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UFRGSMUN | UFRGS Model United NationsISSN: 2318-3195 | v.2, 2014| p. 377-408

SHALE GAS REVOLUTION?

André França1 Katiele Menger2

ABSTRACT

The outstanding growth on the exploration of shale gas in the United States in the last decade has generated a great buzz in the academy and in the media. The debate has been multidisciplinary, covering environmental, eco-nomic, social and geopolitical aspects. This articles aims to present a panorama of all this facets of the debate on the viability of shale gas as an energy resource for the 21st century. In the first part of this article, we proceed with a historical track of the emergence of the shale gas industry in the US and a technical expla-nation of what constitutes this energy resource. In the next section, weanalyze the main points in the debate on shale, bringing considerations from the critics and supporters, offering arguments from multiples angles. This is a very divided conundrum, generally conducted by environmentalists (that tend to oppose shale gas) and energy industry associations (that generally support shale). Later, we proceed with a prospect of the Energy Information Administration of the United States on the possibilities of shale gas development worldwide and brief-ing on the framework of international regimes that have to be considered on this debate. Finally, we make a short consideration on the interest of each rep-resented on the simulation of the Ministerial Roundtable of the World Energy Council on the development of shale gas.

1 André França is a 7th semester International Relations undergraduation student at UFRGS and director of the WEC.2 Katiele Menger is a 4th semester International Relations undergraduation student at UFRGS and assistant director of the WEC.

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1 HISTORICAL BACKGROUND

1.1 GAS MARKET EVOLUTION3

For better understanding the impact of unconventional gas in the world supply market, it is essential to comprehend the history and trajectory of the gas industry, as one that is, and has always been, very different from oil (Stevens 2010).

Gas market used to be essentially a regional one. It was organized this way for a fundamental reason: the so-called ‘tyranny of distance’ (Stevens 2010). Given that gas is defined as a high-volume low-value commodity, its transport cost made gas commerce almost impracticable far off places. Because of costs in liquefaction, transportation by sea and regasification, natural gas trade is generally done by pipelines that cross neighboring countries, under long-term agreements negotiated bilaterally (Kropatcheva, 2013); making prices differ greatly from one region to another, and also making it hard to enforce a gas exporters unity4, like the Organization of the Petroleum Exporting Countries. Furthermore, there is a series of other constraints that have barred the full development of an international gas market. For instance, the necessity of large capital investment to build infrastructure, that made it hard for developing countries to integrate this market; and the domination of national markets by state owned companies, which worked in monopoly systems and hampered the developing of private companies and so the development of a diversified market (Stevens 2010).

In the 1990s, the challenge of improving gas market and turning it into an essential part of the world energy supply trades started to be overcame. Many technological advances in gas storage and transport made it possible for gas trade to start becoming an international one, not only regional anymore. As happened with oil, gas initiated its full development when its transport costs started to decline. When the constraints related to natural gas exploration, production and especially its exportation began to be reduced; demand for gas arisen. Together with it, rose the speculation over the future of gas market and its growing share in energy supply market, which was reinforced by its advantages as an energy supply: the intrinsic properties of natural gas make it a cleaner fuel compared to coal and crude oil.

3 Following Stevens (2010), unconventional gas can be defined as resources that, after the initial well has been drilled, require further processing before it can flow, whereas conventional gas requires no such processing and flows naturally.4 There is no organization of gas exporting countries that could maintain gas prices high by controlling the supply, like OPEC for oil exporters. There is only a Gas Exporting Countries Forum, whose main objectives are exchanging information about gas exploration and production for improving gas market, developing technologies, and assuring the sovereign rights of member countries over their natural gas resources.

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By importing LNG (liquefied natural gas), countries can improve the affordability, flexibility and security of their national energy diet while reducing their CO2 footprint (Chappin, Praet and Dijkema 2010).

Notwithstanding, despite the prospects of a huge development of gas market, in 2007 the conjuncture changed dramatically to a much more favorable for gas market development because of two main reasons: the global economic recession, which reduced gas demand, and the rise of unconventional gas production in the United States, that, by increasing the quantity of gas in the market, made its price go down.

Developments of unconventional gas in the United States, called the Shale Gas Revolution, caused, for some analysts, “huge investor uncertainties at all stages of gas value chain” (Stevens 2010, VII). However, for others, ”the opening of the Shale Gas reservoirs represents an important change that we view as positive for both the oil and gas industry and, consumers” (MLG Group 2012, 2). For now, one can only say that it is a consensus that unconventional gas will surely have many implications in the energy supply market.

1.2 WHAT IS SHALE GAS AND WHY ITS USE CONFIGURES A REVOLUTION?

Essentially, shale gas is the gas deposited inside shale rocks. Its relevance is based in two particular characters: it tends to overlie world’s conventional oil and gas reservoirs5, and it is an unconventional gas, which means that it has insufficient permeability to flow naturally to a wellbore, as happens with natural gas, therefore demanding a complex process for being extracted from rocks. Also, as will be further explained, shale gas is changing the world’s supply market configuration. Some countries that today really depend on oil and gas imports, like South Africa or Argentina, are facing the possibility of filling their energy needs with the exploration of their shale fields, and countries like United States are reducing their imports from the petroleum exporting countries, which are already searching new buyers. There are also other kinds of unconventional gases such as gas hydrates, coalbed methane, shallow biogenic gas and tight gas. More specifically, shale and tight gas development are influencing directly the whole energy supply market, due to their profitability and future prospects (SHALETEC).

Large scale exploration of shale gas in the last decade was enabled due to the improvement of two already existent techniques, hydraulic fracture (figure 1), or fracking, and horizontal drilling. None of those techniques is new, once both were developed more than fifty years ago. What really changed is that over the past ten

5 Stevens (2010) states that unconventional gas resources are estimated to be five times those of conventional gas.


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years, those techniques were really improved. Drilling efficiency was accelerated, what consequently made it possible to more gas supply at a lower cost per unit (Stevens 2010).

Image 1 - The geology of natural gas resources

Source: EIA 2011.

Horizontal drilling is a drilling process in which the well is turned horizontally at depth. It is normally used to extract energy from a source that itself runs horizontally, such as a layer of shale rock. When examining the differences between vertical wells and horizontal wells, it is easy to see that a horizontal well is able to reach a much wider area of rock and the natural gas that is trapped within the rock. Thus, a drilling company using the horizontal technique can reach more energy with fewer wells (Curtis 2011).And Hydraulic fracturing is the process of producing fractures in the rock formation. It is done by pumping large quantities of fluids, such as water, sand and certain chemicals, at high pressure down a wellbore and into the rock, for stimulating the flow of natural gas or oil, increasing the volumes that can be recovered (EnergyFromShale).

Nonetheless, it is important to consider that shale wells production depletes much faster than conventional gas wells, and thus more wells are required for extracting shale. However, the continual improvement of technology shows ”that producers have become increasingly successful in managing decline rates over the past few years and that they appear to have become better at softening the impact


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of decline rates as the hydraulic fracturing technology develops” (Stevens 2010 11).In addition, the environmental impacts of shale gas exploration should not

be disregarded. There are some concerns that must be taken into consideration: chemicals used in the hydraulic fracturing may contaminate water; fracking leads to physical effects that increase seismic activity; the land use requirement competes with densely populated areas. Also the emissions of carbon dioxide and methane are bigger when compared with the drilling for conventional gas (Stevens 2010), (IGU 2012), (Krupnick, Gordon, and Olmstead 2013).

Moreover, the development of shale gas exploration and production is quite different all over the world, and the main base of comparison until now comes from the United States’ exploring and producing system. Although the process of extracting shale may differ in some countries, the consequences of its exploration, or its role as a ‘game changer’ in energy supply market, are almost the same.

1.3 UNITED STATES AND THE SHALE GAS REVOLUTION: CAN IT BE SPREAD?

When considering whether shale gas revolution may spread to beyond the United States, it is required to comprehend the main factors that made the boom of shale gas start in the North American territory.

Some of the most important factors that settled the appropriate conjuncture for shale gas emergence in the United States are the ones that follow. First, the experience in drilling and its tough geological knowledge, since they started extracting gas and oil 150 years ago. Second, an act that, until 2002, provided a credit when there was a decline in oil price that could encourage investors’ migration for the cheaper sector to reduce the switch from unconventional gas to oil products when oil prices fell. Third, the population huge acceptance of the idea of exploring gas reserves, once there is the subsoil property rights by the landowner from which many can profit. Finally, a dynamic industry that responds to the needs of the operators, making the gas market to be constantly improved (Stevens 2010).

As stated by Wang and Krupnick (2013), a number of factors converged in the early 2000s to make it profitable for firms to produce large quantities of shale gas, but the most important factor was technology innovation, which was facilitated by government research and development programs, and private entrepreneurship that aimed to develop unconventional natural gas. Nevertheless, some of the key technologies, like hydraulic fracturing and horizontal drilling, were largely developed by the oil industry to explore and produce oil instead of unconventional natural gas.

From 2000 to 2009, United States shale gas production has leapt from 1% to 20% of its national energy production total. Also, “several analysts say that the


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[United States], or at least North America, [are] also likely to become energy self-sufficient in a couple of decades due to unconventional gas and oil’ (Vihma2013 3).

It is doubtful whether the same conditions may appear in other places, if the revolution has conditions to spread and under what other conditions it could be possible. Stevens (2010), when defining shale gas prospects outside the United States, points that:

In Western Europe, the prime targets (based upon geology) are Poland, Germany, Hungary, Romania, Turkey and the northwest of England. In particular, Exxon Mobil, Conoco-Phillips and Chevron have all signed or are negotiating exploration agreements for shale in the Lublin and Podlasie Basins in southeast Poland. In 2009, the industry and the German National Laboratory for Geosciences launched a research programme for gas shale in Europe (GASH) that aims to assess the volumes in place and the ability to produce them profitably in Western Europe. In Latin America much attention is being directed to Argentina and Chile. China and India have expressed strong interest in CBM given their extensive coal deposits, and China also appears interested in the potential of developing shale gas. In Canada, the National Energy Board believes there is potentially at least 1,000 tcf6 of shale gas to be found (5).

2 STATEMENT OF THE ISSUE

The recent developments of the shale gas industry in the United States led to an intense public debate on the various aspects of the so-called “Shale Gas Revolution”. With projected total reserves of 37 trillion cubic meters (tcm) of unconventional gas (which includes tight gas and coalbed methane) (International Energy Agency [IEA] 2011, 102), many have proclaimed the future energy independence of the United States. Positively, it would be based in a resource that, notwithstanding being a fossil fuel, is much less pollutant than oil and, specially, coal. The Energy Information Administration (EIA) of the American government foresees the beginning of natural gas net exports for the United States to happen within less than 15 years (2014, CP-9).

All of this led to much international attention by governments and energy industries all over the world. The perspective above mentioned is expected to change radically and quickly the energy market worldwide, with obvious effects on economics, geopolitics and more else. Not only the United States are expected to experience this shale gas boom, but also other countries with large shale deposits such as China, Argentina, Australia and Poland may have new and important roles on energy production (IEA, 2011). Briefly, shale and other unconventional gas resources are expected to be “game changers” domestically and internationally.

Controversies accumulate, nonetheless. Environmental, social and public

6 Trillion cubic feet, a commonly used measurement for gas.


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health viability is under scrutiny by researches affiliated to the academia, to NGOs, to industry associations and international organs, such as the World Energy Council. The results of these studies vary greatly and reflect a fight for public opinion endorsement or veto. Consensus is far from being reached.

The next sessions intend to analyze the main points of this debate, bringing considerations from the critics and supporters of the unconventional gas resources. Thus, it offers arguments from multiples angles to base the discussions of the Ministerial Roundtable of the World Energy Council.

2.1 GENERAL ASPECTS OF NATURAL GAS PRODUCTION AND SUPPLY

A critical aspect of natural gas production, for both conventional and unconventional sources, is the necessity of continuous expansion of the number of wells drilled in order to maintain the flow rate of gas. “Typically, the production from a new conventional gas well will decline by 25% to 40% in its first year” (Hughes 2011, 18). Also, a historical perspective of natural gas production shows that, even with an increased drilling activity, total production declines due to ever lower initial productivity of the wells. In the United States, production peaked in 1973, with 7,000 gas wells being drilled every year. In the 2006-2008 period, to reach a close volume to 1973’s production, four times more wells were drilled annually (Hughes 2011).

The law of diminishing returns generates ever-growing costs and demands constant infrastructure expansion. With a complex infrastructure 100% larger than in 1990, the United States production of natural gas achieved only a 21% increase in production (Hughes 2011).

Price and its volatility are key variables to determinate the commercial competitiveness of a product. Examined from the past, natural gas prices show extreme changes in short periods. Another important aspect of natural gas pricing is that, although world market integration has increased, it stills responds greatly to a regional logic, as it has already been exposed. Figure 3 demonstrates that, despite a general pattern of similar variation over time, prices differentiate greatly across the globe.

The EIA’s projection of steady future low prices of natural gas in the US and high prices abroad feeds the perspective of American producers taking the opportunity given by the spread between the domestic and international prices to boost exports. Nonetheless, the ignored price volatility represents a great financial risk for producers and there are doubts that the current prices are profitable (Hughes 2011, 19).


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Image 2 - Gas prices evolution in U.S., Europe and Asia

Source: Hughes 2011, 20

2.2 SHALE GAS PARTICULARITIES AND ISSUES

Generally, unconventional gas shows further technical difficulties compared to conventional sources. First, the decline rates of a shale gas well are typically higher, between 63% and 85% for the first year only (Hughes 2011). Even with productivity being high, depletion steeps production fast. So, relying on shale gas to expand natural gas production exacerbates the necessity of continuous and ever intensive drilling activity, accompanied by higher capital expenditure per well and need of expanding infrastructure. The cost of a shale gas well ranges from between US$ 2 million and US$ 10 million each, depending much of the geology of the play, the number of hydraulic fracturing and other technical considerations (Hughes 2011).

Furthermore, Hughes (2011) raises questions over the metrics used by most studies supporting what he calls the “shale gas panacea”. Most of it estimates unconventional resources and its recoverable fraction on an in situ basis, which means the total amount of a play. However, according to the author, two other


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metrics are fundamental in determining the viability of an energy resource: (i) the rate of energy supply – basically the rate of production of the resource; and (ii) the net energy yield – that is the difference between the energy input required in the production and the energy produced.

The focus of the analysis of Hughes (2011) is on the resource quality, instead of its volume. Shale plays are found in a variety of places around the world and with different sizes of reserves. A play with larger reserves does not imply, nevertheless, a more commercially rentable play. Within a play, the so-called sweet spots concentrate large volumes of gas in small areas and so, are where the most profitable wells can be drilled. Due to geological characteristics, a large play can have fewer sweets spot than a smaller one; and so, become less profitable. Furthermore, as the productivity in the sweet spots diminishes, production moves to regions with marginal or uneconomic production. The rate of energy supply and the net energy yield decreases. And more wells, at a higher cost, have to be drilled in order to maintain production (Hughes 2013, 50).

The figure 4, below, shows graphically the considerations above mentioned, considering the net energy produced, the concentration of resources, the difficulty of extraction and the price and technological limits in the exploitation of gas and oil resources.

Image 3 - The pyramid of oil and gas resource volume versus resource quality

Source: Hughes 2013, 37


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2.2.1. DemanD Dynamics of shale Gas

Higher production costs, caused by greater technical challenges in shale gas exploration, may undermine its viability. “In the United States, natural gas prices are projected to fall to US$ 4.63 per thousand cubic feet by 2015. By one estimate, however the spot gas price of shale gas should amount to US$ 7.5-8 per thousand cubic feet to recover the still cost extraction” (DELL 2010 apud KPMG 2011, 18). These prices in the United States are explained by the great expansion on drilling that happened during the 2006-2008 period coupled with an economic recession that resulted on less demand of energy. Reaching a price that balances the returns of the investments and the competitiveness of shale gas compared to other fuels is critical to its success, in the view of its supporters and critics (Hughes 2011; KPMG 2011; Muller and Muller 2013).

Expanding the demand side becomes essential to shale gas producers. Government support through public policies is essential to enhance a transition to a natural gas-based energy mix. Also, its advantages as the least pollutant fossil fuel available could be explored to help bring down greenhouse gases (GHG) emissions turning it even more attractive. Demand expansion for natural gas would come, mainly, from two activities: electricity generation and transportation.

Today, burning coal is the main source of electricity generation worldwide, accounting for 41% of such amount. While shale gas carbon footprint in its generation is in the range of 423 to 535 g CO2e/kWh, coal emits 837 – 1130 g CO2e/kWh (MacKay and Stone 2013, 4). This has been the main appeal in favor of replacing coal-fired plant by gas-fired ones as a way to cut down carbon dioxide (CO2) emissions. Not only in many developing countries coal has a significant share in electricity generation, but also in the developed world: where nuclear plants have been shut down, coal is granting a greater weight. There has also in the United States a lobby for the government to stimulate natural gas-running vehicles production (starting by subsides for commercial fleets) and the refitting of older vehicles to start burning gas (Hughes 2011).

2.3 ENVIRONMENTAL RISKS RELATED TO SHALE GAS EXPLORATION AND INDUSTRY’S REPONSES

Much has been discussed about the environmental risks related to shale gas exploration through articles and news on the main newspapers and TV channels around the globe, even by the Oscar-nominated documentary, GasLand. Public concern with water contamination, seismic activity and other issues led to a moratoria on shale gas production on the states of New York and Pennsylvania (United States), in the province of Quebec (Canada), in South Africa, Bulgaria and France (The Royal Society and The Royal Academy of Engineering 2012). National and international


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authorities on energy, NGOs, the academia and the gas industry promptly entered in the discussion not only to satisfy public questioning, but also to elaborate general measures aiming at creating sustainability criteria to unconventional gas production. Reports by a variety of sources show a large consensus on the recommendations to shale gas industry for granting public support through the diminishing the environmental impact of its activity (The Royal Society and The Royal Academy of Engineering 2012; IEA 2012; Muller and Muller 2013; Shell Oil 2011). The Golden Rules for a Golden Age of Gas 2012 report by the International Energy Agency (IEA) is the main document concerning this matter, having inspired the European Commission Recommendation on the minimum principles for hydraulic fracturing (Collet 2014).

The wide geographical distribution of unconventional resources deposits and the difficulties of extracting them explain much of the potentially larger impact of these operations. Drilling is more invasive and more wells are necessary per area than in conventional gas fields7. The highest level of depletion also contributes to demand a more intensive drilling activity when compared to conventional natural gas. Unconventional developments, thus, tend to be extended across larger geographic areas, demanding a much larger scale and resulting in larger industrial footprints, such as roads, truck traffic, air emissions and sound pollution (IEA 2012; Hughes 2013).

The core of most criticism in relation to environmental impacts of the shale gas industry is water, particularly the contamination of aquifers and other underground water reservoirs. This specific subject has dominated much of the public debate in all countries with perspectives of exploring shale gas, leading France to ban hydraulic fracking inside its borders. Environmentalists worry that ground water could be contaminated by leakages of methane from fracking, passing though poorly done cementing jobs on wells and arriving to the aquifers, making it improper for human consume. The US Environmental Protection Agency reported a case of a drinking water supply contaminated by hydraulic fracturing in Pavillion, Wyoming (DiGiulio et al 2011 apud The Royal Society and The Royal Academy of Engineering 2012). Some experts state, nonetheless, that this risk is minimum as shale gas formations are 3,000 to 4,500 meters underground, while aquifers are usually 300 meters underground, making a leakage through the rock unlikely (International Gas Union [IGU] 2012). Yet, these risks could be even lower by assuring the use of best practices in well design and construction to ensure proper stress resistance of the seal and by a systematic verification of its quality (IEA 2012).

Contamination of surface water could also happen due to improper disposal of toxic fluids from hydraulic fracturing, including radioactive elements. The fluid pumped in the shale at high pressure is a mixture of water and chemicals additives, in the production phase called completion. A large part of it then returns to the surface

7 “Whereas onshore conventional field require less than one well per ten square kilometers, unconventional fields might need more than one well per square kilometer” (IEA 2012, 19).


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and can be recycled, disposed or reutilized. The contamination of surface reservoirs by wastewater and spills has been pointed out as one of the main preoccupations by experts in government, industry, universities and NGOs, showing a high degree of consensus among them. Still, much the attention of the public debate is not centered in this matter (Krupnick, Gordon and Olmstead 2013).

The consumption of water, as well, is another critical point: between 2 million and 8 million gallons per well are used (Hughes 2011). The production of shale gas could lead to competition for such resources with other activities in the same region, such as agriculture. This way, water availability can be a great constraint for shale gas activity. The Tarim Basin in the Xinjiang Uyghur Autonomous Region holds some of China’s largest shale deposits, but also suffers from severe water scarcity (IEA 2012, 32). Thus, development of shale gas in China has been focused in other regions. Alternatives to the usage of fresh water, nonetheless, have been raised by the industry. Hydrocarbon-based fracturing fluids, such as propane, can eliminate the water from the fracking process (IEA 2012, 32). Deep brines – salty water – wells at shallow depths are found in virtually all shale gas regions for its typical geological formation and can be a – sometimes even cheaper – source of water (Muller and Muller 2013, 6-7).

Cases of seismic activity associated with unconventional gas production have been reported, such as the Cuadrilla shale gas operations in Blackpool, United Kingdom, and in Youngstown. Seismic events are inherent to hydraulic fracturing, as it creates cracks in rocks deep beneath the surface. Most of these go totally unnoticed by the local population because of their low intensity. Greater shocks occur when fracking intersects and reactivates existing faults, though. Hydraulic fracturing is not the only anthropogenic process that can trigger small earthquakes: deeps mining, construction of large building or damns, and most activities involving altering the underground. A previous careful survey of the geology of the area to be explored can avoid enhanced risks, nevertheless (IEA 2012).

The application of these precautionary measures impact the overall cost of production of shale gas. The IEA (2012, 56), based on the Golden Rules elaborated by the organ, estimates a total 7% raise in the cost of drilling and completing a shale gas well with this. Due to the necessary large scale implied in the Golden Rules Case (better explored in session 2.4.), the relative costs of production are expected to diminish because of economies of scale. Further efficiency savings from better, long term planning of the production have the potential to reach approximately 5%. (IEA 2012, 60).

2.3.1 Unconventional Gas, GreenhoUse Gases emissions anD Global WarminG

The substitution of coal-fired electricity generation plants by gas-fired ones has been lobbied as one way to reduce the global CO2 emissions. In fact, a comparison


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between the most efficient current generation technologies for coal- and gas-fired plants shows that emissions can be reduced from 1.82 pounds of CO2 per kWh to 0,8 pounds of CO2/kWh with this change (Hughes 2011). Yet, these statistics consider the burner-tip emissions of those plants and not the entire supply chain of electricity generation for both sources, which should include one sensitive aspects of shale that is methane emission. Methane has between 72 and 105 times the Global Warning Potential (GWP) of CO2 as greenhouse gas (Howarth et. al 2011 apud Hughes 2011).

Howarth et al (2011 apud HUGHES 2011) proposes the consideration of the full-cycle GHG emission for a better understanding of the impacts of this substitution on the electricity generation fleet. Because of the differences on the composition of coal and shale gas, Howarth et al. concludes that on a 20-year time frame basis, the best-in-class gas technology fueled by shale gas would produce between 21% and 52% more emissions than best-in-class coal technology, according to the GWP criteria used. As time goes by, though, this difference get smaller, until, after a 50- to 60-year time frame, total emissions by coal overtake those of shale gas. On a 100-year time frame, the best-technology coal emits 32% more than its gas equivalent (Howarth et al. 2011 apud Hughes, 2011). This trend is explained by a much shorter lifetime of methane in relation to carbon dioxide coupled with much stronger GWP of the first.

If Howarth et al. (2011)’ statistics are to be considered – there has been harsh criticism to his studies by authors such as Richard and Elizabeth Muller (2013, 8) – promoting shale gas as “bridge fuel” to a future of renewables, while using a less pollutant fossil fuel, would actually be totally counterproductive. On the medium-term, emissions would grow and so would global temperature.

International Energy Agency’s projected 2035 scenario of a boom on shale gas production foresees a growth of 20% in energy-related emissions – though being 0.5% lower than the 2035 baseline project –, but it considers only carbon dioxide emissions. Nonetheless, the report is clear in stating that promoting “a greater role for natural gas in the global energy mix does not bring environmental benefits where it substitutes for other fossil fuels, natural gas cannot on its own provide the answer to the challenge of climate change” (EIA 2012, 93). Promoting natural gas should be only a part of a wider energy policy that seeks greater energy efficiency with widespread application of technologies such as carbon capture and storage and more.

2.4 A SUCCESSFUL FUTURE SCENARIO FOR UNCONVENTIONAL GAS

On the Golden Rules for a Golden Age of Gas report of the International Energy Agency (2012), a hypothetical scenario for 2035 is projected in which, with appliance of the golden rules, the level of environmental performance and public


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acceptance certifies the shale gas industry with a “social license to operate”. This scenario, called the Golden Rules Case, assumes that the entire resource base for unconventional gas – estimated by IEA in 331 trillion cubic meters, of which 208 tcm are of shale gas – is accessible for development, including where restrictions are currently in place. This session briefs the International Energy Agency projections.

On the demand side of the Golden Rules, natural gas is expected to overtake coal as the second most important fuel in the energy mix, accounting for one-third of the increase in primary demands. China will lead this growth (representing more than the growth of all the OECD countries put together), sustaining a leading role in the Asia-Pacific region both in the demand and supply sides.

The expansion of unconventional gas production in North America could make the United States takes the place of Russia as largest gas producers, with 820 billions of cubic meters (bcm) and 785 bcm of total gas production in 2035 respectively. Canada and Mexico would contribute with more 740 bcm to the North American total, even though the regions share in the unconventional gas market would fall to 45% in 2035 – compared to 70% today.

The Asia-Pacific region has great potential for expansion. In the Golden Rules Case, China becomes the second-largest producer of unconventional gas, after the United States, with 390 bcm in 2035. The domestic supply of unconventional gas in India reaches 90 bcm in the same year, while Indonesian production has a potential to rise to 55 bcm. Australia, with large amount of both conventional and unconventional gas, produces 170 bcm of gas – 65% coming from the latter (IEA, 2012).

In Latin America, the largest potentials for unconventional gas development are in Argentina (with a large base of shale gas), followed by Venezuela (tight gas) and Brazil (for shale). Of a total 70 bcm domestic production of gas, Argentinian shale would represent 50% of it, much coming from the Vaca Muerta formation. The ample Venezuelan and Brazilian conventional resources are expected to delay a significant production of unconventional gas in these countries. Peru and Bolivia, however, could produce 5 bcm each; Paraguay and Uruguay 3 bcm each in 2035 (IEA 2012).

Unconventional gas production in the European Union could moderate its decaying natural gas production and import dependence. Poland could reach a 34 bcm production in 2035 (90% of it from unconventional sources), while total OECD European countries production would fall from 2010’s 304 bcm total to 285 bcm (IEA 2012, 81-87).

This worldwide expansion of natural gas markets creates strategic challenges to today monopolistic suppliers, such as Russia and Qatar. Production in Russia, for instance, is expected to grow by 20% compared to 2010 numbers; still, these are below the foreseen levels by Russian companies’ outlook for 2035 (IEA 2012, 83). A boom in the production of conventional gas coupled with growing domestic demand is expected to be experienced in Africa, from Nigeria to Angola


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and Mozambique. In North Africa, nonetheless, a slightly significant share of gas production is expected to come from unconventional source, reaching 8% of the domestic output in Algeria.

3 PREVIOUS INTERNATIONAL ACTIONS

Due to the novelty of the subject, the exploitation of shale resources has not yet been a topic of intergovernmental discussion on the main international forums. The International Energy Agency and the World Energy Council have been somewhat active in the recent years on the discussion, producing reports, issuing statements etc. International industry foundations, such as the International Gas Union, also have been responsible for some important studies in the area. Nonetheless, the debate on the viability of the exploitation of shale gas is tied to some larger international commitments related to, for instance, the protection of water reservoirs and the control of greenhouse gas emissions.

One of the provisions under article 2 of the Kyoto Protocol (United Nations 1998) is the “(viii) [l]imitation and/or reduction of methane emissions through recovery and use in waste management, as well as in the production, transport and distribution of energy”. This is directly related to the above mentioned controversy on whether shale gas helps or not softening the effects of climate change. The same article, under the seventh clause, calls for the implementation of “measures to limit and/or reduce emissions of greenhouse gases not controlled by the Montreal Protocol in the transport sector”, one of the sectors which the lobbyists of natural gas in the US say is promising for the future.

The international commitments with respect of water are stated under the Protocol on Water and Health of the 1992 Convention on the Protection and Use of Transboundary Water Courses and International Lakes. The terms of this agreement are the ones that better address the worries about shale gas. Article 4, clause c, states the need to ensure “[e]ffective protection of water resources used as sources of drinking water, and their related water ecosystems, from pollution from other causes, including agriculture, industry and other discharges and emissions of hazardous substances”. Article 5, clause a, though strictly related to water-related diseases, could be a precedent approach to the uncertainties of shale gas exploitation:

The precautionary principle, by virtue of which action to prevent, control or reduce water-related disease shall not be postponed on the ground that scientific research has not fully proved a causal link between the factor at which such action is aimed, on the one hand, and the potential contribution of that factor to the prevalence of water-related disease and/or transboundary impacts, on the other hand (United Nations 1999).


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On the regional level, The European Union’s “Recommendation on minimum principles for the exploration and production of hydrocarbons (such as shale gas) using high-volume hydraulic fracturing” is the most advanced framework until now. Approved in January 2014, it delivers its member states a general guideline on fracking, demanding previous environmental and geological risk assessments, water management plans, widespread monitoring of all possible impacts and public transparency. Due to opposition of some governments, especially from the United Kingdom (Krukowska and Bakhsh 2014), the final document does not bind and leaves the regulatory activity to national governments.

4 BLOC POSITIONS

Image 4 - Technically Recoverable Shale Gas Reserves by Country

Elaborated by the authors, with data from EIA (2013). The countries that are not displayed on


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the graphic above are considered to have no considerable reserves, or are currently developing researches in the area to estimate them.

North America is the most advanced region in the exploitation of shale gas and oil reserves. Canada and the United States hold the largest experience in this new market of unconventional gas. The prospects of a production boom projects a future scenario where the two countries, along with Mexico, will become net exporters of natural gas. With lower costs, North American LNG could be sold to the Asian and European markets, affecting pricing worldwide.

United States of America is the leading country in the development of shale gas and shale oil industry in the globe. Though it has not the largest reserves discovered to date – with 665 tcf of technically recoverable gas, the US ranks fourth in the world (EIA 2013, 10) – the country has the most consolidated experience in the exploitation of shale8. In 2010, shale gas accounted for over 20% of its natural gas production (Stevens 2012); and by 2018, it should become a net exporter of gas (EIA2014, CP-9). This fact is expected to change not only the global market of natural gas, with its various economic impacts, but also the international politics and geopolitics of energy. It would represent less dependence on the Middle East and Africa for its imports of energy, the possibility of (at least partially) replacing traditional suppliers in the Asian and European markets and creating new interdependent relations with them.

Canada is another shale gas rich country, with 2,413tcf of in-place reserves, 773 tcf of which are technically recoverable (EIA2013)9. Shale gas is already in advanced stages of development, accounting for 15% of all Canadian natural gas production – the third largest in the world (Chong and Simikian 2014). As demand for imports of gas decline in the US, Canada has been looking to develop new markets, with special attention to Asia – where prices are high and Canadian LNG could be more competitive. Then, several companies have already announced plans of investing in liquefaction plants in order to export shale gas production (Chong and Simikian 2014).

Mexico has great potential of profiting from its shale gas reserves of 2,233 tcf (in-situ), located along the Gulf of Mexico. The 545 tcf of technically recoverable

8 Strong controversies not only on the prognostics of shale oil reserves, but also on the reliability of the IEA, have surfaced after an announced two thirds write down in total American shale reserves in a report still to be released by the agency (Sahagun 2014).9 A report by the Canadian parliament, and based on its national Geological Survey, estimates the national reserves of shale gas in 4,995 tcf (Chong and Simikian 2014); largely surpassing the projections made by the Energy Information Admnistration of the United States. Nonetheless, the report states that, in many basins, industry claims of shale gas reserves have not been independently verified by public authorities.


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reserves of unconventional gas is potentially larger than its conventional resources. The first initiatives on the Mexican shale industry date to 2011, while PEMEX, the national oil company, foresees the beginning of the commercialization of this resource by 2015 (EIA 2013, II-2). The development of a domestic shale gas and shale oil market in the USA poses a threat to Mexican exports of energy; and so, PEMEX is looking forward to attend the European market (Harrup 2014).

Due to its dependence in imports of natural gas from Russia, the debate on the possibility of reproducing the success in the development of the shale gas industry has been especially strong in Europe. Though dependence on Russian gas varies a lot from country to country, there has already been a movement to diversify the suppliers of natural gas for Europe. Leaked documents have shown that the European Union has been pressing the American government to expand shale production in the negotiations for the Transatlantic Trade and Investment Partnership (TTIP) trade deal (Carter and Sheppard 2014). In addition, further developing the indigenous shale gas industry, which is still at early stage, could enhance energy security of these countries. There is not a consensus within the European Union about profiting or not from the opportunity of developing shale resources (Florette 2012). Nevertheless, as above mentioned, a general framework for the EU has been approved sooner this year.

Poland is the country with the greatest potential of shale resources in the European Union due to favorable infrastructure, public support and an experienced industry of onshore conventional gas and oil, as well as coalbed methane – another unconventional gas source. EIA reports a total in-situ reserve of 763 tcf, being 148 tcf of it considered technically recoverable (EIA 2013, 1-7). Besides being at an early phase, the exploration of shale plays has been considered “disappointing” so far in Poland. In 2012, ExxonMobil abandoned its activities in the country after drilling the first wells; other companies, such as Marathon, Talisman, ConocoPhillips and Chevron, have been cautious because of poor results from this first initiatives (EIA 2013, VIII-3,4). The Energy Information Administration (US) point to the need of better geological studies to locate the best areas for drilling and successfully implementing hydraulic fracturing programs. Interestingly, despite the interest of many western European countries of diminishing the dependence on the Russian through Polish shale, 25% of all the shale gas permits issued were conceded to Russian companies (World Energy Council 2012, 9).

France falls short, with 727 tcf of in-situ and 137 tcf of recoverable shale gas in its territory. Nonetheless, public aversion to the development of shale industry is especially high among the French. The worries about environmental impacts led to a prohibition of hydraulic fracturing by the national government in 2011 (Baudet 2013). Most industry representatives argue that this decision impedes their activity in the country (Collet 2014). Some politicians, such as the Minister of Industrial


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Renewal, have stressed the importance of researching alternatives to hydraulic fracturing, stating their support to methods still being developed as the propane injection (Khalatbari 2014).

With in-place reserves of 134 tcf of shale gas, the United Kingdom ranks second in the European Union in terms of advance and support of shale resources industry. With substantial 26 tcf of technically recoverable gas (EIA 2013, 1-7), the British industry is still beginning its development; it has already been under public scrutiny, nonetheless. After reported seismic activity following the hydraulic fracturing of wells by Cuadrilla in early 2011, government suspended activities for 18 months for further considerations (EIA 2013, XI-8).

Germany is one of the countries that presented the strongest public debates on shale industry, mostly focused on the environmental impacts. Fracking has been used for over 50 years in the country, with no sound opposition until the beginning of the debate on shale gas. In 2013, the federal government decided to suspend the submission to the Bundestag, until the September elections, of a draft law for regulation on hydraulic fracturing, which would demand large protection of water reservoirs and the need of environmental impacts assessment (Vetter 2013). About only 12% of all natural gas consumed in Germany comes from national resources, with large dependence on the Russians. With 80 tcf of in-place shale gas reserves – about 17 tcf of it are technically recoverable (EIA 2013, 1-7), industrials claim that shale could halt the decline on national gas production, increasing energy security and lowering costs to an economy with large need of energy to its strong industrial sector (Eckert 2014). The national government faces a challenge to ensure energy supply after the decision of shutting down all nuclear power plants until 2022, following the disaster of Fukushima in 2011.

Denmark is one very special case. As the other Scandinavian countries, it is known for being ecologically avant-garde, with plans to have a 100% clean energy mix in the energy and transportation sectors by 2050 (Becker and Verner 2014). Due to controversies on shale gas exploration, the Danish government has been precautions in developing its 32 tcf technically recoverable reserves out of a total 159 tcf of in-place reserves (EIA 2013, 1-7). It has issued permits for the local subsidiary of Total to conduct research surveys and test drillings to check economic viability. The results of these activities are expected to be the basis for a future policy towards shale gas (Becker and Verner 2014 23). Shale gas could deter natural gas production decline from North Sea, which granted for long independence of gas imports.

Although there are some uncertainties about the estimates, there is a strong potential for shale gas development in the Netherlands. Its shale reserves are estimated in 26tcf of recoverable areas and 151tcf of proven gas reserves (EIA 2013). In 2011, some test wells were planned to be drilled, but due to public resistance, and some political and economic matters, it was stopped. Up to now, the drilling of


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shale wells has been suspended, and it will not be allowed until a study promoted by the government, on the possible risks and effects of exploration of shale gas, is concluded (de Rijke, 2014).

Italy has no considerable shale reserves (EIA 2013), and there is little investment on investigations about the country’s unconventional gas potential (Natural Gas Europe 2013). This lack of governmental interest on shale, verified by declarations that Italy will not develop shale production, is explained by environmental concerns and the attention given to conventional hydrocarbons production (Moloney 2013).

Russian Federation’s shale reserves are especially large – 1,920 tcf of in-situ gas, being 285 tcf technically recoverable (EIA 2013). Russia has been for long time the major producer and exporter of natural gas. Its energy power plays an important role as material basis for its strong foreign policy. Thus, the future development of shale gas in other countries, enhancing global competition on the natural gas market by LNG exports, possibly affects Russian economic and political strength (Kropatcheva 2014). Growing costs for the exploration of conventional resources, nonetheless, made Russian companies pay more attention to shale resources. Rosfnet signed agreements with ExxonMobil and Statoil to use horizontal drilling and hydraulic fracturing in Russian basins (EIA 2013) and Gazprom assumed the possibility of buying American gas firms as a way to access technology in shale gas exploration (The Moscow Times, 2010).

Algeria is a major gas exporter, and its economy is extremely dependent on the profits from gas selling; however, its local demand is increasing in a way it will interfere in the exports. Therefore, extra gas reserves would enable its prominence in gas market to keep fueling the country’s development (AfDB report 2013). Algeria owns 3,419tcf of proven gas reserves and 707tcf of recoverable areas (after China and Argentina, it is the third biggest technically recoverable shale gas reserve in the world), and has already signed exploration agreements with some companies. However, there are many concerns over the increasing of shale exploration in the country. The fracking process demands a huge water supply, and the use of this scarce resource should not harm some sectors, like the agriculture. Also, Algeria does not yet have experience with the regulations and monitoring that are required in the fracking process, which are really important for making sure it will not cause environmental problems (AfDB report 2013).

For South Africa, development of shale gas could be a game changer for the economy, given that more than 70% of the country’s energy supplies come from coal, and it has almost no production of gas. The country has the eighth biggest reserve of technically recoverable shale gas resources in the world, with 1,559tcfproven gas reserves and 390tcfof recoverable areas. However, the reserves are believed to be spread over a geographical area, much of it is desert, and water shortages would be a major constraint (AfDB report 2013, p 15). The shale gas exploration is in process


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of regularization, as South Africa’s cabinet proposed new technical regulations to govern petroleum exploration, particularly standards for shale gas exploration and hydraulic fracturing, and they are about to be released (EIA 2013, p 8; SouthAfrica.info), what will lead shale gas exploration in the country to begin.

Although Nigeria does not have shale gas reserves, it is the largest oil producer in Africa, holding the largest natural gas reserves on the continent, and was the world’s fourth leading exporter of liquefied natural gas (LNG) in 2012. Given it, the country’s importance on the topic lies on its dependence on natural gas and oil exports, whose prices may decline if shale takes its share in the global supply market. United States and South Africa, Nigeria’s important gas and oil buyers, are between the countries that have the biggest shale reserves in the world. If the shale exploration develops around the world, and increases in its commerce partners, the country will have to be prepared for the impact it may lead to its economy.

China accounts for the biggest shale reserves in the world, with 4,746tcf of reserves in place and 1,115tcf of technically recoverable areas, and is the only country, besides US and Canada, that produces shale gas in commercial quantities (EIA 2013). China is turning its investments in gas industry, once it is a way to decrease the air pollution caused by coal burning. The government believes in a wide development of shale industry in the country, and plans to considerable increase its production. Sinopec, a state owned company, plays the principal role in shale extraction. However, the process is still been improved, and China’s biggest challenge is technological, once it lacks the necessary personnel and equipment to exploit its shale gas reserves on a large scale (Tomsen and Davies 2013). Given this necessity, China and the US started, in 2009, the US-China Shale Gas Resource Initiative - a joint effort to enhance investment and technical cooperation aimed at accelerating shale gas development in China (JES 2013).

India and Indonesia, both having the greatest shale reserves in Asia (the first with 584 tcf of shale reserves in place and with 96 tcf of recoverable areas, and the former with 303 tcf of shale in place and with 46 tcf of recoverable areas, following EIA) are likely to emerge just behind China as major shale gas players in the coming decades, but both face similar or greater obstacles to reach that point (Tomsen and Davies 2013). They need technology for extracting shale, and lack infrastructure for distributing the gas when extracted. Indonesia, as an archipelago, presents unique obstacles to developing the distribution networks necessary for large-scale shale gas production (Tomsen and Davies 2013). Also, their water resources are scarce, and there are some predictions that they will decrease in the next years, what poses a question about the viability of hydraulic fracking. Nonetheless, in spite of all those difficulties, India has interest in developing shale industry. The Oil and Natural Gas Corporation (ONGC), an Indian public enterprise, has already drilled a shale well and plans to dig 30 shale gas exploratory wells across the country. These explorations


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are expected to be carried out in alliance with ConocoPhilips, a US-based oil company that is leader in shale gas and deep-water exploration.

The Islamic Republic of Pakistan faces problems with supplying its energy demand. Even though the country produces gas and oil, it depends on imports for fuelling its local needs. Pakistan has 586 tcf proven shale gas reserves, and 105tcf of recoverable areas, but lacks capital and technology domain to start the exploration (EIA 2013). Recently, the Petroleum Ministry implemented a Shale Gas Policy that regulates exploratory licenses, and now plans to allow foreign companies for exploring some areas (Williams 2013).

Israel has no reported shale gas reserves. Nonetheless, important offshore natural gas reserves have been recently discovered in the Mediterranean Sea. These could change Israeli position in the energy market, from energy imports dependent to a major exporter of natural gas to Turkey, Egypt and even Palestine (Alray, 2014; Ayyub, 2014; Mitnick, 2014). The findings have set a dispute with Lebanon, as the Lebanese authorities affirm that activities the Leviathan and Tamar basins affect its resources located offshore (Aziz, 2013). Part of the resources are also found under Gaza Strip’s maritime territory, but Israeli naval force currently control the Palestinian coast (Ahmed, 2014).

Turkey has considerable shale gas reserves, 163tcf risked gas in place and 24tcf of technically recoverable areas according to an IEA (2013) estimative. A state owned company and other private companies already started exploring shale, but the country lacks technology and information about shale extraction, so there is a need to establish cooperation agreements with countries such as the USA that can share their knowledge in this area. A Turkish committee has already visited those countries and some wells are been drilled in a partnership with a company from US and one from Canada (Natural Gas Asia 2013). It is also uncertain whether the exploitation of shale gas can be profitable, but given the country dependence on energy importing, it could be a way of filling the country’s energy demand for a period of time. Also, the lack of a legislation regarding shale extraction raises environmental concerns, once there is no regulation on the process (Natural Gas Europe 2013).

Argentina has the second largest in-place shale gas reserves in the world, with most of its 3,211 tcf located in the Neuquen basin, bordering the Andes. Important exploration programs are being implemented and early-stage commercial production is already underway in this basin by companies such as ExxonMobil, Total and YPF, aiming at profiting 802 tcf of technically recoverable gas in the country (EIA 2013, V-2). Three other basins in the Argentinian territory show potential for prospection, but Neuquen “already a major oil and gas production area from conventional and tight sandstones, (…) is emerging as the premier shale gas and shale oil development area of South America” (EIA 2013, V-5). YPF, the Argentinian state oil company, has announced joint investments in drilling of $1 billion with Chevron and $1.5 billion


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with CNOOC, a Chinese state oil firm (EIA 2013, V-13). Many other companies are also drilling in Neuquen. With large conventional and unconventional reserves, Argentina emerges as a probable mass exporter of gas, with large potential markets in the region, such as Chile and Brazil.

With 1,279tcf of shale reserves in place, and 245tcf of technically recoverable areas, Brazil shows up as the 10th country with the biggest shale reserves in the world (IEA 2013). The country’s state owned company, Petrobras, controls almost all the shale exploration in the country, which occurs in small scale. Studies are been conducted by Petrobras agency that explores shale gas, and the country is taking part in Venezuela’s recent shale exploration. Furthermore, Brazil’s National Petroleum Agency (ANP) issued fracking regulations, stating that fracking must not harm the environment, and announced several new regulations to ensure groundwater sources are protected (ANP 2014).

Bolivia is a great natural gas exporter, and the development of shale exploration around the world, principally in Brazil and Argentina, its major buyers, could really affect its share in the energy supply market. Bolivia accounts with 154tcf of shale reserves in place, and 36tcf of technically recoverable areas, however, there is no short-term perspective on exploring it. The government just considered that future developments of shale industry need to be preceded by responsible evaluation, and is closing partnerships with Argentinean companies to start researches on its shale fields (LA RAZÓN 2013).

Colombia, which already exploits heavy oil reserves, has potential shale reserves of 308 tcf of in-place gas, being 55 tcf recoverable (EIA 2013). The commercial exploration of its shale fields is under studies by the government, which is also conducting the elaboration of the licenses and determining the regulation to shale gas production in the country.

Paraguay has the 4th biggest shale reserve in South America, with 350 risked gas in place and 75tcf of technically recoverable areas (EIA 2013). Its reserves are located in the South Cone, the area of the greatest South America reserves. Paraguay has no natural gas production or significant proved reserves, than the development of shale industry could fundamentally change the domestic energy outlook in Paraguay. Also, Petropar, a state owned company, and private companies have ratified intent to produce shale gas in the southeastern region of the nation(Lavaller 2012).

Japan has very limited domestic energy resources, which meet less than 15% of its internal demand. The country is the third largest oil consumer and importer of the world, and is the world’s largest importer of liquefied natural gas (EIA 2013). Its major importers are Southeast Asia countries and Middle East oil and gas producer countries. Recently, Japan closed a deal involving American and Japanese companies, where they settled that Japan will receive large supplies of low-priced natural gas starting in 2017 (REUTERS 2014). Also, in the beginning of the year,


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Japan Petroleum Exploration Co (Japex), a private Japanese company, started the country’s first commercial shale production and intends to increase it, although there are no public estimative of Japan shale resources.

Just like Japan, South Korea domestic resources are insufficient, and do not meet the countries internal demand. Energy imports meet about 97% of its energy needs, making South Korea one of the world’s biggest energy importers (EIA 2014). However, it seeks to be part of world’s energy supply market, and if they cannot as a producer, they can as an investor. As a country that leads the world’s high-tech development, it closed partnerships in LNG development projects with Uzbekistan, Turkmenistan and Indonesia (NATURAL GAS ASIA 2014). In addition, SK E&S, South Korea’s third biggest conglomerate, concluded a contract with Freeport LNG in United States, where it is stated that they will import large quantities of shale from US, starting in 2020.

As world’s major petroleum and natural gas exporters, and as members of OPEC, Iran, Iraq, Qatar and Saudi Arabia represent the countries whose economy relies on energy sector. Therise of US production and exports can change the share of global supply market, and may force them to lower their prices. However, they are already searching for alternatives, and some of them have shale reserves that can be explored in long-term.

For Iran, US shale gas industry is hampering the development of the Iran-Pakistan-India (IPI) gas pipeline. With US shale gas competitive prices, both countries are considering to buy gas from US and do not move along with the gas partnership with Iran (Dipaola and Tuttle).

Iraq is one of the world’s largest oil producers, and it may benefit from joining pipeline projects and investment agreements in its prominent oil industry. Furthermore, in the Iraqi Kurdistan, the region where a big part of the oil reserves is located, there are also significant shale fields that have not yet been exploited. The Kurdish Regional Government, that took control of the northern part of Iraq after Saddam Hussein’s fall, has shown interest in conducting studies on the shale reserves and exploring them (TAHA 2013).

Studies on Kazakhstan shale gas potential have not yet been conducted, so it cannot be affirmed whether the country has or not shale reserves (EIA 2013). However, it is important to consider that Russia’s largest shale reserve is located right above Kazakhstan’s northern border, so probably it has considerable shale fields, as cam be seen in EIA’s map of world’s shale reserves (EIA 2013). In addition, the country is a major petroleum producer and exporter, whose share on the world’s energy supply market is increasing (Alexander’s Gas and Oil, 2006).

Qatar, as stated by Oxford Business Group (2013), is investing in shale-related projects in North America and elsewhere to help maintain its position as one of the top players in the global gas market.


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The world’s biggest oil producer, Saudi Arabia has, as stated by The Saudi Minister of Petroleum and Mineral Resources, estimates of over 600 tcf of unconventional gas reserves, more than double of its proven conventional reserves. But many of the factors that made the shale gas boom in US possible are still lacking in Saudi Arabia. However, the kingdom aims to invest in shale development in long term (Reuters 2013), andRussia’s Lukoil is already discussing a deal with SaudiArabiato exploit unconventional gas deposits in the kingdom’s desert region (Natural Gas Asia 2014).

The importance of Syria in the topic is not directly related to its shale reserves, once, according to EIA (2014), the country has only considerable shale oil resources that are not already been fully explored. Then, its relevance is based on a geopolitical question. Syriais going through a hard period, once a series of conflicts between government and opposition forces are happening. Also, some sanctions were imposed by European Union and United States, what further damaged the country’s energy sector (EIA 2014). However, Syrian and Russian government closed a deal allowing exploration and drilling off the Syrian coast, that has up to 122 tcf of natural gas reserves. This deal puts Russia, which has enormous shale reserves, in an important position in the Eastern Mediterranean energy supply market (Natural Gas Europe 2014).

With 57tcf of reserves in place, and 128tcf of technically recoverable areas, Ukraine has Europe’s third largest shale gas reserves (EIA 2013). The country relies on imports from Russia for fueling its gas demand. However, according to Reuters (2013), Ukraine signed a $10 billion shale gas production-sharing agreement with Royal Dutch Shell and later with U.S. Chevron, what can be seen as step in a drive for more energy independence from Russia. For now, the territorial divisions and the unstable period that the country is passing through hampers the full exploration of the countries shale reserves, once many of the conflicts take place in locals were they are located (W. Lijdsman, 5). However, the president stated that the agreements with foreign companies would enable Ukraine to be full sufficient in gas by 2020 (Reuters 2013).

5 QUESTIONS TO PONDER

1. Considering the broader global needs for energy transition, could shale gas be a “bridge fuel” option to a future cleaner energy mix?2. Is shale gas exploitation suitable to every country or region in the world? Under which social, economic and environmental conditions should it be or should it not be developed?3. What advantages and disadvantages would shale gas bring to the energy


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markets? Would it weaken the current oligopoly and boost competition, lowering prices? Or could it be a factor of destabilization?

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SHALE GAS REVOLUTION? - UFRGS · objectives are exchanging information about gas exploration and production for improving gas market, ... Large scale exploration of shale gas in the