The Shale Gas Revolution: From the Other Side of the Meter

In terms of its impact on the worldwide electricity industry, virtually all of the discussion about shale gas coming to market has been centered on using the fuel to generate electricity. But shale gas extraction and delivery, along with its companion “tight oil,” is an energy-intensive sector. How much electricity will the sector consume? The answer is a lot, if you extrapolate electricity demand expected to be created in North Dakota’s Williston Basin to the rest of the world.

According to Power Forecast 2012, a report prepared by engineering firm Kadrmus, Lee, & Jackson (KLJ), Bismarck, North Dakota, and commissioned by the North Dakota Transmission Authority, between now and 2030, around 2,500 MW will be necessary to accommodate oil/gas-related growth in the 43 counties (within a four-state region) of the Williston Basin. The study team included population growth, commercial and industrial development, primary and secondary employment, and the electricity needs for 30,000 additional wells. This is more than a 200% jump from current electricity demand in the area.

Based on estimates from the oil and gas production rates, the study anticipates around 1 million barrels/day (bpd) of oil through 2030 and around 1.18 billion cubic feet/day of natural gas.

Next, contrast these production figures with what ExxonMobil forecasts for the rest of the world in a new report, “The Outlook for Energy: A View to 2040.” Tight oil production is expected to grow from 4.5 million bpd to around 9.5 million bpd in the U.S., and that accounts for the majority of global growth as well. Unconventional natural gas growth rises from 30 billion cubic feet/day to 160 cubic feet/day. The report notes that unconventional gas includes shale gas, coal bed methane, and tight gas, but that the major component is shale gas. If we assume half of this total is shale, it amounts to around 65 billion cubic feet/day of production in 2040 (Figure 1).

1. Tight oil and unconventional gas extraction and delivery is expected to grow worldwide. Electricity necessary to power this growth could total 100,000 MW to 200,000 MW, based on an extrapolation of the estimate for the Williston Basin. Courtesy: ExxonMobil

Obviously, these are forecasts, which are always fraught with potential error. And there isn’t necessarily a direct, linear extrapolation from the U.S. to the rest of the world. What is clear, though, is that if 2,500 MW is necessary for the production expected in the Williston Basin, then potentially between 100,000 MW and 200,000 MW may have to be added worldwide over the next 20 to 30 years. Some of this represents potential displacement of existing capacity. Economic growth and electricity demand in shale and tight oil regions could mean economic decline in other regions as families and workers migrate toward the opportunity. Still, it pays to remember that getting and delivering energy takes energy, too. There are two sides of the meter when assessing the growing symbiosis between natural gas and electricity.

—Jason Makansi is president of Pearl Street Inc.

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