There's a lot of natural gas in the Arctic: maybe 30% of the world's undiscovered natural gas resources. But the value of those resources, and the likelihood of development, depends on the availability of substitutes.
Unfortunately for Arctic jurisdictions hoping to cash in on their resources, there's been a big increase in the availability of substitutes recently. The Economist has an overview this week: Natural gas, An unconventional glut.
New technologies have made it possible to access tremendous volumes of natural gas from shale:
Geologists had always known of it, and Mitchell had been working on exploiting it since the early 1990s. But only as prices surged in recent years did such drilling become commercially viable. Since then, economies of scale and improvements in techniques have halved the production costs of shale gas, making it cheaper even than some conventional sources....
New shale prospects are sprinkled across North America, from Texas to British Columbia. One authority says supplies will last 100 years; many think that is conservative. In 2008 Russia was the world’s biggest gas producer (see chart 1); last year, with output of more than 600 billion cubic metres, America probably overhauled it. North American gas prices have slumped from more than $13 per million British thermal units in mid-2008 to less than $5. The “unconventional”—tricky and expensive, in the language of the oil industry—has become conventional.
Prices have dropped and Arctic development has slowed. Gazprom's Shtokman field is in trouble:
In February, for example, Gazprom postponed its Shtokman gasfield project by three years because of the change in the market. Some of the gas from that field, in the Barents Sea, was to be exported to America. But Shtokman’s gas will be costly, because the field is complex and its location makes it one of the world’s most difficult energy projects to execute. Some analysts now wonder whether gas will ever flow from Shtokman.