Williston, North Dakota, is a bleak little city in the vast American
prairie. It's dusty in the summer and frigid in the winter. Moose
hunting is one of the few sources of entertainment. But despite its
drawbacks, Williston has seen its population more than double within a
short period of time.
The city is so overcrowded that new arrivals often have no place to
stay but in their motor homes, which, at monthly parking fees of $1,200
(€880), isn't exactly inexpensive. And more people continue to arrive in
this nondescript little town.
The reason for the influx is simple: Geologists have discovered a
layer of shale saturated with natural gas and oil deep beneath the city.
The Bakken formation, spanning thousands of square kilometers, has
become synonymous with an American economic miracle that the country
hasn't experienced since the oil rush almost 100 years ago.
North Dakota now has virtual full employment, and the state budget
showed an estimated surplus of $1.6 billion in 2012. Truck drivers in
the state make $100,000 a year, while the strippers being brought in
from Las Vegas rake in more than $1,000 a night. President Barack Obama
calls the discovery of Bakken and similar shale gas formations in Texas,
Colorado, Pennsylvania, Louisiana and Utah a "stroke of luck," saying:
"We have a hundred years' worth of energy right beneath our feet."
A Vital Nerve
The future of the American energy supply was looking grim until
recently. With its own resources waning, the United States was dependent
on Arab oil sheiks and erratic dictators. Rising energy costs were
hitting a vital nerve in the country's industrial sector.
But the situation has fundamentally changed since American drilling
experts began using a method called "fracking," with which oil and gas
molecules can be extracted from dense shale rock formations. The
International Energy Agency (IEA) estimates that the United States will
replace Russia as the world's largest producer of natural gas in only
two years. The Americans could also become the world's top petroleum
producers by 2017.
Low natural gas prices -- the price of natural gas in the United States
is only a quarter of what it was in 2008 -- could fuel a comeback of
American industry. "Low-cost natural gas is the elixir, the sweetness,
the juice, the Viagra," an American industry representative told the
business magazine
Fortune. "What it's doing is changing the US back into the industrial power of the day."
The government estimates that the boom could generate 600,000 new
jobs, and some experts even believe that up to 3 million new jobs could
be created in the coming years. "My administration will take every
possible action to safely develop this energy," Obama said during his
most recent State of the Union address.
Shifting Calculations
The gas revolution is changing the political balance of power all
over the world. Americans and Russians have waged wars, and they have
propped up or toppled regimes, over oil and gas. When the flows of
energy change, the strategic and military calculations of the major
powers do as well.
It is still unclear who the winners and losers will be. The Chinese
and the Argentines also have enormous shale gas reserves. Experts
believe that Poland, France and Germany have significant resources,
although no one knows exactly how significant. Outside the United
States, extraction is still in its infancy.
The outlines of a changed world order are already emerging in the
simulations of geo-strategists. They show that the United States will
benefit the most from the development of shale gas and oil resources. A
study by Germany's foreign intelligence agency, the BND, concludes that
Washington's discretionary power in foreign and security policy will
increase substantially as a result of the country's new energy riches.
According to the BND study, the political threat potential of oil
producers like Iran will decline. Optimists assume that, in about 15
years, the United States will no longer have to send any aircraft
carriers to the Persian Gulf to guarantee that oil tankers can pass
unhindered through the Strait of Hormuz, still the most important energy
bottleneck in the world.
The Russians could be on the losing end of the stick. The power of
President Vladimir Putin is based primarily on oil and gas revenues. If
energy prices decline in the long term, bringing down Russian revenues
from the energy sector, Putin's grip on power could begin to falter. The
Americans' sudden oil and gas riches are also not very good news for
authoritarian regimes in the Middle East.
European industry is also likely to benefit from falling world market
prices for oil and gas. But according to prognoses, without domestic
extraction the Europeans' site-specific advantages deteriorate.
German chemical giant BASF has already invested a lot of money in the
United States in the last two years. In Louisiana, for example, it has
built new plants for the production of methyl amines and formic acid.
"The local natural gas price is a criterion that affects the question of
where we invest in new production facilities," says BASF Executive
Board member Harald Schwager. At the moment, the United States has a
clear advantage over Europe in this regard."
German Reservations
So far, the
political debate
in Germany has been dominated by concerns over adverse environmental
effects. Fracking has become a dirty word for citizens' initiatives and
environmental groups.
The concept of pumping water laced with chemicals into the earth at
high pressures to crack open layers of rock several thousand meters
beneath the surface makes many citizens uneasy, even though the
technology has, in principle, already been used for decades in
conventional gas extraction in the northern German state of Lower
Saxony.
At the same time, Germany's energy and climate policy would in fact
be a reason to use the new gas reserves. Flexible gas power plants would
be the best approach to offsetting unpredictable fluctuations in wind
and solar electricity, thereby maintaining a reliable power supply.
Besides, burning natural gas generates up to 60 percent less
climate-damaging CO2 than burning coal.
With the help of natural gas, the Americans have been able to reduce
their CO2 emissions associated with energy production to the lowest
level in years. This is one of the reasons the country plans to replace
one in six coal-fired power plants with gas power plants by 2020.
At the Munich Security Conference this weekend, fracking will be at
the top of the agenda for the first time. In fact, one of the agenda
items is called "The American Oil and Gas Bonanza." In past years,
nuclear weapons and threats from international terror were discussed at
the conference, but this year one of the hot topics is the "Changing
Geopolitics of Energy." This shows how important the issue has become.
"It is perhaps a permissible exaggeration to claim a natural gas
revolution," John Deutch, a former undersecretary at the Energy
Department and CIA director, and now a professor at the elite
Massachusetts Institute of Technology, recently wrote in
Foreign Affairs magazine. Deutch has been monitoring the development for years.
America
's Energy Miracle
In the late 1990s, American oil and gas companies used new
technologies to advance into previously unexplored layers of the earth.
They drill up to 4,000 meters (13,123 feet) into the shale, then make a
sharp turn and continue to drill horizontally. Then they inject a
mixture of water, chemicals and sand into the drilled well at high
pressure. This creates small fractures in the surrounding rock, allowing
gas and oil to be released and rise to the surface through pipes.
New technologies are drastically reducing drilling costs. In 2012,
shale gas already made up 34 percent of total production, and the
technology is constantly improving. The sector is booming, and there are
dozens of new companies searching for additional, previously
undiscovered deposits.
In the future, the United States could even go from being a net
energy importer to a net exporter. But that would require a true policy
shift. Since the oil shock of the 1970s, the export of domestic
petroleum resources has been banned in the United States. Many companies
also have an interest in keeping as much of the cheap natural gas in
the country as possible, as it provides them with a competitive
advantage over foreign competitors.
According to a study, lower natural gas prices last year created a
benefit worth more than $100 billion for US industry. "The country has
stumbled into a windfall on the backs of these entrepreneurs," says
study co-author Professor Edward Hirs of the University of Houston.
And perhaps things will indeed improve substantially. The US
government has identified a new deposit in Utah, although additional
major advances in technology are needed to make extraction economically
viable. The Utah deposit contains an estimated 1.5 trillion barrels of
extractable oil, or as much as the world's entire proven oil reserves to
date.
Russia
on the Losing End
A building in the southwestern section of Moscow juts into the sky
like a rocket. The architectural message of the headquarters of energy
giant Gazprom, which towers over everything else around it, is clear:
The only way is up. Until recently, there was still an overwhelming
consensus that nuclear weapons and energy commodities like oil and gas
are the two currencies that gave a country its superpower status.
Russia, the world's largest exporter of natural resources, has both in
abundance.
President Putin built his dominance at home and his foreign policy on
Russia's wealth of natural resources. Oil and gas revenues make up about
50 percent of the national budget. The president needs Gazprom's
billions in revenues to keep his supporters, mostly government
employees, retirees, blue-collar workers and farmers, happy with
expensive social benefits. Gas also plays a central role in the plan to
expand Russia's sphere of influence into the former Soviet republics.
But now the American natural resources boom threatens Putin's dreams
of an imperial resurrection of his country. It is already struggling
with falling gas prices. Gazprom's operating profit shrank by more than
25 percent in the first nine months of 2012.
The Russians are now forced to give their customers, like Germany's
E.on and Italian energy company Eni, discounts in the billions. Still,
the Europeans are reorienting themselves. In the first three quarters of
2912, Gazprom sales fell by 43 percent in the Netherlands, 30 percent
in Slovakia and 20 percent in France.
