NEWS RELEASE                                   APRIL 2010

Shale Gas Bonanza Will Alter Air, Water and Energy Markets

The unexpected potential for utilization of gas held in shale deposits is significantly changing not only the energy outlook, but also the air and water market potential.  This is the conclusion reached by the McIlvaine Company in its various air, water and energy market reports.

When the price of natural gas soared in the U.S. in 2008 from $6/MMBtu to $14/MMBtu, it appeared that this fuel would no longer be a candidate for power generation.  But in just two years the outlook has changed radically.  The reason is expectations of large amounts of gas extraction from shale deposits in the U.S. and elsewhere.  There is a fair chance that the price of natural gas in the U.S will remain at $8/MMBtu or lower due to the shale resources. 

While the deposits in the U.S. appear to be the largest, they represent less than 20 percent of the world total.  China and India could become major producers of gas from shale, so the impacts on economic growth and energy infrastructure investment will be significant.  Because large quantities of water are needed to fracture the shale, there are very large markets for flow control, water treatment equipment and chemicals.

Effects on the air markets will be mostly negative but there will be positive segments as well.

The world consumed 110 trillion cubic feet (TCF) of natural gas last year.  By 2030 it will likely consume 153 TCF.  The U.S. has shale gas resources of 3700 TCF of which possibly 1000 TCF is recoverable.  Successful extraction of shale gas by hydraulic fracturing in Texas has led to a boom in Pennsylvania where the Marcellus deposit is estimated at 2100 TCF, or more than half of the entire U.S. recoverable reserves.

It is estimated that investment in wastewater treatment in the Marcellus region alone will be more than $1 billion per year with peaks several times higher.  So there will be very substantial sales of pumps, valves, cross-flow membrane systems, centrifuges, sand filters, filter presses and water/wastewater treatment chemicals.  For example, polymers are needed to reduce friction on the fracturing (frac) water and also to separate contaminants in the flow back water.

The impact on energy infrastructure investment will be significant.  Already several utilities have announced plans to retire old coal-fired power plants and replace them with combined cycle gas turbine plants.  This is a complete reversal from just a few years ago when operators of gas turbines suffered large losses due to the high natural gas prices.  It is possible that some of the environmental aspects of shale fracturing will either raise the cost of gas or limit its availability but at least in the short term, gas has again become the fuel of choice for utilities.

The impact on air markets will be mixed.  On the negative side, there will be lost orders to retrofit air pollution control equipment on some of the old coal-fired power plants which will be retired.  There will be few new coal-fired power plants started in the next several years in the U.S.  There is not likely to be a slowdown in new coal-fired power plant orders in Asia, so this will be the big market for suppliers of air pollution control equipment.

On the positive side, the availability of gas will make the U.S more competitive as a manufacturing base for chemicals and fertilizers - all of which utilize air pollution control equipment.  Also on the positive side, there will be increased markets for selective catalytic reduction systems and catalyst for the gas turbines which will utilize this shale gas.

The impact of shale gas has been taken into account in the air, water and energy forecasts in McIlvaine market reports.  For more information on these reports, click on: