Saturday, October 10, 2009
Is Natural Gas the New Oil?
There have been a number of stories over the past week about the growth potential of natural gas in the US. The optimism over supply has resulted from the application of a technique which fractures natural gas bearing shale rock. The fracturing process involves pumping fluids at high pressure into wells to break the reservoir rock and permit natural gas to flow which would otherwise never move across the tight formation to the well.
The fracturing ("fracing") of tight shale formations is now being investigated for use in Europe and other areas outside the US.
Estimates as to how much additional natural gas can be extracted using such techniques vary extremely widely. Some say that natural gas could become an increasing alternative transport fuel to liquid hydrocarbons (crude oil) in certain applications and certain regions of the world for several decades. Natural gas may also increasingly displace solid hydrocarbons (coal) as a baseload (running all the time) electrical power generation fuel.
What is certain is that the industry is in a state of flux which could turn the oil and gas industry upside down over the next 10 years.
In fact, there is a now frantic effort bubbling to the surface in the US to try to avert a natural gas crisis due to prolonged oversupply and low prices. The effort is focussing on expanding alternative uses for natural gas and if possible linking natural gas prices to liquid hydrocarbon (crude oil) prices which are expected to trend higher due to global supply constaints.