Shale Gas Steel

Introduction

Fig. 1: Shale formation. (Courtesy of the U.S Department of Energy.)

The energy companies have known about the existence of shale gas since its first extraction as a resource in Fredonia, NY in 1821. However, lack of economical profit for producing shale gas led the termination of shale gas project since then. It was not until 1970s that the industrial-scale shale gas production began. With the decline of conventional gas deposits in the United States, federal government started to invest research and development on the techniques for producing shale gas much more economically. It was successful in terms of securing abundant source of natural gas for United States and fueling standstill steel industry at the same time.

What Is Shale Gas?

Shale gas is natural gas trapped within shale formations (Fig. 1). Shales are fine grained, rich sources of petroleum and natural gas sedimentary rocks. In 2000 only 1% of the United States natural gas production was by shale gas, but it was over 20% by 2010, and by 2035, 46% of the United States natural gas supply will come from shale gas according to Energy Information Administration in the United States (Fig. 2). [1] Now shale gas is very important source of natural gas in the United States and the rest of the world as clean energy for the next generation.

Two Important Techniques For Shale Gas Production

Shale gas rush is inspired by two innovations on techniques which are horizontal drilling and hydraulic fracturing also known as fracking. Until recently, energy companies were having a problem to develop shale gas by traditional vertical drilling techniques because of its lack of economical efficiency. In the mid to late 2000s record high energy prices encouraged energy companies to have one of innovations, horizontal drilling. The other advancement in a technique, hydraulic fracturing is coupled with horizontal drilling. These two innovations enabled the energy companies to break shale rock barriers and bring the fragmented pockets of gas to the market.

Fig. 2: U.S. Natural gas production. [4] (Courtesy of the U.S. Department of Energy.)

Two Important Connections With Steel Industry

The shale gas rush brought cheap and stable price of natural gas due to the abundant supply. [2,3] Steel companies have begun replacing coal with natural gas to power its blast furnaces. Using shale gas instead of coal to power the furnaces saves at most $10 per ton. This enables U.S. Steel could save $133 million in 2012 and also Pittsburgh-based company could save another $80 million for nonblast furnace operations according to UBS AG. The other key connection is dramatically increased demand for steel. [2] For example, in Ohio only 33 wells were drilled in 2011. However, according to a recent investigation, the number of wells (especially gas wells) could increase up to 2,000 with an additional 1,000 wells being drilled per year by 2014. A lot of steel will be required for these wells. The other shale plays in the United States will go through the same situation.

Conclusion

The shale gas rush just begins for its long journey to fuel the next century energy consumption of the world. As the techniques evolve to lowering the producing costs for shale gas, related industry (e.g. steel industry) will be accelerated its own innovation as well. This interrelated relationship will be fastening by their positive effects on the other side.

© Hyucksoo Park. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.

References

[1] "Annual Energy Outlook 2012", U.S. Energy Information Administration, DOE/EIA-0383(2012), June 2012.

[2] J. W. Miller, "Steel Finds Sweet Spot in the Shale", Wall Street Journal, 26 Mar 12.

[3] "Shale Gas Boom Boosts Steel as Well," Charleston Daily Mail, 28 Mar 12.

[4] "AEO2013 Early Release Overview," U.S. Energy Information Administration, 2010.