x Abu Dhabi, UAEMonday 22 January 2018

Shale gas extraction a worry in US

US consumers fret about gas shale drilling contaminating groundwater, brightening the outlook for LNG exporters such as Qatar.

Americans are unwilling to put their water supplies at risk for the sake of cheap natural gas, a survey has found, suggesting that grass-roots environmental protests could slow the US gas shale boom.

That could be good news for liquefied natural gas (LNG) exporters such as Qatar and Algeria, which have been hit hard by falling global gas prices.

The US survey, recently conducted by the polling firm Infogroup/Opinion Research for the not-for-profit US Civil Society Institute (CSI), was the first nationwide poll to gauge US attitudes to the environmental impact of the US onshore drilling boom.

After advances in drilling technology and the development of a technique known as hydraulic fracturing, or "fracking", which stimulates the flow of gas into wells, US and international oil and gas producers have flocked to exploit huge but previously uneconomic deposits of gas locked in North American shale beds.

Some of those shallow gas deposits are conveniently close to major US markets, such as New York. But they also impinge on the porous underground rock formations that store fresh water for the populous region.

Consumers are increasingly concerned about the potential for the fracking chemicals used to unlock the gas to poison groundwater.

"Among Americans who already are aware of fracking, more than two out of three (69 per cent) are concerned about the drilling technique's possible threat to clean drinking water" CSI said.

The survey also found that 72 per cent of respondents disapproved of energy production that used large quantities of water or jeopardised water quality.

"The message from our new survey is clear: Americans of all political persuasions prefer to see clean energy development that protects water supplies over traditional fossil fuel production that endangers safe drinking water and human health," said Pam Solo, the founder and president of CSI, which is based in Newton, Massachusetts.

The unexpected boom in US gas drilling over the past two years has contributed to a global gas glut that is most pronounced in the Atlantic basin. Qatar, the world's biggest LNG exporter, had expected to sell much of its new production to European and US markets but recently has diverted cargoes to Asia. That, in turn, has pressured Pacific-basin LNG prices.

"The fact that [shale] projects will slow down relieves the pressure on LNG suppliers," said Colin Chapman, the president of Euro Petroleum Consultants, a consultancy in London that tracks global fuel trends.

In the long term, Mr Chapman views the intensified environmental scrutiny that oil and gas producers have faced this year after BP's Macondo oil spill as a positive development for the industry.

"There was bound to be resistance to shale drilling after the BP thing. This will push the companies to make sure the environmental issues are taken care of," he said. "There's bound to be a big lobby now on both sides of the shale gas issue. It's good for the sake of the industry to look at the environmental impact."

Public concerns about potential groundwater contamination have been a major obstacle to shale gas development in Europe, which tends to have greater population densities than North America.

"In Europe, people are looking, and looking seriously, but [shale gas development] is not going to come overnight," Mr Chapman said. Investment in shale gas could be limited by an expected slow recovery in gas prices over the next few years. The existence of improved technology for exploiting difficult shale gas deposits puts a ceiling over global prices by showing there is "an alternative out there", Mr Chapman said.

Gas producers that have stuck to developing conventional reserves have increasingly found themselves tackling costly projects in remote or politically unstable locations, or in deep water far offshore.