The shale gas market is expected to register a CAGR of more than 9.0% during the period of 2021-2026. The COVID-19 has brought the largest change in the industry since the beginning of the shale boom in 2007. The pandemic is expected to impede the growth of the market, with most of the risky assets being restructured and many companies either leaving or soon to leave the basins till the price point becomes profitable. Factors, such as an increase in consumption of oil and the rising growth in the oil-dependent industries, are expected to drive the market. However, volatility in the oil market with prices going below the shale gas production cost may be a restraint.
- Increasing environmental concerns during the production of shale gas are expected to restrain the market studied.
- New developments in shale gas production technology, like the advancements in horizontal drilling technology, are expected to make the shale gas reservoirs more viable, and this may provide an opportunity for market players.
- North America is expected to be the largest market in the forecast period, owing to its large-scale production of shale gas in the region. The United States is expected to lead shale gas production in the region.
Key Market Trends
Increasing Environmental Concerns to Restrain the Market
- Despite the economic benefits, environmental risks associated with hydraulic fracturing are restraining the shale gas market.
- Methane gas emissions during the drilling process pose potential air pollution risks. Additionally, incorrect disposal of large volumes of chemically treated water used in hydraulic fracturing operations can potentially cause severe surface water contamination. This has attracted criticism from environment protection bodies and NGOs around the world. Due to its impact on health and farming, local farmers and residents have also repeatedly opposed hydraulic fracturing.
- Additionally, a typical fracking well requires approximately 2-10 million gallons of water during fracking operations, which puts additional strain on the water supply, particularly in the drought-prone regions.
- In West Texas, where the Permian Basin (which is expected to drive the growth of shale gas activities in the United States) is located, shale gas companies faced opposition and criticism from the farmers due to the water shortage.
- The US Geological Survey (USGS) blamed shale gas activities for the increase in earthquakes in recent times in certain parts of the Central and Eastern United States that are well-known for oil and gas extraction.
- Thus, the increasing environmental concerns are expected to restrain the market during the forecast period.
North America to Dominate the Market
- In 2019, the United States was the largest producer of shale gas in the world. Different countries, such as Brazil, Canada, China, and Argentina, have tried to emulate the American shale boom but have not been able to succeed. However, large progress has been made in China, but due to the difficulties posed by the unstable reservoirs, shale gas production may only rise slightly in the forecast period.
- In January 2021, Reliance Industries Ltd agreed to sell its entire stake in certain upstream assets in the Marcellus shale gas asset in south-western Pennsylvania in the United States for USD 250 million amid weakness in the global hydrocarbon market. The assets, controlled by RIL's wholly-owned unit Reliance Marcellus LLC and operated by affiliates of EQT Corporation, a US-based energy company engaged in hydrocarbon exploration and pipeline transport, were sold to Northern Oil and Gas (NOG) Inc. The shock caused by COVID-19 caused many smaller investors in the shale region to delay or abandon the projects in the industry.
- The shale gas production in the United States increased, by 1.8%, from 835.247 billion cubic feet (bcf) in 2019 to 850.192 bcf in 2020. Shale gas production may increase further due to new wells being drilled across the country.
- Canada is known to have significant conventional gas reserves, and the country was a key supplier of natural gas to the United States for decades until the recent shale boom in the country. However, with conventional natural gas sources in decline, Canada's industry is turning to unconventional sources, including shale gas. Many oil and gas companies are now exploring and developing shale gas resources in Alberta, British Columbia, Quebec, and New Brunswick, which may balance the difference in shale gas production in the coming future.
- An estimation by the Energy Information Agency (EIA) shows that the US dry shale gas production in 2020 was about 850 bcm. The current scenario of the region may demand more natural gas supply during the forecast period, which may attract investment in the exploration and production of shale gas.
- Hence, North America is expected to dominate the market due to the overwhelming production of shale on the continent.
The shale gas market is moderately fragmented due to many companies operating in the industry. The key players in this market include Chesapeake Energy Corporation, Royal Dutch Shell PLC, Exxon Mobil Corporation, PetroChina Company Limited, and ConocoPhillips, among others.
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