Global shale gas options to delay Arctic energy action - US

19 October 2009 20:13  [Source: ICIS news]

WASHINGTON (ICIS news)--Increasing the development of vast new natural gas reserves from previously inaccessible shale rock formations poses a significant deterrence to costly exploration for gas in remote Arctic regions, the US Energy Department said on Monday.

The department’s Energy Information Administration (EIA) said in a new report that developments in production of shale gas resources in the US, Europe and elsewhere “could significantly defer the future development of Arctic natural gas resources”.

The administration said that while the Arctic region may hold about 22% of the world’s undiscovered oil and natural gas resources, logistical costs, sovereignty claims and environmental concerns may combine with the impact of new shale gas resources to make Arctic energy development less likely or subject to lengthy delays.

The availability and price of natural gas is of longstanding concern to US petrochemical producers and downstream chemical makers because they are heavily dependent on gas as a feedstock and power fuel.

In the report, “Arctic Oil and Natural Gas Potential”, the EIA said that technically recoverable oil and natural gas resources in the Arctic region could total 412bn barrels of oil equivalent.

However, as much as 78% of those energy resources are in the form of natural gas or natural gas liquids (NGL), and that in itself stands as an impediment to development, the administration said.

“The fact that the Arctic is particularly rich in natural gas and NGL may impede the exploitation of its resources, because the world’s natural gas consumers live far from the Arctic and the long-distance transportation of natural gas and NGL is considerably more expensive than oil due to the significantly lower energy density of these fuels relative to crude oil,” the EIA report noted.

The EIA is the department's data and analysis arm.

In addition, the administration said development of Arctic energy resources likely will be delayed by sovereignty claims among the nations whose boundaries encompass some parts of the Arctic region, such as Canada, Denmark (through Greenland), Finland, Iceland, Norway, Russia and the US.

But efforts to resolve those sovereignty issues and the environmental and infrastructure costs of developing Arctic oil and gas might be indefinitely postponed because of shale gas, the EIA said.

“The importance of Arctic oil and natural gas resources is likely to be affected by the growing realisation that shale beds in existing petroleum provinces around the world might be capable of producing 5,000 to 16,000 trillion cubic feet of natural gas,” the administration report concludes.

“This potentially large shale gas resource could significantly defer the future development of Arctic natural gas resources,” the report adds.

Consequently, “while the Arctic has the potential to be a more important source of global oil and natural gas production sometime in the future, the timing of a significant expansion in Arctic production is difficult to predict”, the report said.

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