America's natural gas boom has been truly amazing. Since 2006,
U.S. gas production has increased 55%, and the result has been a
decline in gas prices of 70% since 2008.
This amazing production growth has been thanks to technology
such as hydraulic fracturing and horizontal drilling. Its
also been due to geological formations such as the Marcellus and
Utica shale, whose production has increased 47% annually since
2007 and 165% since 2012, respectively.
To give you an idea of just how remarkable this growth has
been, the Marcellus shale is now single-handedly the world's
third largest gas producer, ahead of Qatar and Canada, and just
6% behind all of combined Europe. Analyst firm
expects production for the Marcellus/Utica shale to increase 127%
The benefits of natural gas
Other nations have taken notice of the many benefits of natural
gas, including both lower costs and environmental benefits. For
example, not only do natural gas power plants generate 50%-70%
less CO2 than coal, but according to the World Health
Organization, gas kills 40 times fewer people per TWh. In China,
the world's largest consumer of coal, coal is 68 times more
deadly than gas because of less well regulated mining
The world's shale gas potential
As this table from the Energy Information Administration
shows, the U.S. holds only 9% of the world's technologically
recoverable shale gas. So, the question is, with all the benefits
of cheap and abundant gas can offer, why hasn't the rest of the
world jumped on board the gas fracking bandwagon? As I'll now
explain, there are three main categories of problems preventing a
global gas boom, reasons that might leave America as the sole
shale gas superpower in the coming century.
Obstacles to an international gas boom
The obstacles to a global shale gas boom can be placed into
three categories: legal/regulatory, economic, and
In the first category, the U.S. is blessed with highly
favorable regulations. According to James Kipp of
Securites, the fact that land owners in the U.S. also own the
mineral rights and can lease these rights to private companies is
something unique in the world.
In addition, the regulations in the U.S. are designed to
incentivize experimentation with new techniques, such as tax
breaks that allow for faster depreciation of assets, while those
in other countries do not. According to Robert Beck of
, "It's just set up for conventional oil and gas
production. There's no way in the traditional production
sharing contract that we as an industry can come in and make
Meanwhile, in Europe, governments are far more hostile to
fracking. For example, sighting environmental concerns
popularized in the controversial documentary Gasland, France has
made fracking illegal. This is despite the EIA estimating that
France contains enough shale gal to provide 80 years of the
nation's current gas consumption.
Thus far, only Bulgaria has joined France in outlawing the
practice, but German Environment Minister Barbara Hendricks,
has publicly called for such a move. Mrs.
Hendrick's reasons for her stance aren't entirely environmental;
they are also geographic. "Unlike the USA, our country is densely
populated and small,"This brings me to the second category of
obstacles, geology and geography.
America: wide open spaces, lots of water
The United States has been blessed with large, relatively easy
geologically exploitable shale formations located
in underpopulated areas. We also have the world's
largest gas infrastructure, with 1.22 million miles of pipeline
-- a number that has quadrupled in just the last six years.
Compare this abundance of infrastructure with China, who,
until recently, had the goal of reaching 22%-37% of 2013 U.S. gas
production levels by 2020.
China's shale gas ambitions may prove impossible
, partially because its pipeline infrastructure is 41 times
smaller than that of the U.S., despite being 16% larger in
In fact, according to the CIA World Factbook, China currently
has only 29,940 miles of gas pipeline. To put that in
, America's largest pipeline operator, has 70,000 miles of gas
China also has a major water problem, and fracking is thirsty
work. Fracking requires an average of 4.4 million gallons of
water per well, enough to supply 11,000 American families for a
In fact, China's water shortage is such a problem that the
government is worried it might cause power disruption from water
intensive coal, nuclear, and gas power plants. To address the
issue, the government is in the middle of a 100-year, $62 billion
engineering effort call the South-North water diversion project.
When complete, it will be the equivalent of diverting the Thames
river in London across the width of the United States.
All told, the combination of a favorable legal and regulatory
framework, vast infrastructure, large water resources, and
favorable geology result in U.S. fracking costs per well being
135%-788% cheaper than in other nations. Given that many of these
obstacles cannot easily (if ever) be overcome, it is very
possible the shale gas boom will prove to be a mostly American
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Does America Have a Stranglehold on This Valuable
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