--By Sanjeev Sharma

 

As the world impatiently awaits next energy boom, United States, the world’s largest consumer of oil has changed its long-time image from biggest petroleum importer to net exporter. The data published by the International Energy Agency (IEA) on 11th October shows that US is set to be the world’s largest oil producer by next year, surpassing Russia. The Paris-based global energy watchdog in its latest report forecasted that the average US oil production will average 11 million barrels per day (bpd). According to IEA estimates, Russian oil production will average 10.86 million bpd in 2014. “With output of more than 10 million barrels per day for the last two quarters, its highest in decades, US is set to become the largest non OPEC liquids producer by the second quarter of 2014, overtaking Russia. And that’s not even counting biofuels and refinery gains,” the IEA projected. Meanwhile, China climbed up to the position of biggest oil importing nation.  

 

Thanks to the ongoing shale energy boom, the surging oil production transformed US into net exporter of petroleum. Looking a few years back the scenario was very different. It was until 2011 when US heavily relied on oil imports from gulf nations (mainly Saudi Arabia), South Americas and Africa to meet its energy demand. In 2011, US became the net exporter of gasoline, diesel and other bio fuels for the first time in 62 years. Shale fuel extraction done through hydraulic fracturing or ‘fracking’ process suddenly emerged as a major fruit bearing factor for the US economy. Neighbouring Canada also followed US, extracting significant amount of oil and gas through this unconventional extraction process. The Energy Information Administration (EIA), a US government agency on 23rd October published a report stating, “Shale gas as a share of total natural gas production in 2012 was 39 percent in the United States and 15 percent in Canada.” 

 

The report entitled “North America Leads the World in Production of Shale Gas” also informed about the shale energy exploration across the world. The report highlights the increasing number of countries with significant amount of shale oil and gas reserve.  EIA assessed 41 countries with recoverable shale oil and gas reserves. In 2011, the number of countries with shale fuel reserve was 32. EIA’s estimation of worldwide technically recoverable shale and gas also rose sharply. The agency’s worldwide shale oil estimation increased to 345 billion barrels in 2013, up more than 1,000 percent from 32 billion barrels in 2011. Similarly, EIA’s global shale gas amount estimate also rose to 7,299 trillion cubic feet from 6,622 trillion cubic feet in 2011. 

 

Started from oil rich states of US, Texas and North Dakota in early 2000’s, the extraction and exploration of shale fuel has now gone global. Governments across the world are mobilising their resources to find this organic fuel entrapped in the sedimentary rocks found beneath the earth’s surface. In Europe, the shale fuel exploration has gathered a swift momentum. Eastern Europe is said to have significant prospective shale oil and gas resources. The Carpathian Foreland basin in Bulgaria, Ukraine’s Dniepr-Donets basin and Moesian Platform of Romania are identified as the regions with substantial quantities of shale fuel in Europe. These three regions are estimated to be holding about 1.6 billion barrels of shale oil and 195 trillion cubic feet of shale gas.  Similarly, parts of Poland are also seen as potential reserves of commercially viable oil and gas. Another Eastern European country Estonia is also hopeful of finding huge amount of oil and gas as number of drilling projects continues throughout the nation. Northern Spain’s Basque-Cantabrian basin and the Ebro basin in the southeast region of the country were recently assessed with huge amount of fossil fuels. 

 

 

The United Kingdom ha also embarked on the journey to find the petroleum wealth. The cabinet of Prime Minister David Cameron in early September laid out plans to establish shale fuel industry. Despite heavy criticism and outcry by the ‘environmentalists’, the government lifted ban on fracking and drilling activities for oil and gas explorations. Cameron’s cabinet also announced tax breaks and other incentives to the shale project developers. Recently, it was projected that Blackpool, an area in northeast England holds 200 trillion cubic feet of shale gas beneath its surface. Similarly, a joint survey by the UK Department of Energy and Climate Change (DECC) and the British Geological Survey (BGS) in mid-2013 estimated that central England’s Bowland-Hodder basin may contain an eye-popping 1,300 trillion cubic feet of shale gas. As Bowland-Hodder basin is viewed as the largest natural gas reserve in the world, UK will enjoy its position as the biggest producer of shale gas if this estimation comes true. In mid-October, BGS was authorised by the UK parliament’s upper house to start work on estimating the quantity of shale gas deposits between Edinburgh and Glasgow. Denmark, The Netherlands, Czech Republic and Luxembourg are the other European nations who are trying to catch the race of oil and gas extraction hoping for a US-style shale fuel bonanza. The quickly depleting oil and gas deposits of the North Sea and Europe’s desire to end reliance on Russian gas supply seems to be the prime factor for shale fuel extraction push across the continent. Russia, the major exporter of gas to Europe has so far successfully managed to use gas supply as a diplomatic weapon. Russia in many occasions has halted the supply of gas towards Europe in an event of diplomatic relationship turbulence, leaving large part of the continent to freeze mainly during winter season. 

 

In Asia-Pacific region, shale fuel exploration activities are undergoing in a fast pace. China, after reaching the top spot as the world’s biggest oil importer is now looking to exploit all available resources to meet its vast energy demand. Earlier this year the Chinese government authorised energy companies to survey for shale oil reserve. According to the government plan, companies have started fracking and drilling 29 spots with potential oil and gas reserves across China. Though the size of shale fuel across China is still unclear, some rough estimation showed that the Asian giant is holding about 48 billion tonnes of shale oil in 47 shale basins. At the same time there are speculations that the actual shale resource may even exceed that of the US. Seeing this, another oil thirsty Asian nation, India also formally set out plans to exploit its potential shale resources. In late September, the Indian cabinet decided to allow state-owned and private energy companies to start drilling on different parts of the country. Various research and survey data suggest that six basins across India hold significant shale gas potential. The Assam-Arakan basin in North-East India, Cambay basin of the Gujrat, KG onshore in Andhra Pradesh, Gondawana basin in Central India, Cauvery onshore and Gangetic basins are the areas identified for shale oil and gas drilling. Earlier in 2013, EIA, the federal energy administration of US assumed that India ‘could be sitting on as much as 96 trillion cubic feet of recoverable shale gas reserves, equivalent to about 26 years of the country’s gas demand.’  Japan is also becoming active to extract the potential shale energy. Japan after closing its all nuclear plants, (followed by the Fukushima- Daiichi disaster in 2011 March) is facing a huge energy crisis. The country heavily relies on oil and gas imports which has contributed to the sky-rocketing of Japan’s import bills and has widened trade deficit to historic levels. In this context Japan is looking to extract shale oil and gas which will help the nation to narrow its trade deficit.  Similarly, other major economies of Asia-Pacific including South Korea, Indonesia, Malasiya, Vietnam and Australia are set to tap their shale petroleum resources. 

 

The ongoing shale boom has sent ripple wave in global energy market. The international cartel of petroleum producing nations, OPEC is the one likely to be most affected by this. The unconventional oil boom in North America has resulted in the rift and confusion among the OPEC members. A dispute was seen between Saudi Arabia and Nigeria about the issue to handle the rise of shale energy. In a meeting in June, Saudi Arabia, the world’s biggest producer of crude oil welcomed the US shale oil boom saying, ‘ the increase in supply could help stabilise the global oil market.’ However, OPEC’s smaller member Nigeria raised concerns stating, ‘shale oil and the increase in gas production is already affecting Nigeria’s exports to the US, hurting the country’s economy.’ In fact Nigeria was also raising concerns of OPEC’s small producers whose oil exports to US plummeted sharply after 2011. As the price of crude oil falls in the global market, the cartel’s smaller members such as Nigeria, Angola, Libya and Algeria are more vulnerable to economic shocks. While Saudi Arabia and Gulf nations have financial resources to cope with the falling oil prices, smaller members are more likely to face big difficulties to balance their national budgets. However, many experts are pointing to the possibilities of much large scale impacts to the cartel.  As the number of shale fuel producing countries grow, OPEC’s role in manipulating oil prices in global energy market may downsize accordingly. This may result in the decline of income of Saudi Arabia and other big producers within the cartel. 

 

Experts and economists are clearly pointing to the fact that shale oil and gas boom has not only economic but other implications to the new energy producers. “For four decades, the geopolitical leverage achieved by large petro-exporting states has been a major challenge for the US and its allies. Now, the rapid growth of oil and natural-gas production from unconventional shale resources in North America is rapidly eliminating this threat, with positive geopolitical implications for the US,” says Amy Myers Jaffe, the Executive Director of energy and sustainability at University of California.