Shale Gas Development

An Energy Game-Changer

Over the past decade, energy expert Daniel Yergin has identified a dramatic shift in the narratives about global energy supplies. This change is particularly apparent in the story of shale gas development in the United States.

Shale gas is natural gas that is locked up in shale rock formations. In 2000, shale gas as an energy source represented less than 2 percent of total U.S. natural gas production. By 2012, that figure had leapt to 37 percent. A wide variety of authorities, including Daniel Yergin’s company IHS, now estimate that by 2020, shale gas could be responsible for half or more of the total U.S. natural gas supply and could sustain increasing energy independence in the Western world.

Currently, the potential for shale gas development on the North American continent is represented by a base supply estimated at over 2,000 trillion cubic feet, which could help power the U.S. for the next century and support the revival of manufacturing in the United States. Additional resources around the world should assist in sustaining other economies as well. Both Canada and Mexico have significant shale gas resources. Substantial sources of shale gas are also found in some parts of Europe, Argentina, and South Africa.

The unconventional gas revolution is now reaching to China, where rapid economic development requires it to step up development of its domestic energy resources. In addition, natural gas from shale could help China reduce air pollution and environmental problems. Chinese companies have already signed agreements with Western firms to explore shale gas opportunities, and the Chinese government has also signed an understanding with the United States to promote shale gas development.

In his book The Quest: Energy, Security, and the Remaking of the Modern World, as well as in numerous media interviews, Daniel Yergin has traced the trajectory of the development of unconventional energy sources—both shale gas and what is called “tight oil” or “shale oil.” “Shale gas is the biggest energy innovation so far in the 21st century,” Yergin says. This is due to its scale, its rapid ascent within the energy economy, its demonstrated ability to lower costs, and the way in which it is transforming the North American energy marketplace.

Yet the entrepreneurs and innovators whose work made the current boom in shale gas development possible faced large technological, political, and infrastructure-based obstacles.

For generations, people had realized that deposits of hard-as-concrete shale rock formations contained large amounts of natural gas. The problem lay in accessing it. The first natural gas well in the United States was drilled in 1821 in Fredonia, New York, and as with the new supplies today, its source was shale rock. But commercial exploitation of shale gas languished for almost two centuries because the technology did not exist to make extraction commercially viable.

In the 1980s and 90s, experiments began in the Barnett Shale in Texas, led by George Mitchell of Mitchell Energy . Taking advantage of new federal tax credits designed to promote development of unconventional natural gas resources, Mitchell Energy refined the process of hydraulic fracturing by “trial and error.” Success was achieved at the end of the 1990s. By 2003, hydraulic fracturing had been combined with a new advance—horizontal drilling—and together, they established the practicality of shale gas development.

As shale gas development has grown in recent years, so has the focus on addressing the environmental questions associated with it—of which the most significant is the disposal of waste water. A committee that reported to U.S. Energy Secretary Steven Chu in 2011 outlined an agenda addressing environmental concerns, including “best practices” in regulation and operations, technological innovation, and community engagement. Meanwhile, shale gas will continue to take market share in the generation of electric power away from coal, and is also having an effect on renewable energy such as wind and solar because of its low cost.

The Obama administration, as well as governors of many states, has become supportive of shale gas development because of its large impact on job creation, economic development, and U.S. competitiveness in global markets. Shale gas has established itself as an important new source for diversifying U.S. energy supply and helping to make the United States more resilient in terms of its energy options.