The “shale gale” has swept in a new era across the energy industry. Is it the catalyst for economic growth, increased jobs, improved government revenues and a boost for manufacturing profitability? Environmental debate aside, exploration of shale offers a viable means to help lower gas prices and meet energy demands across the globe. So what does the future hold for this unconventional energy source?

On the one hand, the abundant supply of shale gas and its success in the U.S. provides tremendous impetus for industries such as refining and petrochemicals while also reducing operating costs for associated industries, including steel producers and manufacturers. On the other hand, shale gas is still an untapped resource for many regions that have relied on conventional oil and gas feedstock, so the potential for commercial growth is enormous.

Shale a boost for business

A good example of the positive effect of shale gas in the U.S. is that gas has become an attractive alternative feedstock when compared to relatively high-priced crude oil. Consequently, U.S. naphtha and petrochemical producers now enjoy a major cost advantage over foreign competitors who are dependent on liquid feeds. By comparison, the Middle East still has the most feedstock advantage. However, gas availability is rapidly becoming an issue. As a result, many petrochemical sites are turning to liquid feedstocks, hence eliminating their competitive advantage.

Saudi Arabia, for example, has committed to plans to exploit its unconventional gas reserves. Kuwait and the UAE also are reviewing the potential for the resource. Although not significantly affected by shale gas, Qatar is looking to end its indexation to oil prices and move to more flexible agreements. Overall, it is unclear how the Gulf Cooperation Council countries will be affected by unconventional gas resources. However, in the long term, shale is almost certain to play a role in the Middle East’s energy portfolio as more traditional feedstocks continue to experience price fluctuations and market volatility.

Vast shale gas reserves exist across Europe, and the economic benefits of shale gas could encourage exploration. It is true that European shale gas deposits are geologically more difficult to extract than those in the U.S. Drilling can be land-intensive, and this could be disruptive or expensive in densely populated Europe. However, with the appropriate surveying techniques, technologies and skills, companies are making exploitation commercially feasible today.

The U.K. introduced tax relief for investors in shale gas to boost interest in such projects. Investment programs have already taken effect, with Total announcing that it had taken a 40% interest in two shale gas exploration licenses in the U.K. Total’s shale gas projects also cover the U.S., Argentina, China, Australia and Denmark.

While the U.S. has enjoyed significant benefits from the shale boom, Russia has substantial recoverable shale oil resources. Russia has more technically recoverable shale oil resources than the U.S. (75 Bbbl vs. 58 Bbbl, according to the Energy Information Administration). Natural gas is not simply another form of carbon fuel—it burns 50% cleaner in terms of CO2 emissions compared to coal and 25% cleaner than oil. When used with the latest power generation technologies and distributed generation that minimizes transmission losses, the actual carbon savings compared to coal can approach 70%. With this in mind, China faces significant environmental challenges with its heavy dependence on coal, so the Chinese government has issued development plans outlining a move toward shale gas instead of coal as a means to reduce emissions and exploit financial opportunities. Crucially, China has almost twice the recoverable shale gas reserves as the U.S. In essence, countries that can exploit their shale reserves sustainably in the future will reap considerable economic rewards.

The revolution in unconventional oil and gas also has helped to further entrench the supermajors’ dominance in the oil and gas industry. According to Wood Mackenzie, the ranking of top 20 energy companies is virtually unchanged. The top four companies are Saudi Aramco, Gazprom, the National Iranian Oil Co. and Exxon Mobil. Rosneft, Shell PetroChina, Pemex, Chevron and Kuwait Petroleum Corp. all feature in the top 10.

Tools for the job

The creation of jobs as a direct result of shale gas reflects the high demand for engineers and expertise across key disciplines, from chemical engineering and operational management to executive leadership.

This natural gas shale gale has the potential to support millions of jobs globally and contribute billions of dollars to GDP. To support the expansion of production within the shale gas industry, significant growth in capex and employment is expected. According to a recent IHS report, in 2010 alone shale gas industry activities contributed more than 600,000 jobs to the U.S. economy, and by 2015 IHS projects the industry to grow by a further 45%, adding an additional 270,000 jobs. In fact, by 2035 it estimates that shale gas activities will contribute 1.6 million jobs to the overall U.S. economy. The majority of company executives are optimistic about their growth prospects for the long term and are already planning further growth in the oil and gas industry. The need for engineering expertise is positive news for employment prospects, and many engineering operators are rapidly recruiting and training to gear up for growth.

The growth in business correlates with the need for appropriate skills. More and more companies are investing in leading-edge technologies to help equip engineers to meet demand and operational objectives. Extraction of natural gas from unconventional shale formations has become more technologically and economically viable due to improved horizontal drilling and hydraulic fracturing techniques. On a separate point, the demand for leading-edge technologies is subsequently on the increase, including process simulation tools. This is, therefore, a crucial component for companies wanting to transport and process gas reserves. Software technology helps to facilitate the need for improved cost efficiencies. The adoption of engineering software solutions enables companies to bring new gas and liquids processing facilities to market faster with a higher return on investment. The software reduces capital costs through steady-state and dynamic process optimization and lowers operating costs by integrating simulation models with plant data for operations planning and decision support. In an operational context, software solutions optimize manufacturing and supply chains subject to economics, feeds, constraints and demands while providing the agility to react to changing market conditions. Maximizing assets for optimal profitability is vital when margins are tight in highly competitive markets. Process industry software helps optimize unconventional shale play opportunities by aligning inventory and distribution with market demand.

Future prospects

The long-term effect of shale gas is predicted to reap substantial rewards. Lower energy costs will mean that manufacturing becomes cheaper and that investment across industry will be widespread, including growth in chemicals, engineering, technology and employment. Government policymakers and commercial investors who reject shale extraction technologies as niche developments must consider the longer term implications. Market growth means a flourishing economy, job prospects and valuable skills development and potentially a balanced approach to energy portfolios where the reliance upon traditional energy sources has been consigned to feedstocks from powerhouse energy-rich regions. The unconventional could soon become conventional.

Predicting the dynamics of the oil and gas industry and the commercial outlook is complex. Nevertheless, for the foreseeable future one simple fact is certain: Energy demand across the globe will continue to grow. Powered by leading technology, harnessed with industry skills and investment, and regulated by rigorous environmental policies, shale gas will play a vital part of energy portfolios and will continue to be a catalyst for profitable growth.