Russians keep their eye on the shale revolution

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The shale gas revolution means that the US could be the world’s biggest gas producer by 2015

There has been an influx of Russians into Texan courthouses, is the whisper.

Why? Because the officials in these buildings handle the stream of paperwork around the new energy industry in which the region is a leader.

That is the shale oil and gas industry, which through technological developments notably fracking is now able to tap vast reserves held deep in shale rock under America.

Russia’s volumes of conventional gas means it has little impetus to start fracking itself, though it is thought to have significant shale reserves but there can be no harm in watching the competition. “Russia has massive deposits, but feels the need to understand unconventional [gas] so you have Russians sitting in South Texan courthouses,” says Bobby Tudor, chief executive of energy-focused investment bank Tudor (Other OTC: TDRLF.PK - news) , Pickering, Holt and Co, based in Houston.

This marks just one of the ways in which the shale revolution under way in the US but not confined to it is reverberating around the world.

Just last week, the International Energy Agency made headlines across the globe as it predicted that these reserves will make the US the world’s biggest gas producer by 2015, and the largest oil producer two years later.

“The result is a continued fall in US oil imports, to the extent that North America becomes a net oil exporter around 2030,” said the IEA in its flagship World Energy Outlook report.

Certainly, it is often said that a growing Asia is poised to suck up America’s gas at least, once the infrastructure is in place to allow it to export its energy as liquefied natural gas (LNG) that can be conveniently shipped around the world.

But that’s not all that is going on as the implications of the US shale boom are felt. Continental Europe, for example, is supplied by Russian giant Gazprom (MCX: GAZP.ME - news) , so has a lot of interest in what gas it could buy from the US.

Then there are those areas, which, like America, are starting to exploit their own shale resources, most notably Vaca Muerte in Argentina, a vast oil and gas field. Over in Canada, meanwhile, worries are being voiced that the US’s growing energy output could push oil prices down to the point that Canada’s own oil projects do not make sense financially. After all, the US is its biggest energy customer.

For the US itself, the benefits are manifold, at least according to the energy industry . The cheap gas supply released from shale is already seeing factories being built state-side rather than in Asia, it says.

What are the risks to all this activity? Right now, such has been the flood of natural gas onto the US market that prices are so low as to make the bulk of its shale gas developments uneconomic, having this year been languishing around $2 (£1.26) per million British thermal units, down from a spike near $14 back in 2005. (Oil is not affected in the same way, as it can be exported.)

No immediate relief for producers appears in sight, with prices predicted to slide again if the winter proves mild. However, the economics should mean that a sustainable price for the industry will be reached eventually.

Industry observers say the bigger threat to the development of shale would be a disaster of the size that hit BP in the Gulf of Mexico dramatically souring sentiment around shale or the development of technology for a rival form of energy that would make it more attractive than shale.

A prolonged economic malaise would likewise disrupt the industry’s progress. “Everything depends on macro being 'not bad’,” says Tudor. What that means is growth in China, India and other emerging economies not “falling apart”.

There are also the vocal opponents of fracking the hydraulic fracturing technique by which cracks are created in shale rock deep underground and then flushed with liquid to draw out the oil and gas trapped within. Those in shale admit critics have waged a better campaign than they have, so far. ER

= Silver set to soar =

Silver looks set to rise significantly over the next few months, analysts believe.

The precious metal has already outperformed gold, rising 17pc in the year to date compared with a gold price up 10pc. However, the increase could be more significant next year as stimulus measures used to boost the moribund global economy send the price higher.

Last week, the head of precious metals research group Thomson Reuters GFMS said that silver could head significantly higher from its current level just above $32 (£20).

“A rebound in investment demand stemming from continuing loose monetary policies is expected to drive silver prices towards and possibly over $50 in 2013,” Philip Klapwijk, GFMS’s investment director, said in an interview with the Silver Institute. “We are thinking prices will trend higher next year. I’m not convinced that we are going to $50. I think we will definitely see $40 to $45 prices.”

Ian Williams, a fund manager at Charteris Treasury, said last week that silver will increase in value by a multiple of five times over the next three years.

“Silver is about to enter a sustained bull market that will take the price from the current level of $32 an ounce to $165 an ounce and we expect this price to be hit at the end of October 2015,” he predicted.

His forecast was based entirely on technical analysis. GW

= Nickel could jump too =

Nickel prices could rally almost 10pc over the next few months, according to Deutsche Bank (Xetra: 514000 - news) analysts Daniel Brebner and Xiao Fu.

“The fundamentals for nickel remain poor,” they say. “Despite our longer-term concerns with respect to the nickel market, we expect that an improvement in overall physical conditions over the next couple of months, in addition to favourable seasonality trends, could see the nickel price move off its recent lows. “

Prices could move from around $16,000 a tonne towards the $17,500 level, they argue.

Nickel is used in steel making and in other alloys and electroplating. GW