NEW YORK (GBI Research), 26 September 2012 - President Obama faces a shale gas dilemma that threatens to damage his bid to secure a second term in the White House, states the latest report from natural resources experts GBI Research.
The US is currently endowed with a wealth of natural gas following years of overproduction, and while allowing exports would win friends within the industry and potentially boost the economy, it would anger those seeking to keep domestic prices low, says the new report*.
The past few years have seen natural prices falling to around $3 to $4 per million British thermal units (MMBtu), and the US Energy Information Administration EIA expects the annual wellhead natural gas price trend to remain at around $5 per MMBtu until 2025.
By contrast, liquefied natural gas (LNG) prices in potential trade countries, particularly those in Asia, are three times higher, suggesting a highly lucrative export market. However, shipping LNG abroad would alter the supply/demand balance and naturally result in a higher cost for US consumers.
The development of shale gas over recent years has signifi cantly altered the US energy outlook and major industry players have significantly increased their 2012 capital expenditure (cape for the development of shale plays.
ConocoPhillips and Chesapeake Energy announced respective capex of $2.3 billion and $2.4 billion for the development of the Eagle Ford shale play in 2012, while Bakken shale operators Continental Resources and the Hess Corporation, outlined respective 2012 capex of $1.1 billion and $1.9 billion in 2012.
GBI Research forecasts the total US shale play capex to reach $52.1 billion by 2016, climbing at an average annual growth rate (AAGR) of 11.9% from the expected 2012 figure of $35.3 billion.