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Bridging The Gap
 US to emerge as top gas producer: IEA
 Tuesday 05 June, 2012
US to emerge as top gas producer: IEA

KUALA LUMPUR: A surge in unconventional supplies will see the United States overtake Russia as the world's biggest natural gas producer in 2017, but it will still need imports to feed a voracious appetite, the International Energy Agency (IEA) said on Tuesday.

A rapid rise in production of shale gas and oil trapped in difficult reservoirs has revolutionised the industry of the world's top fuel consumer, turning it from the biggest gas importer to a potential exporter and reducing its dependency on expensive crude shipments.

Despite low gas prices that have slowed the pace of drilling somewhat, the momentum of the shale gas boom led to the United States adding production equivalent to half the annual shipments of top liquefied natural gas (LNG) exporter Qatar in 2011, and it could soon overtake Russia as top producer.

"The United States is forecast to be one of the largest sources of incremental supply to 2017, where gas production continues to boom despite a difficult gas pricing environment...putting the United States slightly ahead of Russia," the IEA said in a report issued on Tuesday.

"High oil prices, driving the production of gas associated with light tight oil extraction, combined with substantial domestic consumption and new international opportunities, are expected to underpin continued expansion of U.S. gas production over the period."

The IEA expects total US gas production to rise from 653 billion cubic meters (bcm) in 2011 to 769 bcm in 2017, while Russian gas output is expected to rise from 659 bcm last year to757 bcm over the period. But U.S. demand is also expected to surge from 690 bcm last year to 779 bcm in 2017, as a slump in prices over the last few years encourages U.S. industry to use more.

Although it is set to remain a net importer of around 10 bcm per year, with Canadian pipelines supplementing U.S. production in the north, the United States could export some gas from converted former LNG import terminals on the Gulf coast. "The continued boom in unconventional gas in the United States may even herald the end of the hundred-year dominance of coal in US power generation," said the agency, which advises 28 industrialised countries on energy policy.

Gas could displace coal as the leading fuel source for U.S. power stations by 2017, it said. Abundant and cheap gas will be a blessing for many energy-intensive industries in North America but could be curse on their European competitors, the IEA said.

"The (European) industrial sector struggles amid prices three to four times higher than in the United States, which becomes a new competitor for European-based petrochemical and fertiliser industries," the IEA said. "Unlike their U.S. counterparts, European industrials will not see any benefits of lower gas prices induced by shale gas developments."

Although shale gas has dominated the headlines, tight gas accounted for about half of the 16 percent of global unconventional gas output, the IEA said. North America will likely continue to lead in shale gas output, but in other regions coal bed methane and tight gas will dominate, with shale potential limited beyond China and Poland.

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