A Short History of the Shale Gas Phenomenon in North America

Abstract

In the year 2000, the natural gas reserves in the United States were projected to last only 10 to 20 more years, plans were being made to import Liquefied Natural Gas (LNG), utilities that generate electricity were reluctant to build new facilities that used natural gas, and Russia was the largest natural gas producer in the world. It was about this time that continually improving technology and shrinking costs associated with drilling and completing long horizontal wells in shale resource rocks made it profitable to drill these wells in several formations in North America. Ten years later, North America was estimated by some academics to have a 100-year supply of natural gas, the potential LNG import terminals were now being viewed as potential LNG export terminals, and the U.S. was poised to pass Russia as the largest producer of natural gas in the world. By 2013 the abundance of natural gas in North America had driven the market price so low that most gas-only (dry) shale gas 'plays' were no longer profitable on their own merits. The substitution of natural gas for other energy sources in North America was being felt economically around the world in ways that are both obvious and not so obvious. How did this profound change come about? What are some of the potential implications for energy supply in North America and the world?