S&P: Asia-Pacific's shale gas industry is still nascent, but latent demand may spark growth

(Sept. 12, 2013) -- Commercial production of Asia-Pacific's shale gas or oil won't happen anytime soon?nor will it be easy or cheap, Standard & Poor's Ratings Services said in a report published today, titled, "Asia's Tough Terrain Delays Shale Gas Progress, But Latent Demand May Ignite Growth". That's despite the region sitting on the world's second-largest shale gas resources, according to the U.S. Energy Information Administration. China alone possesses the world's largest shale gas resources, and is expected to consume more energy to power its growth, despite its slowing growth and economic restructuring.

"Technological limitations, inadequate skills, and tough terrains require huge and costly investments. And poor infrastructure in remote reservoirs would make it difficult to get shale resources to markets," Standard & Poor's Ratings Services credit analyst Lawrence Lu said. "Nonetheless, the need for energy security, the push for lower emission fuel, and robust energy demand are likely to spur Asia-Pacific countries to pursue commercial production of shale gas and oil, in addition to other hydrocarbons."

Because of the challenges, Asia-Pacific is likely to take more than five years to unlock its shale resources. Regulatory and environmental policies, including drilling bans in Europe and elsewhere, have plagued and stalled resource development in some countries. At the same time, fixed regulatory controls on gas prices in Asia-Pacific countries make it uneconomical to extract shale resources, although such controls are loosening.

Meanwhile, Australia, China, India, and Indonesia have taken tentative steps to explore their shale gas and oil potential, including drilling wells. At the same time, resource-deficient countries such as Japan and Korea continue to incur huge energy costs mainly because of rising gas imports. (ends)