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Shale Gas – The Revolution is Underway!

 

Lastly, natural gas continues to benefit from headline opportunity. This week’s Economist highlights the global potential for shale gas, which may be in greater abundance and at lower costs than conventional gas or crude oil. Coincidentally, a Barclay’s note predicts that the Marcellus Shale (Pennsylvania/West Virginia/New York) may contribute 1% of US demand this year, but 10% by the end of 2012 – a huge ramp, likely to continue to pressure gas prices relative to crude. And, this morning, the largest producer of eastern coal, Consol Energy, announced a $3.5 billion acquisition of Appalachian natural gas properties from Dominion Energy, in a move that could nearly balance coal and gas profits by 2015. Consol’s gas volumes more than triple in five years, while their coal output falls 20% or more (2008-2011). I would note that natural gas has about half the carbon footprint of coal, although more sophisticated analyses warn that transportation of either can alter the relative merits of the two resources, i.e. ‘downstream’ logistics are an important factor in the ultimate evaluation.