Shale gas: what it is, how it is extracted, what are the advantages and problems

The rapid rise of shale gas as an alternative source of energy - widely debated by experts in the last decade - is gradually becoming the subject of public discussion, especially in our continent. A recent report by the Economist explains why shale gas (known internationally as shale gas) receives much attention from policy makers, investors and the general public. While leaving the technical contributions are particularly novel, the special offers us an effective summary of the latest developments in the commercialization of this fossil fuel, then offering an overview on the current juncture with openings on future scenarios. It is therefore a good starting point for those who want to be initiated at a non-conventional source which, according to many observers, is likely to establish itself as a game-changer in the international energy scene.

The revolutionary potential of shale gas has emerged very clearly in North America in the second half of the last decade. Its advent has given a turning point in the U.S. energy market. A number of factors and is difficult to reproduce the origin of this advent, beginning with broad access to capital and initiative entrepreneurial individuals. Fundamentals have also been advances in extraction techniques, such as hydraulic fracturing and horizontal drilling, which significantly reduce the break-even price (ie the price which makes profitable market the reserve). Some structural factors distinguishing the North American market have played a key role, including the previous liberalization of access to the network of gas pipelines and gas market already liquid and widely set spot prices. Geography also has done its part: the coincidence of the largest gas fields with lines of passage of gas pipelines, the proximity of the giant Marcellus field with the Atlantic coast and the low population density have made it easier extraction and distribution. Finally, a very favorable legislation that recognizes the owners of land ownership of all mineral resources of the subsoil has encouraged sales and accelerated exploitation. The absence of many of these factors in Europe makes it hard to transpose the experience overseas in the Old Continent. Yet the U.S. model is, in many ways, palatable.

First, following the boom in the extraction of shale gas, the price of gas in North America is literally collapsed - finally settling on 2-3 dollars per million BTU, which is the minimum of ten years. According to IHS Global Insight, this decrease would allow every American household to save an average of $ 926 per year. A fine analysis of the Economist is the knowledge of the importance of lowering gas prices for the revival of the competitiveness of important industries. In what seems to be an excess of enthusiasm, the British magazine goes so far as to suggest that the development of shale gas may be one of the keys to break the deadlock manufacturing. It is indeed undeniable that the American petrochemical industry, which hobbled for years, has finally been able to make use of feedstock cheap. The producers were able to free themselves from the naphtha, an oil derivative subject to the volatility of prices of black gold that used to dramatically reflected in the prices of final products. Whereas the petrochemicals supply other compartments crucial - from agricultural fertilizers to car serctor - the positive induced the collapse of gas prices is even greater extent than it seems at first sight. In this perspective, Pricewaterhouse Coopers has estimated that the direct and indirect effects of the shale revolution will create over a million jobs in the United States by 2025.

An even more significant effect of the advent of shale gas is the radical reduction of U.S. dependence on imported hydrocarbons. In a few years, large volumes of domestic gas at competitive prices have flooded the American market. An importer who had chronic, America may even become a net exporter of fossil fuels - which until five years ago would have provoked the laughter of any analyst with common sense. The repercussions of such a development on international relations could take a historical significance. According to some analysts, shale gas would allow the United States to disengage significantly from troubled regions such as the Middle East. If then also China avviasse extraction projects of their own (large) gas reserves of shale, will draw back the specter of the dreaded final battle for the Arab oil between Beijing and Washington. Although this is obviously very vague conjectures, it is clear that a greater energy self-sufficiency is within the U.S. strategic interests. As reported by the Economist, Obama has triumphantly declared in his last State of the Union speech that thanks to the shale gas his country now has reserves of gold blue for over a century.

The third important aspect of the shale revolution lies in the diversification of the energy mix. An increase in the proportion of gas in the range of primary sources is read in the opposite direction from different schools of thought. On the one hand, this development is considered positive by those who believe that the gas could act as a substitute for oil and coal - that generate greenhouse gas emissions much more. On the other hand, skeptics claim that as relatively clean, shale gas is still a polluting fuel, and they fear that his luck will outshine that of clean energy. From the observation of the dynamics seen in the American market, it seems indeed that the success of gas is going to the expense of coal (collapsed from 50% to 42% in the mix of sources used to produce electricity), but the concerns of the second school of thought are equally well founded. Another specific advantage of the gas is its flexibility. It can be easily used in home heating and industrial boilers, as well as raw material in some industrial sectors, and public transport, but mainly in the production of electricity with relatively low environmental costs due to technological advances such as the combined cycle.

Finally, another important consequence of recent events consisted the accentuation of the peculiarities of the American energy sector - including the liquidity and the prevalence of spot prices at the expense of indexation to oil prices, with the centrality of the benchmarks in the mechanisms of pricing. A model of this type is the opposite of the one dominant in continental Europe, characterized by long-term contracts and indexed to oil prices. A model centered on the American gas-to-gas competition would allow us to reduce the dependence on suppliers such as Gazprom and problematic changes in the price of crude oil. Europe could benefit from more flexible contracts with lower prices and purchase commitments of shorter duration, since the reduced dependence on non-European pipeline would make it less urgent the need for early investment and therefore long-term contracts with clauses disadvantageous as the take-or-pay (which bind us to pay a minimum amount of gas to our suppliers even if our demand is lower).

Yet Europe does not seem to want to follow America. France has already banned shale gas, followed this year by Bulgaria. Restrictive bills are under consideration in other European countries, and the skepticism seems to prevail even among the leaders of the main German Länder. Opposition to shale gas is prompted primarily by concerns about its danger to the environment. First, there are concerns that hydraulic fracturing would cause earthquakes, after Cuadrilla has actually had to suspend its activities for mining of strong tremors registered in England. Secondly, the extraction of shale gas is likely to be accompanied by substantial methane leaks, the volume of which was estimated from a study of Cornell University in more than double that produced by the extraction of conventional gas. The extraction of shale gas also implies higher emissions of carbon dioxide, and because we need more wells in conventional gas and because the hydraulic fracturing consumes a lot of energy. The main concerns, however, the relationship between shale gas and water resources. First, the hydraulic fracturing requires a massive use of water (about 22 million liters per well). Second, it is feared that the chemical additives used in the extraction might contaminate groundwater. Pressing environmental issues such as these are highly undervalued by the Economist reports. The reality is that - to date - no one knows how much shale gas is harmful to the environment. Nor any of its promoters nor his detractors have so far failed to demonstrate with sufficient certainty as sustainability or environmental unsustainability. And it is clear that the burden of proof lies with the producers.

The shale gas has many advantages, as taught by the American experience. It is undeniable that one of his advent in Europe would help to resolve the long standing problem of energy supply. The European sensibility for environmental issues, however, must be neither mocked nor branded as aversion to modernity. As there is some unanswered questions of environmental sustainability, must confront the issue without prejudice, but with caution.



Translated via software



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