Six Reasons the U.S. Shale Revolution Can’t Be Duplicated

David Fessler By David Fessler
Energy and Infrastructure Strategist

Oil & Gas

The development of unconventional shale resources has turned the U.S. from a natural gas importer into a natural gas exporter in just a decade.

And it’s all thanks to horizontal drilling and hydraulic fracking technology.

Back in 2005, U.S. natural gas production averaged about 47 billion cubic feet per day (Bcf/d). This year, daily production will likely be around 81.2 Bcf/d.

Today, unconventional shale gas is about 60% of U.S. production. We have so much natural gas that we’ll soon be the world’s largest exporter of liquefied natural gas (LNG).

Other places, like Argentina, China, Great Britain, Poland and Russia, have significant deposits of shale gas. But don’t expect any of them to frack their way into a natural gas boom…

There are half a dozen reasons why no other country would be able to duplicate the U.S.’s success story.

Let’s take a look…

1. Advanced Technology

Subsurface geology is more extensively mapped in the U.S. than it is in just about any other country. Advanced 3-D seismic mapping is commonplace here.

The technology to do advanced 3-D mapping lies with U.S. companies. Most are so busy here that they would have to stretch their resources to expand into another country.

The U.S. was so good at finding natural gas that it developed a glut. But that’s spawned an entirely new industry of LNG exports.

2. Rules and Regulations

The regulatory framework in the U.S. allows drillers to experiment with and develop directional drilling and hydraulic fracturing.

In other countries, hydrocarbon pricing is specified in contracts. The government tells developers what costs they are allowed to recover.

The problem is these contracts are designed for conventional fossil fuel production. The traditional production-sharing contract just doesn’t work for unconventional shale.

3. Property Rights

In the U.S., individual landowners don’t own just the surface of their land… they own the mineral rights below the surface. So they can lease them to a shale gas developer.

In most other nations, the government owns the mineral rights below the surface. Contractual rights for subsurface minerals don’t exist in many countries around the world.

4. Infrastructure

The U.S. has one of the top natural gas upstream, midstream and downstream infrastructure systems in the world.

No matter where natural gas is found, pipelines in the U.S. can gather it, send it to processing plants and pass it along to transmission lines. They then send it to distribution and export terminals.

China has unconventional shale gas deposits nearly as large as those in the U.S. But they will be developed slowly since China lacks the pipeline infrastructure to move the natural gas to cities.

5. Water

In order to frack an unconventional well, drillers inject water, chemicals and sand under high pressure.

For a well with a 10,000-foot lateral, up to 4 million gallons of water are needed. At the end of the process, gas pressure forces the water – now laced with radioactive elements and additional pollutants – up and out of the well.

The water has to be there in the first place to use. Additionally, it has to be treated and transported to the next well.

In places like China, water is scarce. Much of China’s unconventional gas is located in areas with almost no access to water.

6. Expertise

Finally, geologists are in high demand in the U.S., and they generally focus on one formation.

In order to develop unconventional resources elsewhere, U.S. fracking experts would have to leave their jobs here… and that’s just not going to happen.

The bottom line is the U.S. will remain the No. 1 natural gas producer in the world for the foreseeable future.

That’s good news for our economy and good news for shareholders of U.S. natural gas producers and exporters.

Good investing,

Dave