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Next Cold War? US Gas Drilling Boom Rattles Russia

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“Gazprom group generally views shale gas as a great gift to the industry,” he wrote. When natural gas prices rise, “it will make the U.S. plans to become a major gas exporter questionable.”

Whether exports happen involves a dizzying mix of math, politics and marketplaces, along with the fact that U.S. natural gas companies – and their shareholders – want prices to rise, too.

James Diemer, an executive vice president for Pace Global, an international consulting company based in Virginia, believes that shale gas costs more to extract than the current market price. Pace, which recently released a report called “Shale Gas: The Numbers vs. The Hype,” has been studying shale gas for Gazprom and other clients.

“The capital will stop flowing” to U.S. shale gas, and the price will go up, Diemer predicted. He would not divulge the kind of work Pace is doing for Gazprom. Pace is owned by Siemens, a German company.

Pace’s work for Gazprom has raised some eyebrows in Washington, and Hill noted that industry watchers in Europe already believe Russia is bankrolling environmental groups that are loudly opposing plans for fracking in Europe, which could cut down on Russia’s natural gas market.

“I’ve heard a lot of rumors that the Russians were funding this. I have no proof whatsoever,” she said, noting that many critics give the rumors credence because Gazprom owns media companies throughout Russia and Europe that have run stories examining the environmental risks of fracking.

Gazprom dismissed such conspiracy theories, saying that “nothing could be more out of touch with Gazprom’s inherent interests,” because the shale boom promotes gas as an abundant, affordable energy source.

Many U.S. media outlets, including the AP, have run stories about shale gas and the environment. Regulators contend that overall, water and air pollution problems are rare, but environmental groups and some scientists say there hasn’t been enough research.

U.S. energy companies are eager to export natural gas products.

The issue is sensitive enough that the Obama administration has delayed a decision on export permits until after the election. In April, the Sierra Club sued to block one plan for exports, saying it would drive up the cost of domestic natural gas and lead to environmental damage.

But just the potential for exports could allow others to seek lower prices from Russia, said Kenneth Medlock III of the James Baker Institute for Public Policy at Rice University in Houston.

“It changes the position at the bargaining table for everybody,” Medlock said. “You stack all that up, and you start to realize, ‘Wow.”’

There’s one enormous unknown with the shale gas bounty in the U.S., Hill said. Unlike in Russia and some other countries, neither the government nor any one private company can really control or direct it.

“The question is, can the U.S. do what the Russians do, which is use this as a political tool?” she said.

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Posted by FanSite on Nov 1st, 2012 and filed under News. You can follow any responses to this entry through the RSS 2.0. You can leave a response by filling following comment form or trackback to this entry from your site

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