Energy giant BP suggests China will become a major producer of shale oil and gas over the next 20 years. It predicts that overall, shale gas will more than double its share of the global gas market to account for about 24% of the total in a base case scenario.
How important will shale oil and gas become in the energy mix and what might the impact be in chemicals?
The rush to invest in US gas-based chemicals gives a flavour of the potential opportunity, with billions of dollars flowing into new plants alongside midstream infrastructure.
Much has been written about the specific set of circumstances that have enabled such rapid development and how those are unlikely to be repeated elsewhere. But, over time, shale oil and gas will account for a greater proportion of the diversifying global energy mix.
Likewise, the natural gas liquids (NGLs) and natural gas from shale will make greater inroads into the feedstock mix for industry crackers, propylene, methanol and ammonia units.
Energy giant BP suggests China will become a major producer of shale oil and gas over the next 20 years. It predicts that overall, shale gas will more than double its share of the global gas market to account for about 24% of the total in a base case scenario.
“We have been repeatedly surprised by the strength of US tight oil and shale gas,” BP said in its 2016 Energy Outlook. “Technological innovation and productivity gains have unlocked vast resources of tight oil and shale gas, causing us to revise the outlook for US production successively higher.” But it warns past surprises in the strength of the shale revolution introduce considerable uncertainty, although future surprises could also be on the upside.
Now US shale gas is expected to grow at 4%/year over the period of the outlook. US shale gas could account for about 75% of total US gas production in 2035 and some 20% of global gas output.
In a “stronger shale” scenario, characterised by greater reserves and greater production efficiency, shale gas could account for more than one-third of global gas supplies. BP sees global tight oil output increase to twice its level in the base case under this scenario, while the share of total liquids output rises to 18%.
The impact of that sort of development potential cannot be ignored. Think of the way China has moved to capitalise on its coal resources for chemicals, and the impact of coal-to-olefins (CTO) and coal-to-propylene plants on downstream olefins-reliant markets alongside the impact on methanol.
The loser in the latest of BP’s various energy scenarios, in its Energy Review 2035, has to be coal, largely because of its environmental impact – although increased shale oil and gas production would also crowd out conventional resources and renewables.