Premium Essay

Economic Analysis of Shale Gas

In: Business and Management

Submitted By bmc137
Words 1290
Pages 6
Economic Analysis of Shale Gas an Industry Alternative


Lillian Ashford


Bridget M. Chow

Professor Nelson Altamirano, Ph.D.

National University

ECO 607

Economics for Managerial Decision-Making

December 11, 2011


Shale gas is natural gas that is trapped in shale formations. Shale particles are fine grained sedimentary rocks that are rich sources of petroleum and natural gas. In the past, it was not economically viable to produce shale gas; however, with technological advances and the forward thinking perceptions of reducing our ecological footprint, the process has become more economical due to horizontal drilling and fracturing. The natural gas industry in the United States has been revitalized as a result of the production of natural gas from shale formations. In 2009, shale gas represented approximately 14% of the United States total natural gas supply. The production of shale gas is expected to increase and make up approximately 60% of the (U.S.) total natural gas supply by 2035.
The question to ponder is whether or not shale gas is a viable energy option for the United States to consider in reducing the energy dependence of the Organization of Petroleum Exporting Countries (OPEC) while increasing fiscal responsibility and economic viability in both the short and long run analysis?

Economic Analysis

The shale gas industry has contributed to the economy in terms of jobs, economic value and revenue for the government. Shale gas production has changed the U.S. energy outlook and the economy. In 2010, shale gas represented 27% of U.S. natural gas production. Within the next five years, shale gas production is expected to grow to 43% and 60% by the year 2035. Shale gas has the potential to support more than 1.6 million jobs and contribute more than $230 billion to the GDP...

Similar Documents

Premium Essay

The Economic and Environmental Impacts of Shale Development

...ENGR 2595 | Shale Oil | A Controversial Energy Source | | Gabriel Lessard-Kragen, Daylon Hutton, Nikolai Sie | 12/4/2014 | | Table of Contents Table of Figures i Introduction 1 What is Hydraulic Fracturing? 1 Socio-Economic Impacts 3 Local Economic Impacts 3 U.S. National Economic Impacts 5 International Economic Impacts 6 Environmental Issues 8 Water Impacts 9 Greenhouse Gases 11 Liability 12 Conclusion 13 Bibliography 14 Table of Figures Figure 1: Marcellus Shale 10 Figure 2: GHG Eissions Associated with Oil Extraction 12 Figure 3: Deepwaater Horizon Impacts 12 Introduction The topic of this document is shale oil and gas, and the issues surrounding their extraction and usage. The terms oil and gas are used interchangeably in this article, however they technically are different substances. The issues and economics attached to the two substances are similar, and thus are discussed as a group. This document will begin with an analysis of what hydraulic fracturing (fracking) actually is, as a lot of controversy and misinformation has been released around it. Afterwards the economics of the shale boom will be analyzed, from both a local, national, and international perspective. Finally the environmental impact of shale gas will be discussed, as this is the major concern surrounding the technology. What is Hydraulic Fracturing? Fracking is the term most often used to describe the process of hydraulic fracturing. Unknown...

Words: 4807 - Pages: 20

Premium Essay

Shale Gas

...Impact of Shale Gas Production on the Market Fundamentals and Energy Security of  Certain Countries       ICCG Think Tank Map: a worldwide observatory on climate think tanks IMPACT OF SHALE GAS PRODUCTION  ON THE MARKET FUNDAMENTALS   AND ENERGY SECURITY OF CERTAIN  COUNTRIES  Ekaterina Zelenovskaya, ICCG 1 Impact of Shale Gas Production on the Market Fundamentals and Energy Security of  Certain Countries       Impact of Shale Gas Production on the Market Fundamentals and Energy Security of Certain Countries Ekaterina Zelenovskaya, ICCG Abstract The world’s unconventional gas base such as tight gas, coalbed methane (CBM) and shale gas are estimated to be as abundant as conventional gas resources. The recent start of shale gas production in the North America has significantly influenced major regional gas markets around the world. This article intends to examine the impact of shale gas production to the situation with the energy markets and energy security of particular countries, such as United States and countries of Continental Europe. 2 Overview of Shale Gas Production Activities and their Impact on Regional Energy Security    Shale Gas and Energy Security Energy production and use have various environmental implications since energy represents about 1 65% of global anthropogenic greenhouse-gas emissions. The general belief/opinion is that fossil fuels will remain the dominant source of primary energy in the following decades. However,......

Words: 2024 - Pages: 9

Premium Essay

Exxon Acquisition of Xto Energy

...background information, industry characteristics, calculations, and analysis. Abstract This report covers the acquisition of XTO Energy by ExxonMobil including background information, industry characteristics, calculations, and analysis. Case Study 1 ExxonMobil Corp. Acquisition of XTO Energy, Inc. Case Study 1 ExxonMobil Corp. Acquisition of XTO Energy, Inc. EXECUTIVE SUMMARY The purpose of this document is to outline elements of the acquisition process in the energy industry by detailing ExxonMobil Corp.’s (referred to as ExxonMobil) acquisition of XTO Energy, Inc (referred to as XTO). This transaction was announced in December 2009 and finalized in June 2010. The subsequent information will contain an introduction that focuses on the economic atmosphere of the energy industry at this time and details surrounding the agreement including motivations for the deal and terms of the deal. Next, calculations used in the valuation process will be introduced with results presented. Finally, a discussion of findings will conclude, supplying answers to the following questions: (1) What should the acquisition price for XTO shares have been? (2) Which comparable firm is the best comparison firm for XTO Energy? (3) Why did ExxonMobil want to acquire XTO? (4) Based on the analysis, did ExxonMobil overpay for XTO or get a Bargain? (5) What additional information could help with this analysis? INTRODUCTION Economic Considerations and Pertinent Features of the......

Words: 2439 - Pages: 10

Premium Essay

Hyrdro Fracking in Marcella Shale

...Hydrofracking in Marcellus shale: The Consequences of America’s Gas Rush Introduction Demand for fossil fuels in America has led to a flurry of unorthodox methods for the extraction of natural gas. Fracking or hydrofracking in the U.S.A has proven to be an efficient way of extracting natural gas from permeable rock. A new large scale hydrofracking operation has been proposed in the eastern states of Ohio, Pennsylvania and New York. This method of extraction is highly controversial, and is thought to have severe environmental and potential health consequences. This essay will provide further insight into the practice of Fracking in an area of shale known as Marcellus shale, and help to expose the environmental and human implications. What is Hydrofracking? Hydraulic Fracturing is an un-conventional process used in the extraction of gas in permeable rock (David 1973). A horizontal well is drilled into permeable rock such as shale and is injected with millions of gallons a high pressure fluid known as frac-fluid, this fluid is a mixture of sand, water, and an array of lubricating chemicals (Deutch 2011). The high pressure frac-fluid forces open fishers (cracks) within the rock which are kept open with sand granules; this allows pockets of gas to flow more easily from the shale (David 1973). Once the well is depleted all fluid that can be recycled is extracted, and the well is capped to stop any unused gas escaping (David 1973). The process of fracking is expensive and......

Words: 1854 - Pages: 8

Premium Essay

Hydraulic Fracturing White Paper

...Fracturing, Shale Plays and Natural Gas Executive Summary U. S. Steel Tubular Products has been serving the energy industry since 1901 as North America’s largest fully-integrated tubular products manufacturer. Today, we manufacture more than 1,500 different types of steel and have an annual tubular products capacity of 2.8 million net tons. Dedicated to fostering energy-independence in North America, U. S. Steel is proud to offer an array of products and services that are developed, tested, and produced in the United States. U. S. Steel has full control over every step of the pipe manufacturing process, from melt to final product. U. S. Steel is continually making strides to serve the energy industry and promote the development of clean, abundant energy sources with high-quality, high-strength tubular products, including standard and line pipe products and oil country tubular goods and services. (About U. S. Steel Tubular Products, 2015) The past century has been a whipsaw for U.S. energy policy. Fifty years ago, the country was a confident exporter of petroleum. By the early 1970s, it suddenly had become dependent on oil imports and suffered at the hands of its suppliers. Ever since, U.S. energy policy had been a balancing act between reducing oil consumption, cultivating friendly oil-exporting nations, and developing substitutes for petroleum. Indeed, the last time liquefied natural gas received interest in Washington, it was as a means to import gas as a......

Words: 1805 - Pages: 8

Premium Essay

Shale Gas

...What is shale gas and why is it important? Shale gas refers to natural gas that is trapped within shale formations. Shales are fine-grained sedimentary rocks that can be rich sources of petroleum and natural gas. Over the past decade, the combination of horizontal drilling and hydraulic fracturing has allowed access to large volumes of shale gas that were previously uneconomical to produce. The production of natural gas from shale formations has rejuvenated the natural gas industry in the United States. Does the U.S. Have Abundant Shale Gas Resources? Of the natural gas consumed in the United States in 2011, about 95% was produced domestically; thus, the supply of natural gas is not as dependent on foreign producers as is the supply of crude oil, and the delivery system is less subject to interruption. The availability of large quantities of shale gas should enable the United States to consume a predominantly domestic supply of gas for many years and produce more natural gas than it consumes. An analysis in the Annual Energy Outlook 2012 (released June 2012) indicates that the uncertainty in the size and economics of the domestic shale gas resources could have a considerable impact on future domestic natural gas production and that 2035 shale gas production could be between 9.7 trillion cubic feet and 20.5 trillion cubic feet. U.S. total natural gas production is projected to range between 26.1 trillion cubic feet and 34.1 trillion cubic feet.  Where is Shale Gas Found? ...

Words: 754 - Pages: 4

Premium Essay


...the natural gas held in shale formations. Shale gas has become an increasingly important energy resource in the U.S. As for Europe it is being use primarily in central Europe going eastward and on up. In South America it is primarily in central part. 2- Natural gas is already a critical part of America’s energy portfolio and consequently a critical part of the country’s economic growth. Not only does natural gas provide over 25 percent of electricity generation, natural gas, and other gases extracted from natural gas provide a feedstock for fertilizers, chemicals and pharmaceuticals, waste treatment, food processing, fueling industrial boilers, and much more. Although natural gas prices in the United States have historically been volatile, the abundance of shale gas brings the possibility of low, stable prices. North America has approximately 4.2 quadrillion (4,244 trillion) cubic feet of recoverable natural gas that would supply 175 years worth of natural gas at current consumption rates. Further, the National Petroleum Council estimates that fracking will allow 60 percent to 80 percent of all domestically drilled wells during the next 10 years to remain viable.   The abundance of natural gas makes the United States an attractive place to do business, especially for energy-intensive industries. In what could be a growing trend, Royal Dutch Shell recently announced plans to build a petrochemical plant in western Pennsylvania and cited the proximity to natural gas......

Words: 456 - Pages: 2

Premium Essay


...SHALE GAS :AN UNCONVETIONAL GAS RESERVOIR SUNJAY,SUSHEEL KUMAR AND NIKHIL JAIN Geophysics ,Geology ,Mining Engg-IIT ,BHU ,Varansi 221005 ,India,, Summary With a view to energy security of the world, unconventional energy resources - coalbed methane (CBM) , Methane Gas Hydrate, shale gas, basin centred gas ,tight gas, oil shale and heavy oil- exploration and exploitation is pertinent task before geoscientist . Shale gas is natural gas from shale formations which acts as both the source and the reservoir for the natural gas. Each Shale gas reservoir has unique characteristics. Shale has low matrix permeability, so gas production in commercial quantities requires fractures to provide permeability. For a given matrix permeability and pressure, gas production are determined by the number and complexity of fractures created, their effective conductivity, and the ability to effectively reduce the pressure throughout the fracture network to initiate gas production. Understanding the relationship between fracture complexity, fracture conductivity, matrix permeability, and gas recovery is a fundamental challenge of shale-gas development. Shale gas reservoirs almost always have two different storage volumes (dual porosity) for hydrocarbons, the rock matrix and the natural fractures .Because of the plastic nature of shale formations, these natural fractures are generally closed due to the......

Words: 3175 - Pages: 13

Premium Essay

Fracking and the Eagle Ford Shale

...OF TERM PAPER PROF. RUZIC HYDRAULIC FRACTURING AND THE EAGLE FORD SHALE Patricio Calles Almeida – UIN 651559726 Everyone knows that the urge to find an alternative to fossil fuels is one of the top priorities of technology researchers and scientists. We also know that the United States is becoming more and more dependable on foreign resources as the national ones are running low. However, fossil fuels are still the only cost-effective sources of them all. You could argue that hydroelectric and nuclear power are on the rise, but the first one does not produce large scale amounts of energy and the latter requires a huge initial investment with long waits until returns and profits; all the previous makes these sources not really convenient in developing countries, the ones that ironically need is the most. That’s why fossil fuel sources will continue to dominate the energy scene for the next decades, at least. In this context, I want to focus my paper on hydraulic fracturing, fracking. Actually, more specifically, the absolute focus will be to relate this modern method of oil and natural gas extraction with the Eagle Ford Shale, located in South Texas. Specifications and characteristics that make this shale so appealing for fracking will be a part of the following analysis. Overall, the shale is one that could be the biggest production center of oil and natural gas of the US and bring lots of economic benefits to the region. The objective of this paper is demonstrated......

Words: 3616 - Pages: 15

Premium Essay

Mckinsey Global Institute

...McKinsey Global Institute July 2013 Game changers: Five opportunities for US growth and renewal The McKinsey Global Institute The McKinsey Global Institute (MGI), the business and economics research arm of McKinsey & Company, was established in 1990 to develop a deeper understanding of the evolving global economy. Our goal is to provide leaders in the commercial, public, and social sectors with the facts and insights on which to base management and policy decisions. MGI research combines the disciplines of economics and management, employing the analytical tools of economics with the insights of business leaders. Our “micro-to-macro” methodology examines microeconomic industry trends to better understand the broad macroeconomic forces affecting business strategy and public policy. MGI’s in-depth reports have covered more than 20 countries and 30 industries. Current research focuses on six themes: productivity and growth; natural resources; labor markets; the evolution of global financial markets; the economic impact of technology and innovation; and urbanization. Recent reports have assessed job creation, resource productivity, cities of the future, the economic impact of the Internet, and the future of manufacturing. MGI is led by two McKinsey & Company directors: Richard Dobbs and James Manyika. Michael Chui, Susan Lund, and Jaana Remes serve as MGI principals. Project teams are led by the MGI principals and a group of senior fellows, and include consultants from...

Words: 4680 - Pages: 19

Premium Essay

Unconventional Oil

...IMPACT OF THE DISCOVERY AND EXLORATIONOF UNCONVENTIONAL OIL ON CONVENTIONAL OIL OPEC STATES | BYNAME:STUDENT ID:MODULE: | | | Contents Contents 1 Introduction 2 OPEC (Organization of the Petroleum Exporting Countries) 2 UNCONVENTIONAL OIL 3 SOURCES OF UNCONVENTIONAL OIL 3 CONVENTIONAL OIL 4 PESTLE ANALYSIS 4 PESTLE ANALYSIS ON NIGERIA 4 PESTLE ANALAYSIS ON U.S 6 Conclusion 9 References 10 Bibliography 10 Introduction The producers of oil which are outside the OPEC (Organization of Petroleum Exporting Countries) are been recorded to be producing almost 60 percent of the oil used in the world with constant increase in the hurdles of production (Khadduri, n.d.). Some researchers have indicated that the Non-OPEC states is as a result of having less producing wells, high costs of new projects, older wells and in most cases the increase in the home demand of oil which may cut the oil for exportation (Nakhle, 2013). Increases in the prices resulted in the difficulty of oil project and making it lucrative, resulting in the increase of the production of unconventional oil. Though at a time, there’s declination in the Non-OPEC oil production as the investing in new production of oil becomes tougher as a result of tightening, volatility of oil price, resource nationalism and credit markets (Brendow, K;, 2003). Now the unconventional oil production by Non-OPEC states is coming up as originally projected as few of the producers are been expected to......

Words: 2700 - Pages: 11

Premium Essay

Financial Analysis of Conoco-Phillips

...……………………………………………………………………………………. 22 5.0 Recommendations ………………………………………………………………… 23 6.0 Conclusion …………………………………………………………………………... 24 7.0 References …………………………………………………………………………... 25 Appendices Appendix 1 – Key Financial Data for COP, XOM and CVX Appendix II – Financial Ratios 1.0 Executive Summary ConocoPhillips has grown into the 3rd largest Integrated Oil and Gas Company in the US ever since the merger of Conoco and Phillips Petroleum in 2002. Since then, its market capitalization has grown 5 times to US$ 101 Bil with an asset base of US$155 Bil. This report provides an insight to the Board of Directors of the financial performance of ConocoPhillips since 2002 and will be benchmarked against competitors in the industry to give a cross sectional analysis. Whilst the growth of ConocoPhillips has been impressive over the last 10 years, earnings have not performed according to its peers in the industry. During this period, the Company had reported several impairments to its major assets and its earnings were eroded by the volatility of the crude oil and natural gas prices. These results have also unfolded some new challenges to Company in terms of financial gearing and the need to manage its cash...

Words: 6098 - Pages: 25

Premium Essay

Business Anlysis Iii - Mgt521

...Business Analysis III - Anadarko Petroleum Corporation Leonard VanBerkel MGT/521 October 15, 2012 Kirk Davis Business Analysis III - Anadarko Petroleum Corporation Anadarko Petroleum Corporation (Anadarko); head office in The Woodlands, Texas, employees 4,800 people and is a Fortune 500 company with recorded revenues of $13.967 billion for fiscal year ending 2011. This represented an increase of 28% over 2010. Anadarko posted record sales volume in 2011. Contrasted against Anadarko is Exxon, which had reported revenues over the same period of $452.926 billion and was ranked number one for most profitable companies, realizing profits of $41.060 billion (CNNMoney, 2012). Anadarko is ranked 192nd whereas Exxon is ranked 1st. The most glaring difference financially between the two companies is not just the large revenue gap, but the difference in profitability. Despite achieving record sales numbers and double digit growth, Anadarko recorded a net loss of $2.649 billion for fiscal year ending 2011 (CNNMoney, 2012). There are a large number of companies in the petroleum industry that realized large profits on varying degrees of revenues in 2011, yet Anadarko showed large losses. The question that arises is why did Anadarko lose money, while so many other companies in the same industry were profitable? A SWOT (strengths, weaknesses, opportunities, threats) analysis has been performed on Anadarko to determine if it is worth investing in this company, or consider it another......

Words: 3540 - Pages: 15

Premium Essay

Chevron Corporation

...behind ExxonMobil. The company has a market capitalization of over $204.9 billion. They have expanded into essentially every area of the energy industry, including exploring for, producing, and transporting crude oil and natural gas; refining, marketing, and distributing transportation fuels and lubricants; manufacturing and selling petrochemical products; generating power and producing geothermal energy; providing energy efficient solutions; and developing energy resources for the future, such as advanced biofuels. In 2011, Chevron produced, on average, 2.673 million barrels of oil per day, 75% of which was done outside of the US. By the end of 2011, Chevron’s global refining capacity reached 1.96 million barrels of oil per day. They are the largest private producer of oil in Kazakhstan, oil and natural gas producer in Thailand, and overall oil producer in Indonesia. Currently, Chevron has numerous projects underway that will tap into new resources around the globe, including several offshore projects in Africa, Asia, and Europe. They are also involved with the development of the Athabasca Oil Sands project in Canada and the development of steam used to recover oil. As mentioned, they have begun to explore unconventional energy resources including natural gas, oil sands, geothermal and solar energy, and biofuels. With the world’s attention slowly turning towards energy efficiency and with global demand for energy projected to grow by 36% by 2035 due to the expected......

Words: 2160 - Pages: 9

Premium Essay

Should the State of California Permit Fracking on a Large Scale

...continues to rank among the top 10 of the world’s largest economies. It is currently ranked as the world’s ninth largest economy, surpassing many developed nations with an annual GDP exceeding two trillion Dollars, according to a report by CNN last year.1 California’s crude oil and natural gas deposits are located in six geological basins in the Central Valley and along the coast. California has more than a dozen of the United States' largest oil fields, including the Midway-Sunset Oil Field, the second largest oil field in the contiguous United States. California is sitting on a massive amount of shale oil and could become the next oil boom state. But only if the industry can get the stuff out of the ground without upsetting the state's powerful environmental lobby. Running from Los Angeles to San Francisco, California's Monterey Shale is thought to contain more oil than North Dakota's Bakken and Texas's Eagle Ford, both scenes of an oil boom that's created thousands of jobs and boosted U.S. oil production to the highest rate in over a decade. In 2010, California produced 12% of the natural gas, 71% of the electricity, and 38.11% of the crude oil it consumes. The remaining electricity and natural gas was purchased from Canada, the Pacific Northwest, the Rocky Mountain States and the Southwest. Remaining crude oil was imported from Alaska and abroad.2 California is therefore a net importer of oil and petroleum based fuels account for up to 96% of the state’s......

Words: 3421 - Pages: 14