Although natural gas prices are low thanks to an oversupply, capital investments in the natural gas industry are amounting to tens of billions of dollars.
Investments in natural gas infrastructure are estimated to reach trillions of dollars in the next twenty or thirty years. Much of that investment will be in the near term.
Newly discovered horizontal drilling and hydraulic fracturing technologies have brought a revival of the natural gas industry allowing access to an overabundance of natural gas resources.
There is so much natural gas being discovered that new pipelines must be built to accommodate it.
The boom of the natural gas industry is prompting spending by other industries that use natural gas. For example, chemical producers use natural gas as fuel and feedstock. Other energy-intensive industries could invest in natural gas-fueled power generation in the future.
This surge might offer the U.S. the opportunity to enter the export market since shale gas is expected to reduce reliance on liquefied natural gas imports.
Unconventional gas activity—shale gas, coal bed methane and tight sands—accounted for 53 percent of total U.S. natural gas production in 2010 and is projected to rise to 79 percent by 2035, according to a recent study by IHS.
It is expected that $3.2 trillion in cumulative investments will be made in the development of unconventional gas from 2010 to 2035, the IHS study said. Also, according to the study, shale gas investments will more than likely account for nearly $1.9 trillion (mostly in the near future).
Shale gas accounted for 27 percent of U.S. natural gas produced by 2010; it reached 34 percent last September; and it is projected to grow to 43 percent by 2015 and 60 percent by 2035, according to IHS.
Between 2010 and 2035 it is expected that $1.9 trillion will be made in shale gas capital investments, according to IHS, with $48 billion by 2015.
Shale is a big draw for oil and gas transporters, who, according to IHS, are investing billions right now.
As far as pipelines go, companies like Kinder Morgan and its related businesses: El Paso, Williams Companies, Spectra Energy, Enterprise Products Partners, and Enbridge are expected to continue their trends of making capital investments.
Major players like Exxon Mobile along with independent oil and gas producers Anadarko Petroleum and Apache are investing in the shale plays.
On the other hand, despite all of the positive estimates, trouble could be around the corner.
Investment in natural gas may decrease a bit in two or three years. This would happen if the industry is not permitted to export liquid natural gas through coastal terminals—a practice that would require development and investment in new pipelines and liquefying facilities.
The problem with development projects to export liquid natural gas is the cost. The projects are very capital intensive—in the multibillions of dollars. Because of cost, it is unclear how many pipeline projects will go forward.
Some energy analysts expect there will be an oversupply of natural gas for many years—a situation that may be good for consumers and other industries but not good for producers. Many producers have overinvested in gas.
The future of shale rests on many variables. Stay tuned to see how it all plays out.