Shale gas is one of the hottest topics in international energy markets and has the potential to be a true game changer. Large quantities of shale gas have been introduced to the markets and in the US have adversely affected domestic prices. As the shale gas phenomenon spreads globally, its impact will be uneven but significant. KBC believes one near-term hedge against price risk is exploitation of the associated liquids production.

There are significant reasons to exploit shale gas reserves, particularly in countries which are currently net gas importers, or require gas to fuel industrial expansion. As an example, Poland – an importer of Russian gas – now regards development of domestic shale gas reserves as an option to both replace coal-fired power generation to meet European Union emission restrictions and as a path forward to energy independence. While shale gas has already revitalised the US petrochemicals sector, there is a real risk of overcapacity as other countries such as China develop their shale gas reserves. Thus, while euphoria over shale gas seems to have captured the attention of the global energy market, there are underlying risks and challenges still to be considered.

This Perspective covers the changing dynamics and challenges introduced by shale gas into global gas markets, addressing topics such as: