10 May 2011 23:58 [Source: ICIS news]
Kevin Swift, chief economist at the American Chemistry Council (ACC), told an industry conference that in his meetings with other chemical sector economists, analysts and top executives, “all I hear is shale gas, shale gas, shale gas!”
“Although I hate to use the term, it really is a game-changer,” Swift said, referring to the rapid development of natural gas resources from deep rock formations that, just a few years ago, were considered cost-prohibitive.
Advances in horizontal drilling and hydraulic fracturing (“fracking”) have greatly expanded the amount of recoverable natural gas resources from shale fields (known as plays) that criss-cross the US, from the eastern seaboard, to the southwest and into mid-continent states.
Once providing only a few percentage points of US natural gas supply, shale-derived gas now represents fully one-third of US current natgas production, and it is expected to expand further in the near term.
Natural gas, and particularly the natural gas liquids (NGLs) found in most gas outputs, is a key feedstock and energy fuel for the
“Just a few years ago, people were talking about the
“People said that
“When we met with our energy colleagues back then, it was thought that meaningful shale gas development was, like the promise of solar and high-efficiency batteries, many years away, not feasible now but down the road, maybe,” he said.
Increasing US domestic demand for natural gas, in part driven by federal government policies, combined with diminishing supply from mature conventional onshore gas wells, drove gas prices to record highs in 2005-2006, Swift said, noting that in 2005 the US lost about 40% of its fertiliser production capacity and 40% of its chlorine production because of the price crunch.
The double hurricane hits of Katrina and Rita on the US Gulf coast in 2005 briefly drove spot prices for natgas to almost $15/m Btu, helping to push the full-year average price to more than $7 (€4.9), he said.
“And the market worked, the market responded, and more and more drilling was done as a consequence,” he said. “Improving technology and a price point met, and the market responded - it’s exciting stuff.”
“Now, in less than two years, the
With that price range set against $100/bbl oil prices of late, the
That feedstock price advantage is likely to persist for a while, Swift said, perhaps for five years or more.
He noted that while neither he nor the ACC engages in price forecasting, he has run the numbers provided by energy sector analysts’ outlooks for shale gas production and gas pricing.
“It turns out that every time you double shale gas production, gas prices go down by about 30%,” he said. “This could go on, or there could be something happen that could push the supply side down again.”
He noted that there are concerns that could affect gas supply, even amid the abundant new shale gas resources.
“Challenges remain,” he said, citing “environmental concerns over hydraulic fracturing, and pending legislation in Congress that may force utilities to retire many of their coal-fired power plants.”
Swift spoke at the Pittsburgh Chemical Day conference.($1 = €.70)?xml:namespace>
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