Energy Ink

ExxonMobil sees growing role for shale gas

30 per cent of global gas demand will be met by shale by 2040, firm says

December 09, 2011

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Where will the shale gas story go from here? The answer to that question is beginning to depend, now more than ever, on whom you ask. If, for instance, you query Rex Tillerson, the chief executive of ExxonMobil Corp., you would be told that gas is a versatile and competitive alternative to coal for electricity generation, and that a world eager to slash carbon dioxide emissions will increasingly come to rely on the stuff. That, at least, is the view expressed in Exxon’s just-released Outlook for Energy: A View to 2040.

Exxon sees unconventional gas – from shale and other rock formations – growing to capture a 30 per cent market share globally by 2040, up from just 10 per cent in 2010. By 2025, the Irving, Texas-based firm predicts gas will have replaced coal as the world’s fuel of choice. Fifteen per cent of global gas demand will be met by liquefied natural gas by 2040, Exxon estimates.

None of this will surprise industry watchers. Exxon, as we’ve seen, has joined other supermajors and invested heavily to become a central figure in North America’s shale gas saga. The brains at Exxon see shale gas spreading globally, from its North American cradle to Asia-Pacific countries, Latin America and Europe in the coming decades. Even there, though, the company is cautious, noting in its outlook that there are few guarantees that horizontal drilling and hydraulic fracturing “will be applied as successfully outside of the United States.”

That view is bolstered by Ernst & Young, which said this week that shale gas will be slower to catch on in European countries compared to North America. Analyst John Avaldsnes noted in a statement that although exploration is underway in places like Austria, Germany, Hungary, and the United Kingdom, only a “fraction” of the resource is likely to be produced at commercial rates. He added that half of all estimated European reserves (which account for 10 per cent of the global share) are in two countries. One is Poland, which has attracted interest from international firms (among them Exxon and Calgary-based Talisman Energy Inc.) as an emerging shale frontier.

The other is France, which voted to outlaw fracking last summer. “There are some difficult challenges that the industry needs to address,” Avaldsnes said in a statement. “There appears to be no consensus across Europe on shale gas development and government attitudes vary, in some cases markedly. Public opinion on the issue is similarly divided, adding to pressure on governments to take action to either support or restrict shale gas development with most countries adopting a ‘wait and see’ attitude.”

The optics involved in large-scale drilling operations also carry the potential of limiting both the pace and level of development. The U.S. Environmental Protection Agency, in draft findings released yesterday linking contaminated groundwater in Pavillion, Wyoming, to shallow (not shale) gas wells operated by Calgary-based Encana Corp., was careful to distinguish the case as an isolated incident, Nathan Vanderklippe reports at the Globe and Mail. Encana disputes the EPA findings. Yet, as the EPA noted, the Pavillion episode supports earlier recommendations made by the agency to the U.S. Department of Energy “on the need for collection of baseline data, greater transparency on chemical composition of hydraulic fracturing fluids, and greater emphasis on well construction and integrity requirements and testing.”

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