[Peakoil] Shale gas to have limited short-term impact on global market

[Jenny Goldie]

http://www.enviroinfo.com.au/shale-gas-to-have-limited-short-term-impact-on-global-market/
Shale gas to have limited short-term impact on global market
May 21, 2013, EnviroInfo 
Shale gas is set to remain a largely regional resource over the next one to three years with an uncertain global impact due to the increased technical challenges and higher development costs of the resource, according to a new report.

The Deloitte Touche Tohmatsu Limited 2013 Oil and Gas Reality Check report focuses on the primary challenges facing the oil and gas industry including: shale gas, liquefied natural gas (LNG) pricing, resource nationalism, national oil company (NOC) expansion, and market complexity.

"Despite considerable market changes, increased complexities, current challenges, and new resource opportunities, there is a need to return to industry fundamentals - supply, demand, macroeconomic, regulatory, cost price and competitive behaviour factors - to understand the future direction of the oil and gas sector," said Adi Karev, DTTL Global Leader, Oil and Gas.

Karev says the success of North American shale gas has spurred interest in duplicating the results in other countries. However, according to the report, these countries still have a long road ahead before they can begin to see the gas volumes and supporting infrastructure needed to dramatically lower domestic natural gas prices and create export opportunities.

He says given the greater technical challenge of shale gas and higher development costs, exploitation of shale resources is not easily replicable in other markets.

And the report contends that while some countries are making progress, over the next one to three years, it will remain a largely regional resource with an uncertain impact on the global market past this timeframe.

Oil indexation will be one of several pricing approaches for LNG long-term contracts in Asia Pacific, according to DTTL. As diverse supplies enter the LNG market over the next 12 months through to 2017, the dynamics of supply competition will drive transition away from contracts purely indexed to oil prices and at high oil price parity in the Asia Pacific region.

The report also says that in the short term, resource nationalism will recede as new resource-rich countries seek to attract investment and access technology. Investors and global oil and gas companies view resource nationalism as an unmanageable risk.

Karev says in the long term, resource nationalism will rise as countries progress through the stages of resource development and gain technological expertise.