Stepping on the Gas: New Drilling Technologies Shake Up Global Market
While the world fears a new oil price shock, the entire energy market is on the verge of a revolution. Companies are using increasingly sophisticated technology to tap new sources of natural gas. Drilling is also underway in Germany, where both the potential and the risks seem enormous.
It was May when globalization came to Lebien, a small town in Poland. The telephone rang and Elzbieta Religa answered. The caller said she represented Lane Energy, a subsidiary of a British company that invests in natural resources. She said her boss wanted to speak with Religa and told her that the company had found something interesting in the earth beneath Lebien's homes and farms.
Religa is a sturdy-looking farmer with three hectares (7.4 acres) of land, 20 hogs and three dogs. Lebien is in the northern Polish region of Kashubia, some 90 kilometers (56 miles) from Gdansk. The town has 960 inhabitants and only its main street is paved. Most of the houses were built by Germans before World War II.
"The woman said there's gas here," says Religa. "Thousands of meters below the earth, locked into the rock, but somehow they can get it out." Religa is currently serving her third term as the Soltys, or mayor, of Lebien. She invited the people from Lane Energy to a meeting at town hall. They arrived in small buses, managers and engineers, Americans, Britons, Canadians and one Indian. The guests paid for a lavish buffet.
The company built its first drilling rig a few months later. One evening, Religa saw a bright light on the other side of a forested area. Lane was burning off the first of the gas being pumped out of the well. The flames were as tall as houses.
Now the drill hole has been sealed with a head-high pipe and three valve wheels. Thanks to the gas, thousands of new jobs will soon be created in Poland -- and elsewhere.
Tapping Unconventional Sources
In many parts of the world, geologists are now testing the ground for natural gas trapped in shale (shale gas), sandstone (tight gas) or coal seams, gas that has been largely unreachable in the past. Using a new technology called hydraulic fracturing, or "fracking," a sort of controlled earthquake, companies are now bringing the gas to the surface all over the globe, in Australia, China, India, Indonesia, Latin America and Europe. The entire planet is being resurveyed.
The authorities in Poland have awarded 70 concessions for exploratory drilling in the last two years. The race for the best reserves is also in full swing in Canada, where the Chinese are leading the pack. The Chinese energy company PetroChina has just spent $5.4 billion (3.9 billion) on a Canadian project.
In the United States, however, the natural gas revolution is the furthest along. Newly discovered reserves there are already being exploited.
About half of the natural gas consumed in the United States now comes from so-called unconventional sources. The country has already replaced Russia as the world's leading natural gas producer. "We have twice as much gas as the Saudis have oil," boasts Texan investor T. Boone Pickens.
The euphoria is being fueled all the more by current global fears of new oil price shocks. The crisis in the Middle East makes it painfully clear, once again, how dependent the world's economy is on petroleum reserves in the Arab world -- and how sensitively prices and growth react to any changes in the region.
When the unrest began in Libya, the international commodities markets fell into a panic within hours. The oil price, which had hovered around $80 to $90 for months, broke through the magic $100-a-barrel (159 liters) barrier within hours and peaked at about $117 on Friday.
This was not so much a factor of Libya being such an important supplier on world markets. What had traders and dealers so concerned and triggered worldwide panic buys was the fear that the crisis could spread to the United Arab Emirates (UAE) and Saudi Arabia.
Together, the UAE and Saudi Arabia are sitting on the world's largest oil reserves. Unrest with possible interruptions in delivery would drive the price of oil to astronomic heights. The most recent upturn in the global economy would come to a precipitous end -- yet again.
Since the last oil price crisis in the 1970s, the industrialized nations have been trying to reduce their dependency on oil from the OPEC countries, with moderate success.
The world's thirst for energy is massive, and there are few alternatives to oil. This could make the exploitation of the new natural gas reserves all the more important.
- Part 1: New Drilling Technologies Shake Up Global Market
- Part 2: Will Shift to Natural Gas Undermind Renewable Energies?
- Part 3: Bad News for Russia
- Part 4: Is Drilling a Threat to Idyllic Landscape?
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