The shale boom in the United States has affected the entire domestic economy, but also is shaping world thinking about energy use, panelists said at the kick-off session for a KPMG conference on global energy in Houston Wednesday morning.
Even as energy supplies rise, many countries around the world, in both mature and emerging markets, are grappling with how the boom can help them provide energy for their citizens. They are also trying to find solutions that are both reliable and sustainable, and they’re evaluating the trade-offs involved in encouraging economic growth.
The answers raise fundamental economic questions, panelists said.
“Clearly, I believe that everyone should have access to electricity,” said Curtis Chin, a senior fellow at the Asian institute of Technology. “But that is not the same thing as saying that government should give it to them for free.”
Even when governments seek to provide reliable and adequate supplies of electricity, what that means can vary by country.
“Reliable is very different in Bangladesh than it is in Japan,” said Chin.
Energy companies in the West show great interest in accessing the Asian markets, eyeing the growing demand, but need to evaluate their prospects in terms of what Asian governments may be considering, Chin said.
“In Asia, where there is tremendous power demand, companies ask, how are we going to partner with the government? But the key question is, what does a government want? Do they want technology, or do they want capital?” Chin said.
For this reason, a foreign government does not just evaluate which company or country can provide the best source of energy — they are also thinking about what they are going to get out of the deal.
“China provides great financing, but you are also going to get 6,000 workers,” Chin said, as an example of the trade offs Myanmar may have to balance in deciding how to meet its country’s growing energy needs.
These trade offs are not always appreciated by the West, whose governments may prioritize environmental issues but ignore the challenge of lifting large populations out of poverty, Chin said.
“There is viewpoint that the developed world is imposing restrictions on the rest of the world that is just trying to feed itself,” Chin said. “If China or India were to do things the way we want them, perhaps their growth would be slowed.”
Chin served as an ambassador to the Asian Development Bank under the second Bush administration and the Obama administration, and said that concerns about growing carbon emissions were often balanced against policies to encourage economic growth in much of the developed world.
Panelists also looked at the development of shale in the U.S.
The U.S. has become the world leader in shale development not only because of its geology and private mineral rights ownership laws, but also because the federal government has provided a more lenient regulatory environment for its development, said John Gimigliano, a tax specialist at KPMG.
“We don’t really have a shale policy,” Gimigliano. “What the government has done right on policy is to just get out of the way – let the invisible hand let the market lead the way.”
The development of shale gas in the US has also had some surprising impacts for the rest of the world, including a much lower price for coal, which has led to big increases in coal imports to Europe.
“Power stations are increasingly using US coal,” said David Newhouse, a special advisor for international financial affairs for EDF, the largest electricity company in the world. “We are producing more CO2 than we used to do before there was shale gas in the US.”
Newhouse said that Europe exploration for shale gas was initially projected to be more vigorous, but its prospects have become more unclear. Issues such as mineral rights laws in Europe, a different entrepreneurship culture and a high population density have led to concerns about environmental issues. For example, France has recently abandoned its initial plans for shale exploration.
In a poll during the session, about half of the audience members said that government policy on shale gas should focus encouraging the development of shale gas, but about half thought that there should be sufficient government oversight to ensure that it meets environmental standards.