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The 'shale gas revolution' - responsible for a 20-fold increase in unconventional gas production in the US over the last decade - is creating huge investor uncertainties for international gas markets and renewables and could result in serious gas shortages in 10 years time, says a new report, The 'Shale Gas Revolution': Hype and Reality.

The report casts serious doubt over industry confidence in the 'revolution', questioning whether it can spread beyond the US, or indeed be maintained within it, as environmental concerns, high depletion rates and the fear that US circumstances may be impossible to replicate elsewhere, come to the fore.

If the revolution continues in the US and extends to the rest of the world, energy consumers can anticipate a future dominated by cheap gas. However, if the current hype about shale gas proves an illusion, the world will face serious gas shortages, as investment in future supplies are hit by the current uncertainty.

From this uncertainty two major problems arise:

Investor uncertainty will reduce investment in future gas supplies to lower levels than would have happened had the 'shale gas revolution' not hit the headlines. While the markets will eventually solve this problem, rising gas demand and the long lead-in-times on most gas projects are likely to inflict high prices on consumers in the medium term.

The uncertainties created by the 'shale gas revolution' are also likely to compound existing investor uncertainty in renewables for power generation in the aftermath of Copenhagen. In a world where there is the serious possibility of cheap, relatively clean ga s, who will commit large sums of money to expensive technologies to lower carbon emissions?

The author of the report, Paul Stevens, said:

'If the shale gas revolution in the US continues to flourish and is replicated elsewhere in the world, this inadequate level of investment will not matter. Consumers can look forward to a future, floating on unlimited clouds of cheap gas as unconventional gas is produced. However, if shale gas fails to deliver on current expectations, then in ten years or so, gas supplies could face serious constraints.'

Notes to Editors

Read The 'Shale Gas Revolution': Hype and Reality >>
Read Executive Summary >>

Professor Paul Stevens is Senior Research Fellow (Energy) at Chatham House.
He is available for interview. Please call him directly on +44 (0)7710 247 013 or email pstevens@chathamhouse.org.uk.

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