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.
In the long run, this has been the case with every new field that requires new technical (or political) challenges to be overcome.
It just requires long term patience for the marginal profitability of the field to work out OK with the costs of meeting the new requirements.
The oil and gas exploration industries are quick to drop new projects when oil economics look shaky simply because of the long period (and large risks incurred) between acquiring rights and ultimately getting some cash back from the oil produced.
It's just a matter of timing.
Posted by: MH | October 25, 2010 at 08:15 AM
Nice post! We should not take for granted all the resources we have!
Posted by: trusted essays | May 18, 2011 at 08:28 AM
Thank you, it's been very interestingly. I fully agree with 'MH'.
Posted by: women | June 06, 2011 at 07:43 AM
Thank you, it's been very useful.
Posted by: kvinnor | June 08, 2011 at 10:39 AM
Look at our economy and gas prices now though! It seems as if it would almost be beneficial to find a way to get the gas.
Posted by: Brent | June 30, 2011 at 11:06 AM
Yeah just like any other business idea, when something new comes along and needs lots of motion and approval, you definitely need to be patient.
Posted by: Andrew Statezny | August 31, 2011 at 09:53 AM
yes it seems like there is still so much gas to be discovered.
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