London-based think tank.
The US has taken the lead in shale gas development both because of government policies favoring unconventional gas and the large reserves of such gas, the report said. Shale gas' share of total US production has risen from 1% in 2000 to 20% in 2009, the report added.
These gains in shale production have taken LNG investors by surprise, the study said, adding that market analysts had predicted that LNG would play an ever-greater role in international energy commerce, as rising demand for the fuel made ship-borne transportation more economical, leading to the development of a global gas market.
But the global economic downturn and the rise of shale gas production in the US has left much of the existing LNG infrastructure under-utilized, costing investors. Because of that, investors have been reluctant to provide money for LNG facilities until it is clear just how broad a role shale gas will play in the future.
"Because of the shale gas revolution there are now huge investor uncertainties at all stages of the gas value chain," the report said. "There are already signs of gas export projects being canceled or postponed," Chatham House said.
And any lack of investment now could mean tighter supply and higher gas prices in the future if the shale gas industry falls short of current expectations, the report said.
"Markets will eventually solve the problem as higher prices encourage a revival of investment, but given the very long lead times on most gas projects consumers could face high prices for a considerable time," it said.
The report raised several issues that could raise the likelihood that shale's impressive ascent might end in the US, and be difficult to replicate in Western Europe.
Among them are the fact that for more than 20 years, the US shale gas industry has benefited from a 53-cent/Mcf tax credit for alternative fuel production. But that credit ended in 2002.
Further, the report said the industry also is facing the prospect of tighter environmental restrictions on hydraulic fracturing, a process in which a mixture of chemicals and water is injected into the well to fracture the shale formation and allow the gas to flow upward.
The US Environmental Protection Agency is due to release a study in 2012 that examines the environmental effects of the practice and legislation has been introduced in the US Senate that would require producers to disclose more of the chemical constituents they use in their fracking mix, the report said.
Europe, meanwhile, lacks both the practical and policy advantages that have been key to the US industry's growth, the report said.
It said Europe is far more densely populated than the US and energy leases are generally smaller, while shale gas production requires more acreage than conventional production.
Technology used to produce onshore gas is less widely available in Europe, and public tolerance for proximity to oil production is lower, the organization said. In contract, the report said "it should be borne in mind that oil and gas operations are commonplace in the US and widely seen as 'normal' by local populations."
These factors contribute to the likelihood that the gas industry may be overestimating the future contributions of shale gas, the report said.
China Chemical Weekly: http://news.chemnet.com/en/detail-1411716.html
