IEA Director: Shale Gas and Oil Changing the Global Energy Map

In 2011, the International Energy Agency predicted what it called "the golden age of gas," with gas production rising 50% over the next 25 years. Last November, the IEA updated that prediction in its World Energy Outlook-2013. Since then, Maria van der Hoeven, its executive director, has been interviewed several times. While she believes that unconventional oil and gas can be produced in an environmentally acceptable way, she has also warned that an expansion of gas alone "is no panacea for climate change." The following excerpts focus on the global effects of increased production during the shift to renewables.

The Christian Science Monitor: The energy industry has undergone a revolution that has opened up vast new sources of so-called "tight oil" and "shale gas," ...Is the promise of this unconventional oil and gas overhyped?

IEA: The light tight oil revolution in the United States is changing the geographical map of oil trade... (From energy post):'s a truly great development, which had been underestimated before. The prospects of US tight oil are still perhaps underestimated. So we will see oil exports from the US and we will see gas exports from the US and Canada. At the same time, however, demand in the East is growing immensely. This means the oil trade from the Middle East will go much more to Asia.

Moreover, although the boom in the US is real, we see it slow down around 2020, because of the available resources. The Middle East will then take its place again as number one oil producer and exporter.

Winners and Losers How is the shale boom reshaping the global economic system? Who are the winners and losers?

IEA: ...lower energy prices in the US mean that it is well-placed to reap an economic advantage... (prices) are about three times lower than in Europe and five times lower than in Japan. Electricity price differentials are also large, with Japanese and European industrial consumers paying more than twice as much for electricity as in the United States, and even Chinese industry paying almost double the US level.

Looking to the future, the WEO found that the United States sees its share of global exports of energy-intensive goods slightly increase to 2035, providing the clearest indication of the link between relatively low energy prices and the industrial outlook. By contrast, the European Union and Japan see their share of global exports decline - around one-third of their current share.

Little non-North American shale development before 2020

The Christian Science Monitor: Where do you see the next "shale boom"?

...There are people who think they can replicate the US shale boom. It's not as easy as that. The land ownership and the resource ownership go together here in the United States - the only country where that is the case... And geology in this part of the world is quite different. You can learn from it, but it's not a copy-and-paste. The United Kingdom is changing its attitude to shale gas. China wants to develop its shale gas, but it's in a very dry part of the country. South Africa is looking to its shale gas resources. The point is there's a lot of shale gas in the world, but it's not as easily accessible as it was in the United States.

IEA: ( will be little non-North American shale development before 2020 due to the much earlier stage of exploration and the time needed to build up the oil field service value chain. Beyond 2020, we project large-scale shale gas production in China, Argentina, and Australia as well as significant light tight oil production in Russia. The current reform proposals in Mexico have the potential to put Mexico on the top of that list as well, but they need to be properly implemented.

OP: What is the future of methane hydrates?

IEA: Methane hydrates may offer a means of further increasing the supply of natural gas. However, producing gas from methane hydrates poses huge technological challenges, and the relevant extraction technology is in its infancy. Both in Canada and Japan the first test drillings have taken place, and the Japanese government is aiming to achieve commercial production in 10 to 15 years.

One thing I always mention when I am asked about methane hydrates is this: It may seem far off and uncertain, but keep in mind that shale gas was in the same position 10 to 15 years ago. So we cannot rule out that new energy revolutions may take place through technological developments and price incentives.

Sub-Saharan Africa

The Christian Science Monitor: Parts of sub-Saharan Africa are coming into new sources of oil and gas. Can countries like Kenya and Uganda reap the benefits of their own resource wealth without falling victim to the "resource curse" that has hurt countries like Nigeria?

IEA: ...that's a very difficult one. This is a very poor region of the world, and in our view it's important that you are on good terms with local populations, host populations, and with host governments. And that means that you share benefits. That can be sharing benefits of fossil-fuel resources, and that can also mean, for instance, that you invest in renewable technology to bring electricity to the people. There are more solutions than one, but we will be working on this, and will come up with a number of proposals in our World Energy Outlook 2014.

Leveraging renewable energy When will we see "the golden age of renewables"?

IEA: Although we have not yet predicted a "golden age" of renewables, the current, rapid growth of renewable power is a bright spot in an otherwise bleak picture of global progress towards a cleaner and more diversified energy mix. Still, the investment case for capital-intensive, low carbon power technologies carries challenges. We need to distinguish between two situations:

o In emerging economies, renewable power often provides a cost-competitive alternative to new fossil-based generation and are perceived as part of the solution to questions of energy supply, diversification, and economic development. In China, for example, efforts to reduce local pollution are stimulating major investments in cleaner energy.

o By contrast, in stable systems with sluggish demand, no technology is competitive with marginal electricity prices, due to overcapacity. Governments are nervous about increasing investment in low-carbon options which impact on consumer prices, and this is causing policy uncertainty. But long-term energy security and environmental goals need to be kept in mind.

The Christian Science Monitor: Can African nations leverage renewable energy - and "leapfrog" traditional electric grid development?

IEA: They need to leapfrog in Africa and they can. There are quite a lot of remote areas where you have to find mini-grid, off-grid solutions, and you need to have storage capacity. It's not always big storage capacity, but the costs have to come down. So it's absolutely vital that we look into a myriad of options. That involves solar, it involves geothermal, hydro, wind, and other renewable and fossil sources... The point is how can they get the money out of it to pay for the solutions for electrification.

Will new shale oil and gas maintain the US advantage?

Photo: IEA