US reliance on shale gas a risky strategy

By Abhishek Kumar 18 January 2017
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Overemphasis on shale gas production in the US could derail prospects for cheap gas in the country. (Encana) Overemphasis on shale gas production in the US could derail prospects for cheap gas in the country. (Encana)

The shale gas revolution in the United States has enabled greater use of the fuel in the country’s domestic sector and led to substantial growth in its gas and LNG exports. However, the development has come at the expense of conventional gas and CBM output, a change that is likely to boost Henry Hub prices over the coming years. It will also increase US gas and LNG export prices linked to the hub, denting the appeal of US gas.

A period of high oil prices between 2007 and 2014 supported exploration and exploitation of shale acreage in the US. This also resulted in advancements in shale drilling technology, ensuring production growth even at low prices. However, not all shale plays in the US are equal in terms of oil, NGL and gas yield, resulting in uneven development profiles across different plays. This has significant implications for gas supplies to states such as Louisiana, which in turn will support prices at the Henry Hub pricing point in Louisiana over the coming years.

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