‘US shale gas story’ and Australian LNG revolutionising the global gas market: report

A world map of unconventional gas production around the world.

A world map of unconventional gas production around the world.

US shale gas and Australian coal bed methane are emerging on the global LNG market, causing a shift in the dynamics of the natural gas market, according to a study by the World Energy Council.

Titled Unconventional Gas, A Global Phenomenon, the study says the growing global supply of unconventional gas is being led by the US shale gas story, in particular.

Despite an uncertain price environment, the magnitude and speed of change brought on by shale gas is not only influencing the US market, but also markets like China, Argentina and Algeria that have similar potential as the US in shale gas production.

Countries such as Mexico, Saudi Arabia, South Africa, Poland and Turkey are also mentioned in the study has having significant potential for shale gas development. Australia has the seventh largest shale gas reserves, at 12.2 tcm.

Christoph Frei, Secretary General of the World Energy Council, said unconventional gas’s spread around the world is being accelerated because it makes gas more affordable to customers and reduces concerns about the security of supply.

“So far, the surprising resilience of the US shale gas market has led the way in the shale gas boom, and whilst other countries may not have the unique characteristics of the US, they will learn how to become LNG producers or exporters which will change the global dynamics of energy.”

With the accolade of being the world’s largest LNG export region at 86.5 Mt/a, Australia is one such country.

The study identified three emerging global trends in the gas market:

  • shifting portfolio allocations: current price uncertainties are forcing operators to shift their capital to more flexible, shorter-cycle investments rather than in deep well projects, a trend exemplified by the US
  • international growth of unconventional gas operators: new operators across the world are realising the global opportunities and bringing new supplies to the markets before 2020
  • interconnected markets: excess supplies in some countries have led to price normalisation and other structural shifts that are making the market more global and transparent across Asia, Europe and North America.

In addition, the study says continued growth in the US, China and Australia gas markets will significantly influence the global balance of supply and demand.

However, the report acknowledged that Australia’s projects have faced delays and cost overruns, and that there are risks regarding project valuations and the long-term commercial viability of Australian coal bed methane assets.

Another challenge that Australian LNG projects will have to keep front of mind is the lower cost of getting Russian supplies to European borders, the study adds.

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