess gas. Typical production decline from new wells can be as much as 60% from the first year, so if there is a significant curbing of drilling it shouldn't take too long for supply and demand to balance. That being said natural gas storage levels remain close to capacity and releasing some of this gas will slow the process somewhat.

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