Technologies developed in the USA have become so valuable, European firms are investing in US companies just to learn how it’s done. I am talking about the mapping, horizontal drilling and fracturing of gas bearing shale rocks that has opened up vast reserves of natural gas in North America and, it is hoped, will do the same in Europe and elsewhere. Geologists have known for decades about gas bearing shale but firms have lacked the expertise to commercially develop them. Only in recent years, have techniques been developed in Texas, Oklahoma and Pennsylvania to successfully exploit these vast reserves. The resulting increase in natural gas supplies has contributed to the current glut in the US market and low prices. Europe of course has a different problem. With low and dwindling supplies of its own, the continent is heavily dependent on Russian supplies which have proved anything but reliable particularly when the Russian authorities use supply as a commercial and potentially political weapon.
The Telegraph newspaper today made an extraordinary statement that illustrates the excitement in the industry “..As for the US, we may soon be looking at an era when shale gas, wind and solar power, combined with a smarter grid and a switch to electric cars returns the country to near energy self-sufficiency. This has currency implications. If you strip out the energy deficit, America’s vaulting savings rate may soon bring the current account back into surplus and that is going to come at somebody else’s expense, chiefly Japan, Germany and, up to a point, China”. Well we will see but make a diference it already has, LNG imports from Qatar and Trinidad have dropped to virtually zero this year.
Manwhile European oil companies are rapidly getting in on the act. ENI paid $280m in May for a stake in the 13,000 acre field near Fort Worth owned by Quicksilver Resources and Norwegian oil and gas giant StatoilHydro has spent $3.9bn buying a stake in Chesapeake Energy’s Marcellus shale holdings. The two companies are going global looking for reserves in China, India, Australia and elsewhere in addition to Statoil’s home turf.
The resulting drilling activity will be a boon for land based drill rig manufacturers at a time when most of the news was about major deep-water offshore finds. The supply chain for specialist drill equipment will also see increased demand, an area where US manufacturing still leads the world.
Estimates of how much gas and how many fields may justify exploration are still hazy but talk of a 20% increase in global reserves seems conservative as the US has already seen a 40% increase according to the NY Times. For developing countries struggling to reduce their dependency on highly polluting coal fired power stations these developments are almost too good to be true. For once environmentalists and oil industry executives will be hoping for the same result, now wouldn’t that be a turn up for the books!