US shale gas market to control 46% of natural gas supply by 2035

The US shale gas market has been predicted to reach a figure of $52.1 billion by 2016, climbing at an average annual growth rate (AAGR) of 11.9% from the expected 2012 value of $35.3 billion.

Shale gas has become an increasingly important source of natural gas in the United States over the past decade, and interest has spread to potential gas shales in the rest of the world. In 2000 shale gas provided only 1% of US natural gas production; by 2010 it was over 20% and the US government's Energy Information Administration predicts that by 2035 46% of the United States' natural gas supply will come from shale gas.

The development of shale gas over recent years has significantly altered the US energy outlook and major industry players have significantly increased their 2012 capital expenditure (capex) for the development of shale plays.

The total value of 2011 oil and gas sector merger and acquisition deals in the third quarter alone was US$48.8 billion, representing an increase of 135% over the third quarter 2010, dominated by transactions related to shale plays. Foreign investment comprised 76% of these deals.

ConocoPhillips and Chesapeake Energy announced respective capex of $2.3 billion and $2.4 billion for the development of the Eagle Ford shale play in 2012, while Bakken shale operators Continental Resources and the Hess Corporation, outlined respective 2012 capex of $1.1 billion and $1.9 billion in 2012.

In January 2012 Kinder Morgan announced the acquisition of El Paso for $38 billion including assumed debt. The combined company, to be called Kinder Morgan, Inc., will be the largest operator of natural gas pipelines in the US with 22% of the US natural gas pipeline network, 67,000 miles (107,803 km.) of pipelines that connect almost every gas field and consuming market in the US.

Yet for all the virtues of shale gas, US producers now are discovering that there can be too much of a good thing. Rocketing production, coupled with the economic slowdown, drove U.S. natural gas prices from about $7-$8 per million cubic feet in 2008 down to less than $3 per million cubic feet today. With oil at about $100 a barrel, gas drilling is levelling off, as the number of oil rigs in the field rise. In 2010, for the first time in 16 years, the number of oil rigs exceeded the number of gas rigs in the continental US.

For more information on the US shale gas market, see the latest research: US Shale Gas Market

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