Emerging markets across the world are investing heavily in shale gas development in the hope of reducing their current reliance on natural gas imports, reports GlobalData.
Global technically recoverable shale gas resources amount to an estimated 7.629 trillion cubic feet (tcf), according to the latest figures from GlobalData. The Asia-Pacific region is estimated to possess the largest technically recoverable shale gas resources, with 2,808tcf or 37% of the global resources (see figure 1). North America, with around 25%, holds the second-largest shale gas resources in the world. South and Central America account for around 16% of the world’s technically recoverable gas shale resources, equivalent to an estimated 1,225tcf. The Middle East and Africa account for a share of around 14%, followed by Europe with 624tcf, or around 8% of the world’s technically recoverable gas shale resources.
Key markets for shale gas investment
Investment for shale gas development has been increasing in emerging markets such as Poland, Argentina, Australia and China. Argentina made substantial investments in shale gas, amounting to around $2.05 billion, from 2009-March 2013 (see figure 2). In 2010, shale gas investment in Argentina amounted to an estimated $513.85 million, which increased to around $1.42 billion in 2011. The Argentinean Government has also introduced the Gas Plus programme in order to support gas shale development in the country. This programme allows operators involved in shale gas development to sell natural gas at a higher price.
In Australia, gas shale investment amounted to an estimated $1.26 billion during the 2009-March 2013 period. In 2009, shale gas investment in Australia was estimated at around $128 million, which increased to around $678.81 million by 2012. At the end of March 2013, shale gas investment in the country was estimated at around $376.01 million.
In Poland, gas shale investment amounted to an estimated $296.66 million during the period 2009-March 2013. In 2009, shale gas investment was estimated at around $21.33 million. By 2012, shale gas investment had increased to around $112.91 million.
Contrasting acreage valuations
Rapid shale gas development in North America has led to steep increases in shale gas acreage valuations in North America, especially in major shale gas plays in the US such as the Barnett, Haynesville, Fayetteville and Marcellus plays. This has led a number of E&P companies to accumulate large shale acreages in countries beyond North America, where they expect a similar rush for shale gas development in the future, as has been observed in North America recently. Acreage valuations in such countries are currently much lower.
During the period 2009-March 2013, the average acreage multiple for gas shale deals in North America was around $6,717 an acre, which is very high compared with the acreage multiple of other countries, such as Argentina, Australia, Brazil and Poland. During the same period, the estimated average acreage multiple for deals involving shale gas assets in Poland, Australia and Argentina amounted to $26.88, $112.80 and $367.42 an acre respectively.
Reducing reliance on imports
Dependence on natural gas imports has prompted a number of countries to take steps to encourage the development of their domestic shale gas resources. In Europe, natural gas consumption has been increasing over the past few years, as a result of the increasing preference for natural gas over fossil fuels. In the present scenario, shale gas resources and development can be considered a key source of natural gas in Europe. If shale gas resources were to be exploited economically, it would enable Europe to reduce natural gas imports from Russia.
In Poland, natural gas imports accounted for around 83% of total natural gas consumption in 2011. That year, Poland imported approximately 417.64 billion cubic feet (bcf) of natural gas, while natural gas consumption amounted to around 503.17bcf. According to the Polish Geological Institute (PGI), the amount of recoverable shale gas in Poland amounts to an estimated 67,756.8bcf. Higher estimates for recoverable shale gas resources in Poland varied from 12,210.34 – 27,102.72bcf. According to PGI, shale gas resources are estimated to be around five times more prevalent than the conventional gas resources, which amount to an estimated 5,117.05bcf. It is expected that shale gas, along with conventional gas, could meet natural gas demand in Poland for a period of between 35 and 65 years.
With the E&P activities for shale gas resources under way in Argentina, the country will be able to reduce its natural gas imports from Bolivia. Between 2007 and 2011, natural gas imports in Argentina increased at an average annual growth rate of around 37.63%. In 2007, natural gas imports in Argentina were estimated at around 59.33bcf, and increased to around 267.33bcf in 2011. Most of the natural gas imports come via pipeline from Bolivia. With the development of gas shale, Argentina will be able to reduce its dependence on Bolivian imports.
Government incentives
In several countries across the world, governments have initiated schemes for the development of shale gas. In Argentina, the government’s Gas Plus programme was introduced to encourage companies to carry out shale gas exploration and development. The programme is a financial incentive for oil and gas companies, allowing them to charge higher prices for natural gas than the government-regulated prices. It was initiated in 2008 in response to a natural gas shortage in the country.
In South Africa, the government decided to lift the moratorium imposed on hydraulic fracturing or fracking. The moratorium was imposed in April 2011 owing to the rising concerns of environmentalists regarding this controversial process. In light of the study carried out by the Department of Mineral Resources (DMR) task team, the South African Government decided to lift the moratorium in order to tap the gas shale resources located in the Karoo region. The study conducted by DMR suggested that hydraulic fracturing activities to develop gas shale resources were safe for the environment.
In August 2011, Germany’s Federal Environment Agency implemented new mining laws, including guidelines regarding the environmental impact of each well drilled. The laws also include a provision of banning fracking activities in areas where such activity could pose a threat to drinkable water. Recently, the German Government has drafted regulations to allow hydraulic fracturing in order to encourage gas shale development in the country. According to Natural Gas Europe, the new legislation emphasises the restriction of hydraulic fracturing in drinking-water-protection areas, and will make environmental assessment compulsory for operators planning to implement the process.