ASSESSING THE POTENTIAL FOR INTERNATIONAL SHALE

UNCLAS STATE 111742

SIPDIS

E.O. 12958: N/A
TAGS: ECON ENRG EPET
SUBJECT: ASSESSING THE POTENTIAL FOR INTERNATIONAL SHALE
GAS DEVELOPMENT


1. This cable is an action request, see paragraph 7.

2. Summary: Recent technological advances in natural gas
production could have a significant impact on international
energy security and climate change. Natural gas from
so-called unconventional sources, in particular production
from hydrocarbon rich shale rock, known as "shale gas," is
one of the most quickly expanding trends in U.S. oil and gas
exploration, with significant international potential. The
Department and Washington interagency community are working
to assess the international potential for shale gas
development, and where USG outreach efforts could be best
directed. The Department is asking that posts assess the
state of shale gas development and/or potential for
development in their host country and report their findings
to Washington. End Summary.
BACKGROUND

3. Over the past several years U.S. energy companies have
been producing large amounts of gas from shale, with gas
production increasing 7.5% in 2008 alone, leading the
Department of Energy to increase estimates of U.S. gas
reserves by 35%. While the U.S. was previously projected to
import increasing amounts of liquefied natural gas (LNG),we
now have a surplus of gas, with prices at record lows. LNG
that would have come to the U.S. is being diverted to Europe
and elsewhere.

4. The Washington interagency community is very interested
in the potential for shale gas development internationally.
On August 27 David Goldwyn, the Coordinator for International
Energy Affairs, held an interagency seminar with private
sector representatives to discuss the potential international
impact of shale gas. Since that meeting, unconventional gas
has been getting increased attention from both the energy
industry and trade press. Action addressee posts are among
the countries identified in an October 5 presentation by
Cambridge Energy Research Associates as having the most shale
gas potential outside of North America. Significant
potential for production of shale gas and other forms of
unconventional gas (coal bed methane and tight gas) exists
abroad, and could have important implications, particularly
in China and India (climate change) and Europe (energy
security). Shale gas production could help both China and
India meet their burgeoning energy needs, potentially
displacing future coal supplies. Natural gas (with half the
CO2 footprint of coal) is expected to play a vital role in
meeting U.S. and global energy needs and helping ease the
transition to a low-carbon economy. Shale gas exploration is
underway in various countries in Europe, which could boost EU
natural gas production and help Europe diversify its energy
supplies. The U.S. Geological Survey is beginning to work
with foreign partners on mapping the potential of shale gas,
and we are looking at how we can assist them with this work.

5. The key technological drivers of shale gas development
have been the refinement of horizontal drilling and hydraulic
fracturing technologies. Horizontal drilling is the
technology which enables the drilling of non-vertical oil and
gas wells that can better reach hydrocarbon bearing
formations. Hydraulic fracturing is a process by which
water, chemicals, and sand-like substances are pumped at high
pressure into the well to "fracture" the rock and release
hydrocarbons. These technologies enable industry to produce
more natural gas from the shale formations economically, and
with fewer disturbances to surface environments. A more
thorough primer on shale gas development can be found on the
DOE website at
http://fossil.energy.gov/programs/oilgas/publ ications/
naturalgas general/Shale Gas Primer 2009.pdf.

6. There are environmental concerns associated with shale gas
that could delay its progress, mainly related to land use,
water use (hydraulic fracturing uses large quantities of
fresh water) and concern that production chemicals could
affect groundwater. Production techniques are improving,
however, and hopefully will be able to address these
concerns. While these issues are being addressed, shale gas
is already having profound implications for global energy
markets.
ACTION REQUEST

7. As resources and workload permit, posts are asked to
provide (via cable or email) any information they can obtain
about the potential for unconventional gas development in
their host country. This may simply involve querying the
Ministry of Energy as to unconventional gas development in
the country, but could include talking to relevant government
geological research organizations or commercial energy
contacts about the potential for shale gas production. If
post assesses that there is no potential for unconventional
gas development in the host country, no response is
necessary. Please direct your response and questions to
EEB/ESC/IEC Energy Officer Alex Greenstein.
SUGGESTED QUESTIONS

8. The below list of questions is intended as a guideline
for issues that may be relevant to post reporting on shale
gas development and is not exhaustive:
-- Are there gas-bearing shale formations in the host country?
-- Are energy companies actively exploring for shale gas?
-- What kind of geologic data is available? What kind of
surveys have been done to assess the presence of gas bearing
shale?
-- What is the regulatory environment for oil and gas
development? What are the relevant host-government policies
with regard to land use and water use?
-- Is there sufficient infrastructure to support shale gas
development? Are there international energy companies
operating in-country? Is there the capacity to build and
maintain drilling rigs? Are oilfield service companies
active in the host country?
-- What is the host country's energy mix, and what is natural
gas's role? Is there significant potential for expanding
natural gas utilization in the power or transportation
sectors?
CLINTON