Baker Institute: US shale gas might weaken Russia, Iran

Paula Dittrick
OGJ Senior Staff Writer

HOUSTON, July 21 -- Rising US natural gas production from shale formations has weakened Russia’s hold on its European customers, and this trend will accelerate in coming decades, concluded researchers from Rice University’s Baker Institute.

In a study entitled "Shale Gas and US National Security," researchers forecast Russia’s gas market share in Western Europe could decline to 13% by 2040 from 27% in 2009.

Iran’s ability to tap energy diplomacy as a means to strengthen its regional power also could be hindered by rising US gas production, the study said.

"The geopolitical repercussions of expanding US shale gas production are going to be enormous," said Amy Myers Jaffe, director of the energy forum at the Baker Institute and one of three authors of the study.

The study forecast US shale production could quadruple by 2040 from 2010 levels of more than 10 bcfd, reaching more than 50% of total US natural gas production by the 2030s.

"By increasing alternative supplies to Europe in the form of LNG displaced from the US market, the petropower of Russia, Venezuela, and Iran is faltering on the back of plentiful American natural gas supply," Jaffe said.

US shale gas development could limit the need for the US to import LNG for at least 20-30 years, thereby reducing negative energy-related stress on the trade deficit and economy, researchers said.

The study’s other two authors were Rice economics adjunct professor and Baker Institute fellow Kenneth Medlock along with Rice economics professor Peter Hartley.

By creating greater competition among gas suppliers in global markets, shale gas also could lower the cost to average Americans of reducing greenhouse gases as the country moves to lower carbon fuels, researchers said.

The Baker Institute study dismissed the notion that shale gas is a transitory occurrence.

The study also concluded US shale gas production could achieve the following:

• Reduce competition for LNG supplies from the Middle East and thereby moderate prices and spur greater use of natural gas.

• Combat the long-term potential monopoly power of a potential organization of gas producers resembling the Organization of Petroleum Exporting Countries.

• Reduce US and Chinese dependence on Middle East gas supplies, lowering incentives for geopolitical and commercial competition between the two largest consuming countries and providing both countries with ways to diversify energy supply.

Contact Paula Dittrick at paulad@ogjonline.com.



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