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Shale Gas Will Bring Down Household Bills

27-01-2012  News

Owing to the country’s own gas reserves, heating bills in the U.S. dropped by as much as 25 percent in three years.
 
This January gas price in the United States sunk to a record low. This is due to cheaper, domestically produced shale gas, announced the Bloomberg agency. America had waited ten years for such reductions. In Poland – assuming industrial-scale production of shale gas commences indeed in 2014 – gas bills could drop faster.
 
As this paper reported early in January, G.EN, a company operating in Pomerania, wants to buy first shale gas from PGNiG still this year. According to Jaromir Lipiec, a member of the G.EN Management Board, the drop in prices will be perceptible for the users as soon as within two years. The U.S.’s experience inspires optimism. Fed estimates that, if [gas] prices remain at the present level throughout this year, American users will save $16.5bn. From a report by the IHS Inc. consultancy it appears that by 2015 the savings would add up to as much as $113bn. Spectra Energy Corp. Chief Executive Greg Ebel told Bloomberg: “This is an unbelievable amount of money, that’s better than any tax cut you’ve seen out there.” Professor Robert Solow of the Massachusetts Institute of Technology believes this could have a significant impact on the growth of GDP in the U.S. in 2012 or 2013.
 
Cheap gas is a factor behind lower heating bills, which dropped since 2008 by 25 percent, on average. In some states last year’s drops ranged from 19 percent to 25 percent. Fed reckons that [gas] prices will continue downward this year, from $468.8 to $323.5, on average. “Form the users’ perspective shale gas has changed the rules of the game dramatically”, admits Hank Linginfelter, Vice-president of ACL Resources Inc., the Atlanta-based gas distributor. Electricity bills have been going down too, electricity prices in the U.S. being linked to the gas market.
 
According to Standard & Poor's, wholesale energy prices have dropped by one-half since the fourth quarter 2008. Poland has a good chance of seeing a similar scenario unfold. While it is difficult to predict today how much resource prices will go down in the wake of shale gas production, it is already a known thing that shale gas production will be cheaper (twice or more) than importing gas from Russia, or Qatar. Initially Wood McKenzie specialists estimated the cost of production of non-conventional gas at $335 per 1000 cu.m.
 
Subsequently, studies by the Oxford Institute of Energy Studies showed that 1000 cu.m. could cost less than $300 and recent studies by the U.S. Rice University speak of a production cost in Poland at a level of $200. This, however, is still a least $50 more than in the U.S. Andrzej Cylwik, Case-Doradcy President, also warns that drilling in this country will be more costly than in America. He cites figures of a U.S. company K&L Gates, which put the cost of making a borehole in Poland at $17m, to the U.S.’s $8m-$9m.
 
However, this cost will go down as competition grows and as the effect of scale is realized. “It will drop to $11m in four years”, he explains. The best-case scenario features the cost reduced to $7.7m. According to Cylwik, drilling 50 exploration wells and 150 exploitation wells will cost us about $2.3bn, all told.
 
In the next two years companies prospecting in Poland for non-conventional resources will carry out no less than 120 wells. The Ministry of the Treasury being intent on expediting the work, it has prevailed on the companies reporting to it to cooperate in the exploration work. As a result, PGE, Tauron and KGHM will involve in the drilling alongside Orlen, Lotos and PGNiG. Enea also has plans relating to shale gas recovery.
 
Source: Dziennik Gazeta Prawna, 27 January 2012, p. 12, by Michał Duszczyk

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