May 25, 2010

WHAT COMES AFTER HYPERPOWER?:

Shale gas will change the world (Gideon Rachman, May 24 2010, Financial Times)

It has long been known that the US is sitting on potentially huge supplies of unconventional shale gas. But until recently, these reserves were very hard to exploit. Now, however, technological breakthroughs mean that many of the economic and technical concerns about exploiting shale gas reserves are being dealt with. Over the past three years, American production has soared. This year, the US overtook Russia to become the world’s biggest gas producer for the first time in a decade.

The result is that the shipping terminals that the US built to receive liquid natural gas from overseas are now lying virtually empty. The rise of shale gas, which can be used to produce electricity, reduces dependence on domestically produced, but dirty, coal. If cars powered by electricity or gas improve, shale gas would also reduce reliance on Middle Eastern oil.

Both the EU and China are excited by the idea that they too may soon enjoy a shale gas bonanza. Chinese foreign policy has increasingly been driven by the need to secure energy supplies. But China looks as if it may have its own shale gas reserves, and has signed an agreement with the US to look into exploiting them.

The excitement in Europe is even more pronounced. Just as North Sea oil and gas supplies are running down, the British are hoping that they may discover exploitable supplies of shale gas in Wales and north-west England. The Poles, who have their own special reasons to fear energy dependence on Russia, also think they have exploitable reserves. Radek Sikorski, the Polish foreign minister, recently visited Houston to talk to the big US energy companies about shale gas.

Even if European reserves are not as promising as some hope, the EU still stands to benefit indirectly from American shale gas. Supplies of liquid natural gas from Africa and the Gulf, which might have gone to the US, are now being redirected to Europe – reducing the Union’s dependence on Russian gas.

Posted by Orrin Judd at May 25, 2010 6:07 AM
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