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Unconventional Shale Energy and the Strategies of Nations

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The Global Impact of Unconventional Shale Gas Development

Part of the book series: Natural Resource Management and Policy ((NRMP,volume 39))

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Abstract

A dramatic shift towards unconventional shale gas as an energy source has distinct winners and losers in the international arena. Much of the literature has focused on the extent to which unconventional natural gas is transformative for markets overall, or for the power of particular states.

The opinions expressed in this work are the author’s alone. They do not represent the official positions of the United States Government, the US Department of Defense, or the National Defense University.

The Author wishes to thank NWC colleagues Vivian Walker, Richard Andres and Teresa Tybrowski for their insights and advice on this chapter.

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Notes

  1. 1.

    See the following excellent assessments of impacts to specific countries: Michael Levi, The Power Surge: Energy, Opportunity, and the Battle for America’s Future, Oxford University Press, 2013, David Buchan “Can Shale Gas Transform Europe’s Energy Landscape?” Centre for European Reform, July 2013, and Leonardo Maugeri, “The Shale Oil Boom: A US Phenomenon,” The Geopolitics of Energy Project, Belfer Center for Science and International Affairs of the Harvard Kennedy School, June 2013.

  2. 2.

    O’Sullivan (2013), p. 37.

  3. 3.

    For an excellent discussion of costs and risk, see Deibel (2007), pp. 322–365.

  4. 4.

    Congressional Research Service, Ratner et al. (2013), p. 22.

  5. 5.

    Maugeri (2013), p. 24.

  6. 6.

    Morrow (2014), p. 7.

  7. 7.

    IEA, United States Energy Overview 2014, International Energy Agency Member Countries Data, prepared August 2014, access at: http://www.iea.org/media/countries/slt/UnitedStatesOnepagerAugust2014.pdf.

  8. 8.

    This assumes growing electricity demand as well as retirement of 97 GW of existing capacity. See EIA Annual Energy Outlook 2014, p. MT-17.

  9. 9.

    Based on the reference case: EIA Annual Energy Outlook 2014, Department of Energy, p. MT-21.

  10. 10.

    Krishnaswamy (2007), p. 17 (The World Bank has not offered an update to this calculus, in spite of rising LNG trade since 2007).

  11. 11.

    NERA 2014 Economic Consulting, (Robert Baron, Paul Bernstein, W. David Montgomery and Sugandha D. Tuladhar, authors) “Updated Macroeconomic Impacts of LNG Exports from the United States,” prepared for Cheniere Energy, Inc., by NERA Economic Consulting, March 24, 2014, p. 20.

  12. 12.

    BP Statistical Review of World Energy June 2015, Gas trade tables and map, pp. 28–29.

  13. 13.

    Das (2011) Das estimates $0.32 for transport if the facility is less than 300 miles from extraction, $1.09–$2.09 for liquefaction, $0.28–$0.61 for shipping, and $0.30–$0.38 for storage and regasification.

  14. 14.

    Gloystein (2014).

  15. 15.

    NERA 2012 Economic Consulting (W. David Montgomery, Robert Baron, Paul Bernstein, Sugandha D. Tuladhar, Shirley Xiong, and Mei Yuan, Authors) “Macroeconomic Impacts of LNG Exports from the United States.” Prepared for US Department of Energy by NERA Economic Consulting, December 3, 2012, p. 34.

  16. 16.

    International Energy Agency, “World Energy Outlook 2013 Executive Summary,” OECD/IEA 2013, Paris, based on the WEO’s central scenario for projections to 2035, p. 2 (henceforth “IEA-WEO 2013”).

  17. 17.

    International Energy Agency, “World Energy Outlook 2014 Executive Summary,” OECD/IEA 2014, Paris, pp. 2–3.

  18. 18.

    A PIRA Energy Group Study, cited at length in CRS 2013, CRS 2013, Ratner et al. (2013), p. 16.

  19. 19.

    NERA 2012, p. 13.

  20. 20.

    NERA 2012, pp. 76–77.

  21. 21.

    British Petroleum, Statistical Review of World Energy, June 2015, table of Total Proved Reserves of Natural Gas, p. 20.

  22. 22.

    Sandler (2011).

  23. 23.

    Quoted in Reuters, “Israeli Government approves a 40 pct limit on natural gas exports,” Reuters Jerusalem, Sunday June 23, 2013.

  24. 24.

    Congressional Research Service, “Antitrust Case Complicates Israel’s Energy Future,” CRS In Focus Series, February 27, 2015, p. 1.

  25. 25.

    Congressional Research Service, “Antitrust Case Complicates Israel’s Energy Future,” CRS In Focus Series, February 27, 2015, p. 2.

  26. 26.

    US Energy Information Administration, “Israel Country Report and Analysis,” Updated July 2015, access at: http://www.eia.gov/beta/international/analysis.cfm?iso=ISR.

  27. 27.

    Shaffer (2011).

  28. 28.

    Maugeri (2012), p. 44.

  29. 29.

    British Petroleum, Statistical Review of World Energy, June 2015, table of Total Proved Reserves of Natural Gas, p. 20.

  30. 30.

    US Energy Information Administration Annual Energy Outlook 2015 with projections to 2040, US Energy Information Administration, US Department of Energy, pp. ES-3 and 4.

  31. 31.

    O’Sullivan (2013), pp. 30–47.

  32. 32.

    Congressional Research Service, Ratner et al. (2013), p. 14.

  33. 33.

    CRS, September 17, 2013 p. 11.

  34. 34.

    Office of the United States Trade Representative, Resource Center, Executive Office of the President, accessed 7 September 2015, at https://ustr.gov/trade-agreements/free-trade-agreements/korus-fta.

  35. 35.

    Congressional Research Service, Ratner et al. (2013), p. 15.

  36. 36.

    The original TPP meetings included Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, Vietnam and the United States.

  37. 37.

    Ami Miyazaki and Krista Hughes, “Pacific Rim Free Trade Talks Fail to Seal Deal” Reuters wire service, posted 07/31/2015.

  38. 38.

    Quoted in “Prosperity at Home and Strengthened Alliances Abroad—A Global Perspective on Natural Gas Exports,” Policy Paper Series from the US House of Representatives Committee on Energy and Commerce, Chairman Fred Upton, Vol 2, Issue 10, February 4, 2014, pp. 9–10.

  39. 39.

    Klare (2015), p. 252.

  40. 40.

    EIA, “World Oil Transit Chokepoints,” US Energy Information Administration, November 10, 2014 report, pp. 8–11.

  41. 41.

    See Holly Morrow for a case study of China: Morrow (2014), pp. 10–13.

  42. 42.

    EIA, “China International Energy Data and Analysis,” US Energy Information Administration, Updated May 14, 2015, accessed 17 September 2015 at: http://www.eia.gov/beta/international/analysis_includes/countries_long/China/china.pdf.

  43. 43.

    Gazprom Export website, “Power of Siberia,” accessed 17 September 2015 at: http://www.gazpromexport.ru/en/projects/3/ Also confirmed by EIA “China International Energy Data and Analysis”.

  44. 44.

    Morrow (2014), pp. 10–11.

  45. 45.

    Manning (2015), p. 120.

  46. 46.

    Morrow (2014), p. 13.

  47. 47.

    EIA Australia Country Analysis, US Energy Information Administration, August 28, 2015, accessed at: http://www.eia.gov/beta/international/analysis.cfm?iso=AUS.

  48. 48.

    Morrow (2014), pp. 13–16.

  49. 49.

    According to the website of ConocoPhillips, which operates the Kenai facility. See http://alaska.conocophillips.com/what-we-do/natural-gas/lng/Pages/kenai-lng-exports.aspx.

  50. 50.

    EIA Annual Energy Outlook 2015, p. ES-2.

  51. 51.

    CRS 2013, Ratner et al. (2013), p. 19.

  52. 52.

    See Carey (2009), pp. 783–810.

  53. 53.

    Murrill (2013).

  54. 54.

    For a detailed discussion of Russian domestic energy policies and Russian trade in energy, see T. Sabonis-Helf, “Russia and Energy Markets,” Chapter 2 in New Realities in Global Energy Security, Edited by John Deni, Army War College Press, December 2014.

  55. 55.

    World Trade Organization, Dispute DS431, “China—Measures Related to the Exportation of Rare Earths, Tungsten and Molybdenum,” final report 29 August 2014, names the US as the key Complainant, with 18 other nations listed as third parties. See: http://www.wto.org/english/tratop_e/dispu_e/cases_e/ds431_e.htm.

  56. 56.

    CRS 2013, Ratner et al. (2013), pp. 14–15.

  57. 57.

    NERA 2012 Economic Consulting (W. David Montgomery, Robert Baron, Paul Bernstein, Sugandha D. Tuladhar, Shirley Xiong, and Mei Yuan, Authors) “Macroeconomic Impacts of LNG Exports from the United States.” Prepared for US Department of Energy by NERA Economic Consulting, December 3, 2012, p. 3.

  58. 58.

    NERA 2014, p. 11.

  59. 59.

    EIA Annual Energy Outlook 2014, p. MT-23.

  60. 60.

    Data from Federal Energy Regulatory Commission Office of Energy Projects, maps of Existing and Proposed Export and Import Terminals, as of December 3, 2014, access at: http://www.ferc.gov/industries/gas/indus-act/lng.asp Offshore facilities are approved by MARAD, by FERC. See table in the appendix.

  61. 61.

    In 2013, the US produced 24,282 BCF—66.5 BCF/day. Data from EIA, US Natural Gas production, access at: http://www.eia.gov/countries/country-data.cfm?fips=US&trk=m#ng.

  62. 62.

    CRS 2013, Ratner et al. (2013), p. 6.

  63. 63.

    Defined in the NERA 2012 report as manufacture which “…has energy expenditures greater than 5 % of the value of its output and serious exposure to foreign competition” to include paper and pulp manufacturing, as well as chemical, glass, cement and primary metal manufacturing. See NERA 2012, pp. 17, 64 and 68.

  64. 64.

    NERA 2014, pp. 8–10.

  65. 65.

    IMF, “Energy Subsidy Reform: Lessons and Implications,” Staff Team led by Benedict Clements, International Monetary Fund, January 28, 2013, p. 13.

  66. 66.

    IMF Press Release: “IMF Calls for Global Reform of Energy Subsidies: Sees Major Gains for Economic Growth and the Environment,” International Monetary Fund Press Release No 13/93, March 27, 2013.

  67. 67.

    EIA, Information Requests, access at: http://www.eia.gov/analysis/requests/subsidy/.

  68. 68.

    Note that, of the three instances in which the International Energy Agency has ordered emergency draw-downs of Strategic Petroleum Reserves of member states, one was in response to Hurricane Katrina. Department of Energy, “International Energy Agency Members release strategic petroleum stocks,” June 24, 2011, US Energy Information Administration, access at: http://www.eia.gov/todayinenergy/detail.cfm?id=1950.

  69. 69.

    Federal Energy Regulatory Commission Office of Energy Projects, maps of Existing and Proposed Export and Import Terminals, as of December 3, 2014, access at: http://www.ferc.gov/industries/gas/indus-act/lng.asp.

  70. 70.

    US Government, “Quadrennial Energy Review: Energy Transmission, Storage and Distribution Infrastructure: Summary for Policymakers,” April 2015, p. S-10.

  71. 71.

    EIA 2013.

  72. 72.

    As in the case of compressed gas, LNG is only flammable when the air-natural gas mix is 5–15 %. If there is less air, there isn’t sufficient oxygen for a flame. If there is more air, the gas becomes rapidly too diluted to ignite. See FERC, Federal Energy Regulatory Commission, “LNG Overview,” can be accessed at: http://www.ferc.gov/for-citizens/citizen-guides/lng.asp.

  73. 73.

    Sandia (2004).

  74. 74.

    Manning, p. 124.

  75. 75.

    CRS 2013, Ratner et al. (2013), p. 16.

  76. 76.

    Manning, p. 123.

  77. 77.

    Morrow (2014), p. 12.

  78. 78.

    For a detailed discussion of Russia, see the author’s “Russia and Energy Markets” Chapter 2 in New Realities: Energy Security in the 2010s and Implications for the US Military, Edited by John R. Deni, Strategic Studies Institute and U.S. Army War College Press, February 2015.

  79. 79.

    Manning, p. 124.

  80. 80.

    Friedman (2006).

  81. 81.

    Production, Transport and Total are marginal cost, from Swiss National Bank, SNBCHF.com, “Shale and Oil Sands: Market Price Compared to Production Costs, Sept 2014, http://snbchf.com/global-macro/shale-oil-oil-sands/ Transport indicates delivery to major distribution channel.

  82. 82.

    Maugeri (2013), p. 14.

  83. 83.

    Morrow (2014), p. 3.

  84. 84.

    NERA 2012 Economic Consulting (W. David Montgomery, Robert Baron, Paul Bernstein, Sugandha D. Tuladhar, Shirley Xiong, and Mei Yuan, Authors) “Macroeconomic Impacts of LNG Exports from the United States.” Prepared for US Department of Energy by NERA Economic Consulting, December 3, 2012, pp. 13 and 76–77.

  85. 85.

    Data from “Record Fall in Oil Prices Threatens Russian Budget” 7 Oct 2014 at http://rbth.com/business/2014/10/07/record_fall_in_oil_prices_threatens_russian_budget_40409.html.

  86. 86.

    “Fiscal Break-Even Oil Prices for Major OPEC Members” OGFJ 3 April 2014 at http://www.ogfj.com/articles/2014/04/fiscal-break-even-oil-prices-for-major-opec-members.html and IMF Statistical Appendix Regional Economic Outlook Update, at https://www.imf.org/external/pubs/ft/reo/2014/mcd/eng/pdf/menapst0514.pdf.

  87. 87.

    Klare (2015), p. 239.

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Authors and Affiliations

  1. National War College, Washington, DC, USA

    Theresa Sabonis-Helf

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  1. Department of Economics and Busines, Washington and Jefferson College, WASHINGTON, USA

    Yongsheng Wang

  2. Naveen Jindal School of Management, University of Texas, Richardson, Texas, USA

    William E. Hefley

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Sabonis-Helf, T. (2016). Unconventional Shale Energy and the Strategies of Nations. In: Wang, Y., Hefley, W. (eds) The Global Impact of Unconventional Shale Gas Development. Natural Resource Management and Policy, vol 39. Springer, Cham. https://doi.org/10.1007/978-3-319-31680-2_2

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