If Vladimir Putin seems a little grumpy lately, there is probably good reason: Russia is losing its grip on Europe's natural gas supply. Suddenly, markets for natural gas that underpin Russia's lucrative energy business are beginning to slip away.
Thanks to horizontal drilling and hydraulic fracturing (fracing) methods that are radically reshaping world energy production, two countries that have been subjected to Russia's economic and political pressure for decades - Poland and Ukraine - now have an alternative source of natural gas that could bring them energy independence. Natural gas from their own shale deposits thousands of feet beneath the ground which they are preparing to drill with equipment and expertise provided by U.S. oil and gas companies, should soon begin making its way to market.
Developed largely in the United States, the innovative technologies for horizontal drilling and multi-stage fracing could open the flood gates to unconventional oil and natural gas production in countries that heretofore have not been big energy producers. Shale gas reserves in Poland and Ukraine rival those in France, estimated to be Europe's largest at 180 trillion cubic feet. While France currently has a ban on fracing, that could change if the country decides to reduce its reliance on high-cost nuclear power and coal used in its production of electricity.
Over the past two years, there has been a surge of interest in shale resources in other countries such as Great Britain, Argentina, Brazil, China, Kazakhstan and India. World shale resources are so large that economists foresee a significant drop in oil and gas prices as the market for shale resources grows. Currently natural gas prices in Europe are three times as much as those in the United States, and in Asia they are five times as much.
The shale-gas explosion has huge geopolitical implications that are just beginning to unfold. As exploitation of oil and gas in shale increases in the United States and gets under way in Europe and other regions, the source of oil and gas wealth is shifting from producers of conventional oil and gas like Russia and OPEC countries to those with shale deposits.
The Russian response to these developments has been striking. The price of Russian natural gas exports to Poland has dropped dramatically in a bid to stave off drilling for shale gas and make it uneconomical. Gazprom, Russia's state-owned energy company, sent the Ukrainians a $7 billion bill for unused Russian natural gas.
Although it may be a decade before shale gas is produced in significant volumes in either Poland or Ukraine, the geopolitics of energy are changing unmistakably, whether Vladimir Putin likes it or not. Reduced reliance on Russian gas will allow Poland and Ukraine to strengthen their economic and political ties with the United States and Western Europe.
It is unfortunate that our own government is not making the most of this new energy calculus by committing itself to greater production and use of shale resources. Here in the United States, shale energy development has produced an economic bonanza. Barely a blip on the radar screen a decade ago, shale gas output now accounts for roughly 35 percent of total U.S. natural gas production while domestic oil production has reached its highest level in 20 years. Aside from the tax revenue it generates, U.S. shale energy development supports 1.7 million jobs and is poised to support another 1.3 million by the end of this decade. As a result, Ohio should enjoy several decades of abundant shale-gas and oil development and economic growth.
The Obama Administration is slowly coming around to see the game-changing impact that shale development can have on U.S. energy supply and demand and the economy. However, while it has provided technical and regulatory assistance to nations looking to jumpstart shale-energy programs of their own, the Administration has been slow to pursue similar policies at home. In fact, it is considering more federal regulations on drilling and fracing even though companies are using new technologies and cooperating with state regulators to ensure that the perceived negative impact on the environment is kept to a minimum.
Unfortunately, the Administration has also placed most of our federal lands off-limits to shale production and embraced other policies that ultimately weaken our ability to reduce our dependence on foreign oil. For example, it is slow-walking action on applications from U.S. companies seeking licenses to export domestically-produced natural gas to Europe and Asia.
Now is the time for Americans to call on Congress and the Administration to embrace shale drilling and seek a greater reliance on the use of natural gas as the fuel of choice for electricity generation and transportation. We have an opportunity to simultaneously free ourselves from our dependence on foreign oil, stimulate the domestic economy, improve our balance of trade with the world, and reduce harmful emissions and improve air quality.
Robert W. Chase is chair and professor of the Department of Petroleum Engineering and Geology at Marietta College, 215 Fifth St., Marietta.