Natural Gas from Shale: Old News

There is suddenly a burst of articles about old news. Yes, companies have developed the technology of horizontal drilling which allows companies to extract gas (and some oil) from shale. But those who follow oil and natural gas industries have known about it since last year.

Is it game changing? Somewhat. This technology probably doubled world natural gas reserves in less than a year. It added a little to the oil reserves. As a new technology, it has a lot of room for improvement, so I expect gas and oil reserves to increase even more.

Is there a trade or investment here? Not much. Obviously, natural gas prices in the US aren't going to grow much anymore because the supply is way too big. The additional supply of oil is too small to make a change. The situation in Europe is different. As far as I know, Poland and Estonia have huge shale fields. In Estonia it was even feasible to use shale rock as a fuel. With Europe looking to diversify gas sources from Russia, it might be a very bad news for Gazprom (OGZPY.PK). Don't even think about investing in it.

Comments

[Ferdinand E...:]

What I won't think about is shale gas becoming a problem for Gazprom. If the Russians really thought that this could happen, they would just start making arrangements to send as much gas as possible south - to China - which is what they eventually are going to do anyway.

Oct 13 09:28 AM

[Henri DeToi:]

It depends. If gas is so widespread and burns much cleaner than oil and coal, it should start replacing them as an alternative energy. Then the reserves should go down before the drilling picks up to satisfy the demand and the price should pick up.

Oct 13 09:55 AM

[Henri DeToi:]

...if gas is cheaper than oil, there is bound to be a switch to natural gas.

Oct 13 09:56 AM

[Shale Gas:]

The Bakken Shale in North Dakota produces primarily oil so this technology has the potential to increase oil reserves as well.

Oct 13 10:05 AM

[bluesky123:]

that's why you buy northern China natural gas distributor China New Energy Group. "CNER".

Revenues +47%
Gross profit +47%
Gross margin 74%
Just did a capital raising so you miss the dilution
CEO's background: Exxon Oil & Gas, Edison Mission Energy (Southen California Utilities), Hong Kong China Light & Power Group; China Tianjin East Ocean Gas as the CEO.

China signs nat gas deal with Russia, in today's NYT
www.nytimes.com/2009/1...

China & energy. No brainer. Stock is 15 cents. PE is 1.5. Go figure.

Oct 13 11:30 AM

[bluesky123:]

that's just what they announced today
www.nytimes.com/2009/1...


On Oct 13 09:28 AM Ferdinand E. Banks wrote:

> What I won't think about is shale gas becoming a problem for Gazprom.
> If the Russians really thought that this could happen, they would
> just start making arrangements to send as much gas as possible south
> - to China - which is what they eventually are going to do anyway.

Oct 13 11:34 AM

[Alex Filonov:]

Thanks everybody for comments.

There is some misunderstanding of the gas agreement between Russia and China:

1. It's mostly a declaration now, government didn't agree on the most important point: price.
2. Russia would need to build a huge new pipeline through one of the worst terrains in the world. Whatever obstacles you can imagine: mountains, big rivers, swamps, permafrost, are there. Cost is huge.
3. Even when built, this pipeline would carry something in order of 5% of the Russian gas export to Europe.

In short, Russia, of course, wants to sell as much as possible of natural gas to China. But in the nearest future it's not that much.

Oct 14 10:57 AM

[Genesis:]

This entire article is old news since NG already made its bottom.

Oct 14 07:03 PM

[v.GNZ:]

Has anyone heard about Goldnev Resources? They have an oil shale discovery in Saskatchewan of over 2+ billion barrels. Its very shallow and very good quality oil shale. With more testing coming up, they could prove this to be an incredible find

Oct 16 11:59 AM