The production of shale gas on the US energy scene in particular, and the world's in general, is very much in the news lately.

Shale gas is natural gas trapped in deeper shale formations of insufficient permeability to easily allow hydrocarbons to flow to a well. It is described as unconventional for this reason. Although the resource has been known for a long time, its production in the United States in earnest started only few years ago due to the difficulties and higher cost associated with its production.

However, US gas production stagnated since the 1990s and some thought it was in permanent decline.

The US started getting ready to import LNG and nine terminals were built and two more are currently under construction.

However, in later years imports declined not only because of the 2008 recession but also because of the increased supplies of shale gas which have come on stream for the high prices of gas at least until the middle of 2008.

US production of natural gas increased from 49.5 billion cubic feet a day (bcfd) in 2005 to 59.1 bcfd in 2010 and more is forecast for the future where all the increase is associated with shale gas.

To demonstrate the significance of shale gas, its production in 1990 in the US was only 2 per cent and now it is 10 per cent with Tony Hayward, the former BP chief, calling it a "quiet revolution".

A forecast suggests that "current shale output of some 6 bcfd, or 10 per cent of total domestic production, could grow to 27 bcfd, or 40 per cent of the total, by the mid-2020s."

Commercial viability

While gas prices originally drove the interest in shale gas, advances in horizontal drilling and the process of hydraulic fracturing technically overcame the low permeability of the formation and allowed wells to be commercially viable.

However, the reserves may have been overestimated by the euphoria surrounding the issue where the Energy Information Administration (EIA) estimated the shale gas reserves in one basin at 410 trillion cubic feet (tcf) — contrary to a recent US Geological Survey's figure of only 84 tcf.

The development in the United States encouraged many countries to take a fresh look at this resource. In fact China has more reserves than the United States and is cooperating with US companies to develop some of its basins.

US President Barack Obama and Chinese General Secretary Hu Jintao agreed to the US-China Shale Gas Resource Initiative in November 2009. China already has a target of reaching a production of 2.8 tcf by 2020. But all this is not without a drawback. Shale gas production has a number of significant environmental challenges.

Hydraulic fracturing where water, chemicals, and sand are pumped into the well to unlock the hydrocarbons trapped in shale needs a huge amount of water — some 20,000 cubic metres per well.

Sourcing, transporting and treating this water is a major cost item and where water is scarce, development becomes practically impossible. While 50-70 per cent of the injected water may be recovered and treated for reuse or disposal there is a danger that the remaining water may lead to contamination of groundwater aquifers. The danger is also there if there is a fault in the casing or cementing of the well.

A study published in May 2011 concluded that fracking has seriously contaminated shallow groundwater supplies in northeast Pennsylvania with flammable methane.

The New York Times reported that "a well can produce over a million gallons of waste water that is often laced with highly corrosive salts, carcinogens like benzene and radioactive elements like radium, all of which can occur naturally thousands of feet underground. Other carcinogenic materials can be added to the wastewater by the chemicals used in the hydrofracking itself."

The claim that shale gas produces less greenhouse gases than conventional gas is challenged by many who claim that it may emit as much or more than oil or coal when methane leakages and the full life cycle are considered.

The US Environmental Protection Agency concluded that shale gas emits much larger amounts of methane, a potent greenhouse gas, than does conventional gas.

Intentional overstating

Some are even questioning the economics of shale gas where the New York Times in June 2011 found that "the financial benefits of unconventional shale gas extraction may be less than previously thought, due to companies intentionally overstating the productivity of their wells."

No wonder then that public concern is mounting in the United States and Europe against hydraulic fracturing.

The writer is a former head of the Energy Studies Department in the Opec Secretariat in Vienna.