The Economic and Budgetary Effects of Producing Oil and Natural Gas From Shale

[Excerpt] Recent advances in combining two drilling techniques, hydraulic fracturing and horizontal drilling, have allowed access to large deposits of shale resources—that is, crude oil and natural gas trapped in shale and certain other dense rock formations. As a result, the cost of that “tight oil” and “shale gas” has become competitive with the cost of oil and gas extracted from other sources. Virtually nonexistent a decade ago, the development of shale resources has boomed in the United States, producing about 3.5 million barrels of tight oil per day and about 9.5 trillion cubic feet (Tcf) of shale gas per year. Those amounts equal about 30 percent of U.S. production of liquid fuels (which include crude oil, biofuels, and natural gas liquids) and 40 percent of U.S. production of natural gas. Shale development has also affected the federal budget, chiefly by increasing tax revenues. The production of tight oil and shale gas will continue to grow over the next 10 years—by about 30 percent and about 60 percent, respectively, according to a recent projection by the Energy Information Administration (EIA). Another EIA estimate shows that the amount of tight oil and shale gas in the United States that could be extracted with today’s technology would satisfy domestic oil consumption at current rates for approximately 8 years and domestic gas consumption for 25

The Effects of Shale Gas Production on Natural Gas Prices

The Producer Price Index (PPI) for natural gas, measured on an annual average basis, fell 56.8 percent between 2007 and 2012, in response to strong growth in domestic energy production. The application of horizontal hydraulic fracturing (fracking) to shale rock formations contributed significantly to this increase in supply, as the technique boosted natural gas production yield by more than 25 percent over this period. Since shale gas has been a key player in domestic natural gas production for only a few years, and because it has been tracked over a relatively short period (since 2007) by the Energy Information Administration (EIA), analysts find that it is difficult to quantify precisely the effects that shale gas has had on natural gas prices. However, data indicate that increasingly higher natural gas prices during the first half of 2008 lured additional shale gas to the market. As natural gas prices peaked in July 2008, drilling activity (as measured by rig counts) hit an all-time high.2 Eventually, effects of oversupply took hold

Examining the advocacy coalition framework for insight into shale gas development in US and UK political systems

Master's Project (M.S.) University of Alaska Fairbanks, 2014The project considers the Advocacy Coalition Framework from the discipline of policymaking which is used to examine contentious and politically complex policy issues, particularly in energy and environmental development and planning. Shale gas development in the United States has been noted for its dramatic economic and political effects, leading some countries to pursue development of their own shale resources. The United Kingdom's tentative steps into the industry have engendered efforts to understand American experiences and conceptualize how their own country may or may not accommodate such development. The project attempts to highlight the current or potential issues or benefits entering the discourse and extrapolate insights from the Advocacy Coalition Framework to enhance and inform shale gas development as a social issue in addition to existing as an economic or technological disruption. Thoughts on attitudes between disciplines tangent to shale gas development are also expressed

An adsorbed gas estimation model for shale gas reservoirs via statistical learning

Shale gas plays an important role in reducing pollution and adjusting the structure of world energy. Gas content estimation is particularly significant in shale gas resource evaluation. There exist various estimation methods, such as first principle methods and empirical models. However, resource evaluation presents many challenges, especially the insufficient accuracy of existing models and the high cost resulting from time-consuming adsorption experiments. In this research, a low-cost and high-accuracy model based on geological parameters is constructed through statistical learning methods to estimate adsorbed shale gas conten

In-situ laser retorting of oil shale

Oil shale formations are retorted in situ and gaseous hydrocarbon products are recovered by drilling two or more wells into an oil shale formation underneath the surface of the ground. A high energy laser beam is directed into the well and fractures the region of the shale formation. A compressed gas is forced into the well that supports combustion in the flame front ignited by the laser beam, thereby retorting the oil shale. Gaseous hydrocarbon products which permeate through the fractured region are recovered from one of the wells that were not exposed to the laser system

SHEER “smart” database: technical note

The SHEER database brings together a large amount of data of various types: interdisciplinary site data from seven independent episodes, research data and those for the project results dissemination process. This concerns mainly shale gas exploitation test sites, processing procedures, results of data interpretation and recommendations. The smart SHEER database harmonizes data from different fields (geophysical, geochemical, geological, technological, etc.), creates and provides access to an advanced database of case studies of environmental impact indicators associated with shale gas exploitation and exploration, which previously did not exist. A unique component of the SHEER database comes from the monitoring activity performed during the project in one active shale gas exploration and exploitation site at Wysin, Poland, which started from the pre-operational phase. The SHEER database is capable of the adoption of new data such as results of other Work Packages and has developed an over-arching structure for higher-level integration

Britain’s Shale Gas Zeal and Riches

The United Kingdom is considered to be shale gas rich with substantial volumes distributed both onshore and offshore. Recent technological development has made shale gas exploration commercially viable. The UK’s shale gas industry is at an early stage, with a few companies actively operating in this area and merely a few specific regulations exist for it. Many questions are waiting to be answered, many barriers must be overcome. This article analyses the UK’s current state of play for shale gas. First, background information and a brief description of shale gas hydraulic fracturing is given. Government and business points of view will be illustrated and analysed before offering an outlook

Economic impact analysis of natural gas development and the policy implications

In the US, the shale gas revolution ensured that the development costs of unconventional natural gas plummeted to the levels of $2–3/Mcf. This success has motivated the development of shale gas in other regions, including Australia and Europe. This study, focussing primarily on aspects of economic impact analysis, estimates the development costs of shale gas extraction in both Australia and Europe, based on both direct and fiscal costs, and also suggests policy initiatives. The increasing liquefied natural gas (LNG) developments in Australia are already straining domestic gas supplies. Hence, the development of more natural gas resources has been given a high priority. However, a majority of the Australian shale resources is non-marine in origin and significantly different to the marine-type shales in the US. In addition, the challenges of high development costs and the lack of infrastructure, service capacity and effective government policy are inhibiting shale gas development. Increasing the attractiveness of low risk investment by new, local, developers is critical for Australian shale gas success, which will simultaneously increase domestic gas security. In the European context, unconventional gas development will be challenged by direct, rather than fiscal costs. High direct costs will translate into average overall gas development costs over$13/Mcf, which is well over the existing market price

Should we extract the European shale gas? The effect of climate and financial constraints

URL des Documents de travail : http://centredeconomiesorbonne.univ-paris1.fr/documents-de-travail/Documents de travail du Centre d'Economie de la Sorbonne 2015.50 - ISSN : 1955-611XIn the context of the deep contrast between the shale gas boom in the United States and the recent ban by France of shale gas exploration, this paper explores whether climate policy justifies developing more shale gas, taking into account environmental damages, both local and global, and addresses the question of a potential arbitrage between shale gas development and the transition to clean energy. We construct a Hotelling-like model where electricity may be produced by three perfectly substitutable sources: an abundant dirty resource (coal), a non-renewable less polluting resource (shale gas), and an abundant clean resource (solar). The resources differ by their carbon contents and their unit costs. Fixed costs must be paid for shale gas exploration, and before solar production begins. Climate policy takes the form of a ceiling on atmospheric carbon concentration. We show that at the optimum tightening climate policy always leads to bringing forward the transition to clean energy. We determine conditions under which the quantity of shale gas extracted should increase or decrease as the ceiling is tightened. To address the question of the arbitrage between shale gas development and the transition to clean energy, we assume that the social planner has to comply to the climate constraint without increasing energy expenditures. We show that when the price elasticity of electricity demand is low, a binding financial constraint leads to an overinvestment in shale gas and postpones the switch to the clean backstop. We calibrate the model for Europe and determine whether shale gas should be extracted, depending on the magnitude of the local damage, as well as the potential extra amount of shale gas developed because of a financial constraint, and the cost of a moratorium on extraction