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America, the Saudi Arabia of natural gas

Posting in Energy

The United States produced 600 billion cubic meters of natural gas in 2009, likely surpassing Russia as the world's largest producer. Our economy will increasingly be more powered by this abundant fuel.

The North American economy may still be too dependent on oil -- and imported oil at that -- but it has massive reserves of another, still-being-tapped energy source: natural gas.

Credit: National Renewable Energy Laboratory, E Conn State University

A new report in The Economist notes that huge reserves across the continent may make both the US and Canada power-brokers in world energy markets:

"North America has an unforeseen surfeit of natural gas. The United States’ purchases of LNG have dwindled. It has enough gas under its soil to inspire dreams of self-sufficiency. Other parts of the world may also be sitting on lots of gas. Those in the vanguard of this global gas revolution say it will transform the battle against carbon, threaten coal’s domination of electricity generation and, by dramatically reducing the power of exporters of oil and conventional gas, turn the geopolitics of energy on its head."

The report states that this new source of natural gas comes from shale, as first discovered by a small wildcatter firm in Texas, starting in the 1990s. "Mitchell Energy pioneered the application of two oilfield techniques, hydraulic fracturing ('fracing,' pronounced 'fracking') and horizontal drilling, to release natural gas trapped in hardy shale-rock formations. Fracing involves blasting a cocktail of chemicals and other materials into the rock to shatter it into thousands of pieces, creating cracks that allow the gas to seep to the well for extraction." Economies of scale have cut production costs by half since the initial discoveries.

The United States produced 600 billion cubic meters of natural gas in 2009, likely surpassing Russia as the world's largest producer.

Natural gas provides a compelling alternative fuel for vehicles, and some transit authorities already run fleets of natural-gas powered buses. The US Department of Energy estimates that natural gas buses now account for at least 20% of all new bus orders.

The Economist also notes that the shale formations that can be tapped fro natural gas reserves are not unique to North America, and many other regions could embark on ventures to alleviate their oil-dependent economies. Combined with green energy-saving initiatives, the potential is significant.

UPDATE: Melissa Mahoney, who joins our community as our resident intelligent energy expert and advocate, provides an additional report on concerns about the potential threat fracking poses to watersheds.

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Joe McKendrick

Contributing Editor

Joe McKendrick is an independent analyst who tracks the impact of information technology on management and markets. He is a co-author of the SOA Manifesto and has written for Forbes, ZDNet and Database Trends & Applications. He holds a degree from Temple University. He is based in Pennsylvania. Follow him on Twitter. Disclosure