International Shale Gas Propels U.S. Technology (and Profits)

by | published January 24th, 2011

Last week, there was a meeting on shale gas that was standing room only. That’s hardly major news these days, as producers, consumers, environmentalists, analysts, regulators, and, oh yes, investors all focus upon the new major player in the energy market.

Except this meeting took place in The City – London’s financial district.

This may come as a surprise. After all, the way the European Union structures its energy pricing makes it more difficult for companies to make a profit.

On the other hand, rising dependence on imported gas (especially from Russia) does not sit well with Brussels.

Domestic shale gas, therefore, is increasingly regarded as the solution.

It will not eliminate the need for imports. But it may well allow Europe to renegotiate terms on pipeline contracts. And that’s more than enough to accelerate the interest in shale gas.

Gas in Europe, the Middle East, North Africa, Asia…

Now, the U.K. itself has some possible shale plays, but that nation has barely even begun to estimate the possibilities.

Elsewhere in Europe, the development has advanced beyond the discussion stage. Production is underway in Sweden (Alum), Hungary (Makó Trough, Szolnok), Austria (the Vienna Basin),and Germany (Lower Saxony).

But the real breakthroughs are likely to come from five major plays in Poland, three in France, and Ukraine – where there may actually be more shale gas potential than the rest of Europe combined.

This is taking place elsewhere, too. Geologists tell us there is more shale in MENA (Middle East and North Africa) countries than anywhere else in the world.

Saudi Arabia had ignored its natural gas until recently. Now, that kingdom is involved in an energetic pursuit of both freestanding gas and shale.

In addition to the Saudis, substantial shale gas is expected elsewhere in the Middle East – especially Syria, Iraq and Jordan.

I have already talked to a delegation from Morocco on their oil and gas shale opportunities (“Shale Gas Initiative Brings Morocco to My Doorstep,” December 13), and Algeria, Tunisia, and Libya have high prospects, as well.

However, the main global target these days is China.

There, the government has already committed to emphasizing gas as the future for electricity production. The attempt is to wean the country from its reliance on polluting, low-quality coal as fuel for power generation.

The Global Leader in Shale

Wherever you are in the world, the primary advantage in the development of shale gas is its ability to satisfy a larger portion of domestic energy requirements from local or regional production. Natural gas is also a rising source for the industrial and petrochemical applications that are essential for economic development.

The downside, of course, remains the environmental impact and water quality considerations.

Hydraulic fracking is the technology used to break open the rock and release the gas, and it employs large amounts of water. That, coupled with the chemicals used in the process, result in a fear of releasing toxic substances in flowback.

The U.S. is the global leader in shale gas (and oil) technology – both in extraction and in addressing the environmental consequences.

There are more than two dozen producing shale gas basins in the American market, along with several additional huge plays in Canada.

In response to the explosion of international interest in shale gas, the U.S. Department of State (DOS) launched the Global Shale Gas Initiative (GSGI) in April 2010.

The organization seeks to provide expertise and advice to developing countries worldwide on the exploitation of shale gas and its economic, policy, and market ramifications.

One of the reasons for the GSGI is the opportunity it presents American companies to profit from shale gas development elsewhere in the world.

Certainly, producers are interested…

Who’s Positioned to Profit

In addition to those leading the shale gas production list – such as Chesapeake Energy Corp. (NYSE:CHK) – major oil companies have used M&A to move into the sector.

Exxon Mobil Corp. (NYSE:XOM) acquired XTO, and Chevron (NYSE:CVX) absorbed Atlas Resources to target shale gas. XOM has an immediate reason, since it is already involved in several European shale plays.

Others, such as Shell (NYSE:RDS.A), Total (NYSE:TOT), Statoil (NYSE:STO), as well as the Chinese majors CNOOC Ltd. (NYSE:CEO) and Sinopec (NYSE:SHI), are farming into already-producing basins or joint venturing with experienced major producers.

There are certainly opportunities for the investor to make some profit for what the operators are doing. Yet the main advantage may well come from the technical side.

Here, the current leaders in shale gas applications remain the largest oilfield service (OFS) companies: Halliburton Co. (NYSE:HAL), owner of the patent on the primary frac technique, and Schlumberger Ltd. (NYSE:SLB), the worldwide leader in OFS.

The most significant potential for investor interest will be with those companies developing improved drilling techniques, non-chemical fracking processes, and larger-horsepower pumping equipment. Each of these categories becomes more essential as the number of shale gas wells grows – bringing renewed environmental concerns right along with it.

It has been less than a decade since the combination of horizontal drilling and fracking made the exploitation of shale gas profitable. In the interim, an initial stage of technical improvements has reduced the cost of production.

Another stage of improvements is now necessary, both to address the declining pricing of gas in the U.S. market (resulting from the rapidly increasing volume coming from shale development) and the need to make the process safer for the environment.

Currently, a number of small companies are rising to the challenge with advances in equipment, pumping techniques, and water treatment. This is going to be the next great example of the entrepreneurial spirit.

And it will receive a major boost from what is now happening elsewhere in the world.

Meanwhile, my next GSGI meeting comes this Friday, January 28.

The DOS is sending a delegation of Polish specialists for a session with me on some policy problems arising from the country’s shale gas development.

If anything of note happens, you’ll hear about it first – right here.



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  1. Sam King
    January 24th, 2011 at 16:37 | #1

    Wonder what your view of GASFRAC Energy Services (GFS.V) might be? GFS uses liquified gas (LPG) rather than water to do fracking in shale. Clearly a more expensive liquid but, as I understand it, most of the gas is recovered and the yield is far above what is used in the process. Supposedly a superior environmentally-sensitive process than using water. GFS is based in Calgary, Canada.

    Your thoughts on the company and its process for fracking as well as the stock please?

  2. Colin Offenhartz
    January 24th, 2011 at 16:48 | #2

    Mr Edwards

    I have the same question. When he [Kent Moors] presented this play my understanding was that the “takeover” price had not been agreed on and
    he expected the insiders to hold out for a much higher number.

  3. William Arnold
    January 24th, 2011 at 16:50 | #3

    Look to the small company Mainland Resource, Inc (NY: MNLU) expertise and the well they are bringing online in Jefferson County Mississippi. In four days I have made 57.5% on my investment. They plan more drilling in the same area. This is the forth largest Shale discovery in the world and it’s right here in the good old USA.

  4. Jill
    January 24th, 2011 at 17:40 | #4

    ditto to the question and comment by Ron E, thank you

  5. Charles Morrison
    January 24th, 2011 at 18:02 | #5

    Would not innovative companies like to work with foreign nations instead of DOS, in developing shale technology? Is this another area where government and private enterprise is about to clash? Different administrations may look at GSGI quite differently, it seems.

    January 24th, 2011 at 18:52 | #6

    C. J. CORNELIUS M.D. :Dear Kent:My nephew, John Claussen, is the Chevron geologist in charge of operations in Poland. He has been working with the Polish government to obtain the necessary permits for drilling the shale deposits in that country. Perhaps you have met him in your travels in Europe. ‘Just thought that you might be interested.CJC

  7. Marjorie Topkins
    January 24th, 2011 at 19:00 | #7

    Several years ago, believing in oil shale, I invested in an Australian companies called “Southern Pacific Petroleum and Central Pacific Mines. They exploded and then crashed. Whateveer happened to this or these companies? Will they make a comeback or are they dead in the water?

  8. Marjorie Topkins
    January 24th, 2011 at 19:14 | #8

    I receently read an aarticle in one of the environmental magazines suggesrting that one method of fracing using CO2 and H2O might result in in some level of pollution of the ground water. Will you coment on this?

  9. Ron Flugum
    January 24th, 2011 at 23:35 | #9

    I’m wondering if Dr. Moors has any recommendation about investing in the current North Dakota oil boom. Thanks.

  10. James Clarke
    January 29th, 2011 at 13:00 | #10

    I am keen, as Dr. Kent is, in finding out about those slightly lesser known companies (but not those very high risk, gamble type companies) that are liable to produce better returns than the household name companies that everyone knows about. We will not go wrong with Exxon, Shell, Chevron etc.–but that doesn’t mean they will produce the best return on our money–and that is what it is all about!

    Thank you

    Jim Clarke

  11. C. J. CORNELIUS M.D.
    February 4th, 2011 at 18:25 | #11

    Do you not think that GSFVF with its oil based fracking compound is the best solution to the problem of excess water usage and possible ground water contamination?

  12. September 2nd, 2011 at 00:05 | #12

    What are the shale gas potentials of west Asian Countries such as Syria and Jordan, where enrgy resources is crutial issue? Thanks

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