Economic impact analysis of natural gas development and the policy implications

Abstract

In the US, the shale gas revolution ensured that the development costs of unconventional natural gas plummeted to the levels of $2-$3/Mcf. This success has motivated the development of shale gas in other regions, including Australia and Europe. This study, focussing primarily on aspects of economic impact analysis, estimates the development costs of shale gas extraction in both Australia and Europe, based on both direct and fiscal costs, and also suggests policy initiatives.The increasing liquefied natural gas (LNG) developments in Australia are already straining domestic gas supplies. Hence, the development of more natural gas resources has been given a high priority. However, a majority of the Australian shale resources is non-marine in origin and significantly different to the marine-type shales in the US. In addition, the challenges of high development costs and the lack of infrastructure, service capacity and effective government policy are inhibiting shale gas development. Increasing the attractiveness of low risk investment by new, local, developers is critical for Australian shale gas success, which will simultaneously increase domestic gas security. In the European context, unconventional 2 gas development will be challenged by direct, rather than fiscal costs. High direct costs will translate into average overall gas development costs over $13/Mcf, which is well over the existing market price.Keywords: Unconventional gas, Development costs, Shale gas, LNG IntroductionThe global energy sector is confronted with soaring energy needs of a growing population, improving standards of living and expanding economies of the world. Global energy consumption is projected to rise by 41% over the next two decades, while fossil fuels will still remain as the dominant form of energy, supplying around 80% of world energy consumption in 2040 (BP, 2014). Under this prolonged dependence on fossil fuels in conjunction with intensifying global concerns of increasing carbon emissions and climate warming, natural gas is becoming an important resource in catering to global energy needs.The International Energy Agency (IEA) (2014) asserts that world's remaining recoverable gas resources are sufficient for over 230 years at the current production rates. Moreover, natural gas is the fuel of choice for power generation as gas-fired power plants have the lower capital costs with less than half of the CO2 emissions of coal-fired power plants (Dormer, 2013; EIA, 2014a;Tay, 2014).In addition, the emergence of unconventional oil and gas has added a whole new dimension to the fossil fuel industry. The term "unconventional" refers to the requirement of some form of reservoir stimulation, which makes the recovery process more complex. The stimulation process is referred to as hydraulic fracturing, which leads to an increase in the permeability of the underground geological formations, such as shale, that are holding the oil and gas, easing the hydrocarbons out of entrapment and towards the well bore and, subsequently, the wellhea...

The Interaction Effect between ESG and Green Innovation and Its Impact on Firm Value from the Perspective of Information Disclosure

“…As the traditional OLS regression method needs to meet a variety of assumptions prior to running, the random disturbance term should have a mean of zero and be identically distributed if the error term meets the normal distribution condition. In the actual economic situation, however, it is found that most economic indicator data does not meet the above assumptions [43]. Quantile regression can better observe the overall distribution of data without data processing, making up for some of the defects of OLS regression [44].…”

Review of shale gas social science in the United Kingdom, 2013–2018

“…We have an awareness that both scholars and the public think planning processes and Silva et al 2016]). Williams et al (2017) report scepticism amongst their focus group participants about the purported economic benefits (e.g., from job creation in the gas sector, taxes collected, expansion of ancillary industries to support SGD in areas with development), but economists have yet to assess, in the peer-reviewed literature, the UK Government and industry claims (e.g., House of Lords 2014).…”

The role of LNG supplies in balancing natural gas demand in EU countries

“…It seems that a real opportunity to significantly reduce the dependence of EU economy on the supply of pipeline gas from non-EU countries (mainly from Russia, Norway, Algeria and Libya) is the development of infrastructure investments related to LNG. Available information on lessons learned from the exploitation of unconventional resources in the EU leads to a conclusion that in most cases they were unsuccessful [12]. According to information provided by the European Commission, it is estimated that in the period 2017-2023 the global LNG turnover will increase by more than 100 bcm, from 391 to 505 bcm [13].…”