Wood Mackenzie says unlocking the estimated 280 trillion cubic feet (tcf) of unconventional gas resource in Europe, India and China poses a huge infrastructure and logistical challenge, and in contrast to the impact of unconventional gas in North America markets, this significant gas resource will have an incremental affect on the global gas markets rather than a disruptive one, particularly over the next 15 years.
Wood Mackenzie's latest report 'The Potential Impact of Global Unconventional Gas Growth' assesses the impact should China, India and Europe realize their full unconventional gas production potential – which could be between 140 and 290 billion cubic meters (bcm) per annum by 2030 - on the global gas market. The report outlines the logistical, regulatory and geological uncertainties they face, concluding that there would be a slow ramp up to this level of production, which reflects the time it would take to overcome the challenges in establishing and developing large-scale unconventional projects in these areas.
Stephen O'Rourke, Senior Analyst for Wood Mackenzie's Global Gas research service explained, "We estimate that these major and growing gas importers have enough unconventional gas production potential to meet, in aggregate, over 20% of demand in their own markets by 2030. However, our analysis suggests that this unconventional gas resource would have an incremental impact on global gas pricing, rather than a disruptive change.
"In the Pacific basin, higher unconventional production in China and India would not be a zero sum game. If unconventional production in these countries fulfills its potential, which we forecast could be 230 bcm by 2030, we forecast that up to 50 bcm of LNG could be displaced from China and India by 2030. However, in reducing the weighted average cost of gas it would also generate additional demand." O'Rourke continued, "Additional Chinese and Indian unconventional gas would reduce the requirement for LNG in the Pacific basin in the longer term and increase LNG availability to the Atlantic. However, the Pacific would still require LNG volumes from the Middle East and Atlantic to meet demand through the forecast period."
Wood Mackenzie believes that for Europe to meet its potential, a fall in development costs is necessary, O'Rourke expanded, "The resulting increase in higher indigenous unconventional supply - which could be by as much as 60 bcm per annum in 2030 - combined with the increased availability of LNG to the Atlantic from the Pacific market could place pressure on the major piped importers to Europe, with Russia particularly affected. This resulting supply pressure could result in reduced spot price both in Europe and in the Pacific, but not until after 2025."
The report concludes that fundamentally, any substantial production from untapped unconventional resources will require three things: the commerciality of the resource to be established, the development of a strong supply chain, and the implementation of a clear regulatory framework.
"In a scenario where China, India and Europe meet their full production potential, we assume that they have successfully proven the geology, and acquired the strong supply chain and clear regulatory framework necessary to support the intensive development required in large-scale unconventional projects," O'Rourke continued.
As an example, O'Rourke illustrates the challenges Europe would have to overcome, "Meeting its full potential would require in excess of 170 rigs active and drilling 2,700 wells a year by 2030. Presently there are only two hydraulic fracturing crews active in Europe."
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