China could follow the U.S. example and develop its shale gas resources to become self-sufficient in natural gas. By 2035, Russia and the Middle East could see declines in natural gas exports of 6.3 Tcf (37%) and 3.4 Tcf (35%), respectively.

At the same time, continued increases in oil production from the “big three” U.S. oil shale plays—the Bakken, Permian, and Eagle Ford—would result in reactions in the oil markets from Saudi Arabia and the Organization for the Petroleum Exporting Countries (OPEC).

A panel of experts at the recent DUG Permian conference in Fort Worth tackled the prospects of “Emerging Resource Plays and the Global Infrastructure Challenges.” Panelists were: Dr. Carmine Difiglio, deputy assistant director for policy analysis, Office of Policy and International Affairs, U.S. Department of Energy; Herve Wilczynski, partner, A.T. Kearney Inc.; Bill Brown, senior analyst, Office of Oil, Gas, and Biofuels Analysis, U.S. Energy Information Administration; and Mike Kelly, vice president and senior E&P analyst, Global Hunter Securities Inc.

“Shale gas, so far, has been a North American story,” Wilcynski told the more than 2,500 participants at the conference. “However, the majority of resources are outside North America. The U.S. might find itself as a pioneer in this field, but the big bang might happen outside the country.”

Shale plays in the U.S., China and Argentina can disrupt the global balance, which could lead to possible changes in global pricing regimes, he said. China has already committed to 4.7 Tcf per year of pipeline imports and is building 2.2 Tcf per year of LNG import capacity to meet half of its 2020 demand.

“China potentially could do like the U.S. has done and become self-sufficient in natural gas. The Chinese government wants this to happen. There is the political will to increase domestic production by 2.2 Tcf to 3.5 Tcf by 2020. The pacing factor is that the midstream infrastructure is very constrained. The pipeline network in China represents only 16% of the capacity in the U.S.,” he continued.

Argentina is rich in shale gas with the second-largest reserves behind China and ahead of the U.S. The situation in Argentina, though, is that the business environment is not conducive to rapid development of shale resources, he added.

There are factors that could impede the growth of shale gas, including subsurface geology, regulations, business environment, above-ground constraints and reactions from competing sources of natural gas like Qatar and Russia, Wilcynski explained.

Difiglio agreed with the shift in natural gas exports by 2035 with worldwide shale development. Not only will Russia and the Middle East see declines in gas exports with unrestrained shale development, but U.S. exports will decrease to zero, a drop of 5 Tcf since U.S. gas ultimately will be less competitive with other major gas producers.

One of the unique aspects of the shale gas plays worldwide is that the resources are located near demand centers, he emphasized. “Natural gas exports from North Africa and the Caspian Region will also be reduced as gas production shifts to demand centers.”

By 2035 with unrestrained shale development, European shale production would increase 9 Tcf (57%) over the baseline case, Australia up more than 4 Tcf (150%) and China nearly 3 Tcf (81%), Difiglio continued.

Kelly said natural gas production growth in the U.S. is still on the horizon. “There is a 30-year drilling inventory capable of generating 25% or higher internal rates of return at $4.50 per Mcf, which should push supply growth higher over the next five years to more than 4.3 Bcf per day. Such growth will keep intermediate gas prices range-bound between $3 per Mcf to $4 per Mcf.

“We’re not too optimistic on natural gas. We see limited upside there,” he added.

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