At one time when the U.S. was considered to become a major importer of natural gas, entrepreneurs experimented with technology to change the energy market in the U.S. and worldwide.
Shale gas development has provided an extraordinary change in the U.S. and global natural gas industry in the past 10 years. Authors Daniel Yergin and Samuel Andrus with IHS Markit have provided an interesting read in telling the story of the ‘Shale Gale’ over the past decade in the commentary, “The Shale Gale turns 10: A powerful wind at America’s back”.
With the decontrol of gas pricing in the 1970’s, drilling increased, causing an oversupply of natural gas. Moving into the new century, declining gas production brought higher gas prices and the concern of the U.S. becoming a major gas importer. Investments were made to build liquefied natural gas (LNG) terminals to plan for natural gas imports. While horizontal drilling and hydraulic fracturing technologies had been in use for years, high natural gas prices provided incentive for entrepreneurial producers to experiment with them in tandem. Their experimentation led to increased natural gas production and new regions to explore. In 2008, there was estimated to be 2,074 trillion cubic feet (Tcf) of recoverable natural gas resources in the U.S. In 2016, this was increased to 3,141 Tcf. In the ten-year time span between 2007 and 2017, natural gas production rose by 20.9 Bdf/d to 72.6 Bcf/d. The productivity of shale with advances in technology opened up new plays, not just in the southwest with the Barnett shale in Texas, but with the Haynesville in Louisiana, the Fayetteville in Arkansas, the Marcellus and Utica in the Appalachian region, the Bakkan in North Dakota, and now the Permian Basin in West Texas. Impacts could be seen on the power industry, the environment, manufacturing, oil and economics.
U.S. electric power generation had been dominated by coal, and investments in nuclear power plants came in the late 1970’s. By 2010, the abundance of cost competitive natural gas led to changes to natural gas power generation, and by 2016, natural gas overtook coal as the major power generation, supplying 34% of total electric generation. New power generation capacity is expected to come from new renewable and natural gas operations in the next decade, with natural gas anticipated to provide over half of all electricity generation by 2040.
In 2016, President Obama pledged that the U.S. would reduce total greenhouse gas emissions by 26-28% from the 2005 by 2025. From 2015 to 2016, there was a drop of 2.5%. The decline in greenhouse gas emissions from U.S. power plants alone was 24% from 2005 to 2016. The conversion to natural gas-powered plants was instrumental in contributing to this goal. Methane emissions from natural gas production has become a priority for industry to research and find the best means to decrease.
Manufacturing in the U.S. is making a comeback as an abundant and inexpensive fuel and feedstock has caused new investments in the petrochemical and other industrial operations. IHS Markit estimates that from 2010 to 2020, new capital investments of over $120 billion will be made to expand the petrochemical industry.
Abundant natural gas has changed the U.S. from a major importer to a major exporter. Imports from Canada decreased from 16% in 2005 to 7%. In 2018, the U.S. exported 4.4 Bcf/d to Mexico, almost half of Mexican natural gas needs. LNG plants that were to be receiving terminals were converted to LNG liquefaction export terminals. It is expected that by 2025, the U.S. will be one of the world’s largest exporters of LNG, shipping over 400 million metric tons per year.
The shale revolution has been one of the most beneficial developments since the 2008 financial crises, helping the economy in several ways. IHS Markit estimates that more than two million jobs supported the oil and gas development, generated over $75 billion in federal and state tax revenues and over $283 billion to the US GDP.