20 September 2012 – Of all energy resources, oil and coal dominate global consumption. While natural gas currently holds a significant share of the energy market, newly discovered shale gas reserves around the globe are likely to promote consumption of gas as both an energy source and an affordable feedstock for a wide variety of chemicals and materials.
A new study by Frost & Sullivan titled Analysis of the Global Shale Gas Market examines the impact of shale gas on the chemical industry and looks at the shale gas market as a whole.
"The rapid development of shale resources is set to dramatically change the current energy assets globally," Frost & Sullivan’s Consulting Analyst Michael Mbogoro, says. Europe willdecrease the region’s dependence on supplies from Russia and the Middle East, in the long term, thus reducing their dominance in energy markets. It is likely to also give rise to new geopolitical alliances at the expense of old.
The majority of demand in Asia will come from China and Japan, following China’s insatiable energy needs, as a result of rapid growth, and Japan’s expected increased dependence on natural gas following the Fukushima nuclear disaster. The large shale gas reserves in China will only temporarily ease the import burden, even if one accounts for increased power generation capacity from other sources such as hydro, solar and wind.
Furthermore, large chemical companies are shifting investment patterns to exploit the rich shale gas reserves in the United States, at the expense of the Middle East and other natural gas-rich regions. North American natural gas prices are the lowest globally, and chemical companies are fuelling a revival of the US manufacturing sector by capitalising on this cheap supply.
Opportunities exist for wastewater treatment companies, due to the high volumes of water consumed in shale gas production, and for companies that produce hydraulic fracturing chemicals.
"The hydraulic fracturing chemicals market is projected to grow by approximately 10 % annually through to 2020," Mbogoro says. "The market is dominated by large energy service companies that enjoy close relationships with oil and gas participants. However, chemical companies still have a significant market share. Gelling agents are the major fracturing chemicals by volume, followed by friction reducers and corrosion inhibitors."
Due to increased shale gas production in North America, demand for gelling chemicals, such as guar gum, has increased, resulting in severe global shortages and high prices.
The wastewater treatment chemicals market is also growing because of the shale gas boom. While some chemicals are commoditised, innovative solutions to water treatment continue to emerge. Due to the huge volumes of water needed for shale gas production and increased regulations limiting toxicity levels in wastewater, innovative firms can tap into a market with promising growth prospects over the next 20 years.
Other markets, such as South Africa and Argentina, also offer exciting opportunities for the development of shale gas markets. Argentina has the third highest estimated technically recoverable shale gas reserves in the world. “Once a regional exporter of natural gas, Argentina has in the last five years become a net importer of natural gas,” Frost & Sullivan’s energy & power industry analyst, Dominic Goncalves, says.
“With an electricity supply industry heavily reliant on natural gas, and a transportation sector that is 20.2% driven by natural gas, Argentina has the third highest penetration share of gas-fuelled vehicles in the world. As such, the country has a highly developed existing natural gas infrastructure, supporting its development of shale gas.” However, the recent nationalisation of the energy sector in Argentina will deter foreign investment. The cost at which shale gas will effectively be extracted in this market will also determine the viable supply.
South Africa lifted its 18 month moratorium on shale gas development in September 2012. This occurred after a much heated and publicised debate spawned by environmental concerns of development in the pristine Karoo Basin, an area regarded for its natural beauty where water scarcity and environmental responsibility will be key challenges for development. South Africa has the fifth highest estimated technically recoverable shale gas reserves in the world.
“If managed effectively and responsibly,” states Goncalves, “shale gas could provide an affordable feedstock for cleaner burning gas-fired power plants in South Africa. Although this development will fall outside of South Africa’s current critical electricity supply, shale gas as a feedstock post-2020 could become a complimentary electricity source with renewable energy, as the country weans itself from coal.” With the moratorium lifted, exploration and pilot studies will soon be under way, although commercial development will only occur in seven to nine years.