Envisioning the Future of Energy and Environmental Stewardship at the 2014 PEIA Forum

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Last Monday on February 24th, the Pacific Energy Innovation Association Forum (PEIA) for 2014 took place at the Wosk Center for Dialogue in Vancouver, BC. I was invited to attend and to participate in a panel titled “Demand: Today and Yesterday.”

I was happy to be able to share my perspective, and decided to focus my presentation on one of the major market influencers of recent years: the development of shale gas reserves, and its impact on global markets and expectations. As we all know, advances in hydraulic fracturing, or “fracking,” have increased shale gas potential worldwide- and this is having a significant impact in North America. The United States and Canada currently lead the world in producing natural gas from shale formations. In fact, shale gas accounted for 39% of all natural gas produced in 2012 in the US, and 15% in Canada. This increase in available supply has sustained lower natural gas prices, and the US and Canada have hung high hopes on the possibility of North American exports of LNG to Asian countries- where prices are currently much higher.

Figure 1: NG prices in North American Markets is between US$3 – US$4, contrasted with NG prices in Asian Markets, which falls between US$14-US$20

In British Columbia, at least three natural gas liquefaction plants are in the works to begin exporting LNG to Asian markets by 2020, with potential revenues of $1 trillion by 2046. However, due to the high demand, many suppliers are vying for the opportunity to provide LNG to the Chinese market in particular. Russia has the largest shale gas reserves of any country- and these are not yet even in play, as Russia still draws on conventional natural gas for export to Asia. Russia intends to be exporting 31% of all the country’s natural gas to Asia by 2035. Norway, the eighth largest crude oil exporter in the world, is also the world’s third largest natural gas exporter; thus, the US and Canada have plenty of competition for exports to Asia. And as with any competition, there are both winners and losers.

It is difficult to predict the future of the shale gas market. It may prove too expensive a fuel source for countries to import, such that they may turn to other alternatives. Year-to-date, futures prices for natural gas have gained around 46% in countries that are not in the midst of a surplus. Further technological advancement may grant us the ability to better wield alternative sources of energy, diminishing demand for LNG. Not to mention, fracking may turn out to be dangerous, leading the shale gas industry to the chopping block- as we have recently seen with nuclear power in the wake of the Fukushima disaster.

The frenzy surrounding shale gas development and the great expectations of North American governments may fail to take into consideration other variables that will influence the result of who wins the race to become the principle Asian supplier. Simply having the resources is not the only factor that will decide the victor. There are geopolitical implications, environmental factors- not to mention that the US is a waning superpower, and other powers are emerging to take their place as the most prominent global player. The focus is generally shifting east- which may favor Russia more than North America in this particular contest. This hyper-focus on shale gas development and its future potential may simply mean countries are putting too many of their eggs in one basket- and it’s one weaved from straw of a dated global perspective.

In addition to myself and the other panelists, the event featured several distinguished keynote speakers: Nobuo Tanaka , the Global Associate for Energy Security and Sustainability Institute of Energy Economics in Japan; Chris Hartshorn, Chief Research Officer at Lux Research; and Richard Heinberg, author and Senior Fellow at the Post Carbon Institute in Santa Rosa, CA .

The day wrapped up with a discussion focused on the steps toward sustainability, and closed with networking for event attendees. This year’s PEIA Forum was insightful and a great opportunity to meet with industry thought leaders; I was honored to be a part of this group of professionals and to represent ZE PowerGroup at this important annual event.

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