UKERC response to the Energy and Climate Change Committee Inquiry into The Impact of Shale Gas on Energy Markets - October 2012, Part 1

This submission focuses on the potential impact of shale gas production on the global gas industry. Firstly, it suggests that the rapid development of shale gas production in the United States (US) has had a significant impact as it has resulted in the loss of a major market for LNG exporters. Events in Japan post-Fukushima are also an important factor in explaining the current situation. Secondly, the very low price for gas in the US, as a result of shale gas production, is putting pressure on gas price formation, both in Europe in relation to long-term oil-indexed pipeline imports and in the Asia-Pacific region in relation to long-term oil-indexed LNG imports. However, the high-price of oil is also a key factor in the current debate over the future pricing of natural gas. To conclude, the potential for significant shale gas production is an important factor in the current uncertainty over the future of the global gas industry, but it is not the only factor at play and any assessment of shale gas must be made in the wider context of multiple uncertainties.