Shale Gas Will Change The World

  • Date: 08/06/10

This conference chatter is a reflection of growing excitement in the US and Europe at the idea that we may have discovered a large part of the answer to one of the most vexatious problems in foreign and economic policy – energy security.

The result is that the shipping terminals that the US built to receive liquid natural gas from overseas are now lying virtually empty. The rise of shale gas, which can be used to produce electricity, reduces dependence on domestically produced, but dirty, coal. If cars powered by electricity or gas improve, shale gas would also reduce reliance on Middle Eastern oil.

Both the EU and China are excited by the idea that they too may soon enjoy a shale gas bonanza. Chinese foreign policy has increasingly been driven by the need to secure energy supplies. But China looks as if it may have its own shale gas reserves, and has signed an agreement with the US to look into exploiting them.

The excitement in Europe is even more pronounced. Just as North Sea oil and gas supplies are running down, the British are hoping that they may discover exploitable supplies of shale gas in Wales and north-west England. The Poles, who have their own special reasons to fear energy dependence on Russia, also think they have exploitable reserves. Radek Sikorski, the Polish foreign minister, recently visited Houston to talk to the big US energy companies about shale gas.

The geopolitical effects of all this may be already being felt. In recent months, western officials have noticed a distinctly more friendly tone in their dealings with Russia. The Russians have signed a new nuclear arms reduction treaty with the US, accepted the idea of tougher sanctions on Iran and responded to the air crash on Russian soil that killed the Polish president and his entourage with unexpected openness and sensitivity.

Some western officials attribute this change in tone in the Kremlin to the US altering its position on missile defence; others credit the growing influence of President Dmitry Medvedev. But some think that Russia is already adapting its foreign policy in response to the sharp fall in the price of gas and the shift on world energy markets.

Some environmentalists are also less than delighted by the shale gas revolution. There are concerns about environmental dangers posed to groundwater by the chemicals that are used to extract the shale gas – and such fears will only be heightened by the oil spill off the coast of Louisiana.

In the short term, increased use of gas will make it much easier for the US and Europe to cut emissions of carbon dioxide, because gas is much less polluting than coal. On the other hand, shale gas is still a fossil fuel and produces greenhouse gases. For those environmentalists who dream of a future powered by windmills and solar panels, the dash for gas is a distinctly mixed blessing.

Copyright 2010, Financial Times


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