The surge in unconventional gas production is transforming sectors such as energy and transportation, finds RBC Capital Markets and the Economist Intelligence Unit.

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“We are entering a paradigm shift in the way that businesses and national governments look at energy, particularly as it relates to underlying market drivers, business models, risks and economic impact stemming from the shale gas boom,” says Marc Harris, RBC Capital Markets’ co-head of Global Research.

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Key findings include:

  • Most Exploration & Production (E&P) market participants believe shale gas prices have bottomed out. The vast majority (87%) of survey respondents predict natural gas prices will stay the same or increase over the next two years. In fact, 73% of respondents anticipate a price increase of 10% or more in the next five years. Until then, E&P companies are moving away from dry gas and are focusing instead on liquid-rich plays, such as wet gas and shale oil.
  • The shale gas boom is making U.S. companies think twice. Companies in the energy, manufacturing and transportation industries are reassessing underlying market drivers, business models and risks as a result of the shale gas boom. On an economy-wide level, respondents expect shale gas will improve country competitiveness in both the U.S. (52%) and Canada (48%).

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  • The shale gas boom is impacting industries differently. Low cost shale gas will be especially beneficial to companies that rely on feedstock or direct energy usage to compete on a global level. In industries like petrochemicals and fertilizers, where feedstock or energy inputs can account for up to 90% of total production costs, low priced shale gas will be a game changer.
  • It’s impacting the U.S. economy. More than half (54%) says shale gas could lead to natural gas becoming a significant U.S. export in the medium term. However, revenues generated from natural gas exports will not have a significant positive impact on the state of the overall U.S. economy. The implications on job creation will be positive, but energy security and environmental concerns could limit the scale of natural gas exports in the U.S.

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  • Lack of transparency remains an obstacle. A lack of transparency regarding chemical usage from producers is a deterrent to gas-related investments, according to 25% of institutional investors. Improved transparency, increased environmental risk management and implementation of best practices will help the industry maintain its license to operate, while capturing the benefit of production currently lost to fugitive emissions.
  • Infrastructure will be challenged. While sourcing infrastructure investment capital is unlikely to be a major bottleneck to growth, regulatory risks remain prevalent. Regional pipeline supply dynamics are rapidly changing in response to changing demand conditions. Notably, an increase in NGL demand production has created an infrastructure bottleneck in some regions, for example in North East U.S.