EME 801
Energy Markets, Policy, and Regulation

The Shale Energy Revolution

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A good introduction to shale gas and hydraulic fracturing, including a map of shale energy (gas and oil) producing areas in the United States, can be found on the Energy Information Administration website. The article makes a distinction between “shale gas” and “tight gas.” This is something of an arbitrary classification, since most shale energy formations would be considered “tight” by geologists. (The term “tight” simply refers to the low porosity of the formation – making it more difficult to extract oil and gas.) “Tight gas” in this case would refer to naturally-occurring gas deposits in low-permeability formations other than shale, such as some sandstones. Some unconventional natural gas development in the Rocky Mountains, for example, is occurring in tight sandstone formations rather than in shales per se.

Shale gas and shale oil1 (collectively referred to as shale energy), long considered “unconventional” hydrocarbon resources, are now being developed rapidly. Shale energy represents a substantial fossil fuel resource for heating, electricity generation, transportation fuel and industrial use. The extraction of naturally-occurring oil from tight shales in particular (particularly in the Bakken formation in North Dakota) also has the potential to impact the energy security of the United States by reducing quantities of crude oil and refined petroleum products purchased on global markets. Natural gas (primarily methane) has lower air emissions of many pollutants relative to coal as a fuel source and is seen by many as a “bridge fuel” to a less carbon-intensive energy future. Shale gas deposits vary in size, depth, and quality across the United States. Some deposits occur primarily in one state, such as the Barnett Shale in Texas. Others, such as the Marcellus Shale, underlie multiple states, including New York, Pennsylvania, and West Virginia. The Marcellus Shale is currently considered the largest potential resource of shale gas, and is close to large energy demand centers in the northeast.

As discussed in the EIA article, since the end of the first decade of the 21st century, growth in shale gas has grown from virtually nothing to providing more than 20% of total U.S. natural gas production in less than five years. The Marcellus and Utica shale states have gone from marginally relevant players in the North American gas market to major players in a rapidly globalizing natural gas sector. The growth in shale gas production has already had substantial impacts, including making the U.S. over 95% self-sufficient in gas supply and leading to flow reversals in major pipelines. The U.S. has also started exporting substantial quantities of gas to both Canada and Mexico. All indications are that the resource potential in North America is large enough to sustain increased consumption levels for several decades (the exact size of the economically extractable resource depends on emerging knowledge about geologic formations as well as advances in drilling and extraction technologies).

As this article from the EIA suggests, the United States is not the only place on earth with substantial recoverable shale energy reserves. But it is the only place that has seen substantial resource development. The report has a very nice map of assessed global shale resources. You will notice that a number of the major potential shale energy basins outside of the United States are located in Russia or Eastern Europe (an area that has seen some geopolitical unrest in recent years) and in Africa and Australia, which face water constraints. The Economist has a nice article discussing some reasons that shale development in Europe in particular can be expected to be slow (while the article is a good one, it is worth noting that editorially The Economist is very favorable towards shale energy development).


1 In this context, “shale oil” refers to the practice of extracting naturally-occurring petroleum from tight shale formations (sometimes called “oil-bearing shales”) utilizing hydraulic fracturing methods. Shale oil, as used here, is distinct from “oil shale,” which refers to unconventional oils extracted from rock formations through pyrolysis.