Abiding by Unconventional Wisdom

From gas crisis to 150 year supply in some places

“It’s going to have an impact on prices here in Europe,” he said. “If you’re like Gazprom who thinks shale gas is a disease, LNG is the vector that is transmitting shale worldwide.

Grealy said the vast majority of LNG emanated from Asia in 2009.

“The US is not only not importing LNG but should actually be exporting it,” Grealy argued.

“The monster in the room in Asia is Japan in terms of usage (of Asian LNG imports). But Japan’s economy has been going down, so demand not likely to grow vastly. Japan imports 99% of their energy via LNG and only have 10 days of reserves - they manage but pay a very high price for that.”

Grealy promised the audience a “world tour” of unconventional gas, moving on to shale in South Africa.

He explained that the first project outside North America for Chesapeake was in September 2009 in the Karoo Basin. Following a joint venture between Statoil and Sasol in the Marcellus Basin, a year later they teamed up with Chesapeake.

According to Grealy, South Africa’s energy mix comprised 75% coal, 14% oil, and 3% natural gas. He said that Sasol’s gas to liquids (GTL) strategy made sense at $50+ per barrel of oil. Sasol, he noted, had paid $1 billion for 50% of a project in Alberta with Talisman Energy Inc.

Before the audience knew it, Grealy had whisked them of to South America, to Argentina, where he said in 2009 Total SA had been exploring the country’s Neuquén basin for unconventional gas potential.

Then Repsol YPF announced a gas find of 250 TCF. (Read More About Argentina Shale Gas HERE)

Grealy explained: “It’s a growing market and had a gas crisis in 2004. They import a lot from Bolivia. In the last year they have had LNG imports. Traders say South America is going to take up some of North America’s LNG imports.”

He said that Argentina’s gas could easily supply Brazil on the order of 150 years and that there was also a lot of gas in Uruguay.

“They were ‘running out of gas’ in summer and then Argentina announces huge shale gas find. This shows you how quickly the conventional wisdom can turn around.”

“In Australia they export a lot of LNG to Japan, Taiwan and Korea,” he reported, “and there are various LNG projects and CBM to LNG in Queensland.”

Grealy continued, “There’s shale as well – it’s not called the lucky country for nothing. That’s going to impact the economics of LNG in Australia. The facilities were built based on a steady demand from China.”

“No one seems to worry that there not going to have enough water,” he quipped of Australia.

He listed various areas like the Beetaloo Basin in Northern Territories and the Petroleum Cooper basin. “The ‘Bakken Shale south’ is going to be the Georgina Basin in Queensland.” (Read More about Australian Shale HERE)

“The big one of course is China,” Grealy explained. “LNG and gas traders are trying to talk up prices because there’s going to be a massive demand from China. They say it will soak up demand and push up prices in Europe. China’s shale is still going to be a shade under 30 BCM. It’s no global game changer.”

He said China was going to be very similar to Europe. “Were independent of gas until 2003. They’ve got a pipeline from Turkmenistan all the way to Shanghai that took about four years to build. There will be imports from Myanmar through Thailand. The Russians would like to have them import directly from Siberia,” said Grealy.

Under the radar, he said, were CNOOC, Petro China and Sinopec investments in Alberta and British Columbia.

“They want to learn the secret sauce,” he said, “what’s in the hydraulic fracking so that they can take it home.”

Grealy said shale in India could leapfrog Europe if the latter were not careful. “There’s the political will, the knowledge – when they want to get things done, they get things done,” he said, like in the building of motorways.

He added, “Speaking to the Schlumberger’ and the Halliburton I think they can’t wait around while Europe is making its mind up.”

Schlumberger, he said, had recently estimated the Indian resource at 200 to 2100 TCF, which are numbers that could be considered similar to Europe’s.

Grealy said India would be having a shale gas auction license some time in 2011-12.

“India has no heat demand,” he pointed out. “The current gas market is oriented towards major industry and they want to promote gas for generation. Still there are 400 million people living off the grid, and to electrify them is going to be a great challenge. If shale is as ubiquitous as it is in North America, perhaps they don’t need a gas grid.”  (Read More on Shale Gas in India HERE)

He said that the shale gas potential in India could be used as gas for cooking and for fertilizer.

Grealy concluded, “If the China and India narrative doesn’t come to pass, Qatar and other export projects will be impacted. Hub prices in Europe are likely to grow stronger – that could be one of the outcomes.”

Read More on Asian Shale Gas at Natural Gas for Asia Natural Gas for Asia