The Economic and Employment Contributions of Shale Gas in the United States

IHS. The natural gas "shale gale" that has dramatically transformed the outlook for U.S. energy supplies is also having profound economic impacts -- creating jobs, reducing consumer costs of natural gas and electricity, stimulating economic growth and bolstering federal, state and local tax revenue, according to a new IHS Global Insight study. The study found that shale gas production supported more than 600,000 jobs in 2010, a number that is projected to grow to nearly 870,000 by 2015.

The study, The Economic and Employment Contributions of Shale Gas in the United States, is the most definitive study to date tracking the long-term economic impact of U.S. shale gas production. It presents the economic contributions of shale gas in terms of jobs, economic value and government revenues through 2035, as well as the broader macroeconomic impacts on households and businesses. The report is the first of three on the economic effects of unconventional gas and oil development in North America.

“The rapid growth in shale gas production—currently 34 percent of total U.S. production—is one of the most significant energy developments in recent decades and is having a significant impact on the nation's economy in terms of stimulating job creation and economic growth,” said IHS Vice President John Larson, the lead author of the study. “This study further informs the discussion with a greater understanding of the economic potential from this vast American energy source.”

Among the study's key findings:

Shale gas had grown to 27 percent of U.S. natural gas production by 2010; it is currently 34 percent and will reach 43 percent in 2015 and more than double by 2035 to 60 percent

In 2010, the shale gas industry supported more than 600,000 jobs; by 2015 the total will likely grow to nearly 870,000 and to more than 1.6 million by 2035

Nearly $1.9 trillion in cumulative capital investments are expected to be made between 2010 and 2035

Annual capital expenditures, especially strong in the early years, will grow to $48.1 billion in 2015

The shale gas contribution to the U.S. gross domestic product (GDP) was more than $76.9 billion in 2010; in 2015 it will be $118.2 billion and will triple to $231.1 billion in 2035

Over the next 25 years, the shale gas industry will generate more than $933 billion in tax revenues for local, state and the federal governments

Savings from lower gas prices, as well as the associated lower prices for other consumer purchases, equate to an annual average addition of $926 in disposable income per household between 2012 and 2015, and increase to more than $2,000 per household in 2035 on an annual basis

The report’s findings reflect the dramatic impact of shale gas production in the United States. As recently as 2007, it was believed that the country would soon need to import large volumes of liquefied natural gas (LNG) for domestic consumption. Instead, shale gas production has more than doubled the size of the discovered natural gas resource in North America—enough to satisfy more than 100 years of consumption at current rates.

A key reason for the shale gas industry’s profound economic impact is its high “employment multiplier”—the indirect and induced jobs created to support an industry. For every direct job created in the shale gas sector, more than three indirect and induced jobs are created, a rate higher than the financial and construction industries, the report finds.

“Shale gas combines a capital-intensive industry with a broad domestic supply chain,” Larson said. “The United States is a leader in all parts of the shale gas industry which means that most of its suppliers are domestically based, and that means a larger portion of the dollars spent are supporting domestic jobs in trucking, steel fabrication, aggregates, heavy equipment manufacturing, hotels, and restaurants, among others.”

The study also found that shale gas and related jobs pay higher wages on average – currently $23.16 per hour – than those paid to workers in manufacturing, transportation and education.

The IHS Global Insight study measured the broader impact of lower natural gas prices, finding that over the 2010-2035 period prices on average would be at least two times higher absent shale gas production. This impact is even greater now and over the next few years when prices would have been two-and-a-half to three times higher. The lower natural gas prices have resulted in a 10 percent reduction in electricity costs nationally and that flows through the economy to lead to lower prices for many other consumer purchases.

Lower gas prices also boost the international competitiveness of domestic manufacturers, resulting in 2.9 percent higher industrial production by 2017 and 4.7 percent higher production by 2035.

“Absent the added supply from shale gas production, large volumes of LNG imports would be required and U.S. consumers would be paying European or even Asian prices which are two to three times what they are today here in the U.S.,” Larson said. “The benefits of that savings reverberate through the wider economy.”

The Economic and Employment Contributions of Shale Gas in the United States was commissioned by America's Natural Gas Alliance (ANGA). IHS Global Insight offers an independent assessment and is exclusively responsible for all of the analysis, content, and conclusions contained in the study.

In measuring the economic contribution of shale gas, the study fully "sized" the economic influence of the industry by capturing all the supply chain and income effects associated with shale gas activity in the U.S. The results of the production and capital expenditure profile analysis were integrated into a customized modeling approach developed by IHS Global Insight. This approach links Input-Output modeling techniques – similar to those used by the U.S. Department of Commerce and the Congressional Budget Office– with the dynamic modeling capabilities of proprietary IHS models to capture the industry's comprehensive contribution and impact on the economy. The results represent a conservative estimate as the study:

Constrained future production and capital expenditures by realistic market demand as well as technical and economic feasibility of developing shale gas plays.

Did not consider production or investment activities from additional gas plays that have yet to be discovered.

Independently evaluated each play to reflect regulatory environments in each region and adjusted production profiles to reflect little or no development if there was uncertainty as to regulation and access.

Did not consider the economic benefits accruing to the U.S. suppliers who are supplying the Canadian shale gas industry.

Did not quantify the job creation in industries that would refocus investment back to the United States (for instance, petrochemicals).

IHS Global Insight established the modern economic forecasting industry nearly 50 years ago and provides the most comprehensive economic and financial  information available on countries, regions, and industries, using a unique combination of expertise, models, data, and software within a common analytical framework. Among those who developed IHS Global Insight's expertise in this area was Nobel laureate in Economics Lawrence Klein.

IHS (NYSE: IHS) is the leading source of information and insight in critical areas that shape today’s business landscape, including energy and power; design and supply chain; defense, risk and security; environmental, health and safety (EHS) and sustainability; country and industry forecasting; and commodities, pricing and cost. Businesses and governments around the globe rely on the comprehensive content, expert independent analysis and flexible delivery methods of IHS to make high-impact decisions and develop strategies with speed and confidence. IHS has been in business since 1959 and became a publicly traded company on the New York Stock Exchange in 2005. Headquartered in Englewood, Colorado, USA, IHS employs more than 5,500 people in more than 30 countries around the world. IHS is a registered trademark of IHS Inc. All other company and product names may be trademarks of their respective owners. Copyright © 2011 IHS Inc. All rights reserved.

The Economic and Employment Contributions of Shale Gas in the United States 

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Nigeria Electricity and Gas Improvement Project

The development objectives of the Project are to: (i) improve the availability and reliability of gas supply to increase power generation in existing public sector power plants; and (ii) improve the power network#s capacity and efficiency to transmit and distribute quality electricity to the consumers.

World Bank.Author: Fernstrom,Erik Magnus.Document Date: 2011/12/01.Document Type:  Implementation Status and Results Report.Report Number:ISR4948

Nigeria Electricity and Gas Improvement Project (NEGIP) : P106172 - Implementation Status Results Report : Sequence 04

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Cameroon.Kribi Gas Power Project

World Bank. The development objective of the Kribi Gas Power Project for Cameroon is to: (i) increase the capacity of electricity generation from the project, and (ii) improve access to private finance for the development of the project, including local currency financing.

The project consists of: (i) the development, construction and operation of a new 216 (nameplate) MW natural gas-fired power plant located near the Mpolongwe village, nine kilometers north of the coastal city of Kribi in South Province of Cameroon; and (ii) the development and construction of a new 100-kilometer 225-kilovolt double-circuit transmission line between the Kribi power plant and the existing Mangombe 225/90-kV substation at Edea in Littoral Province, including substations and transformers, all developed by the Kribi Power Development Company (KPDC).

Associated infrastructure includes: the offshore Sanaga South gas field, marine pipelines, and a Central Gas Processing Facility, all developed by Perenco Cameroon; an 18-kilometer onshore gas pipeline developed by the National Hydrocarbons Company (SNH); and the transmission line (including substations and transformers) after construction completion and transfer to the Government of Cameroon (GOC).

Cameroon.Kribi Gas Power Project

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Brasil.Institutional Framework for Sub-salt Oil Production

This consultancy will support the National Agency of Petroleum, Natural Gas and Biofuels (ANP) in the development of the new regulatory framework and of an appropriate institutional framework for the economic use of the sub-salt reserves.

The document will provide detail on who are the different actors involved in the process, including the definition of the areas to the realization of production, what are their roles, and what are the laws and regulations governing their actions. Also, the study intends to clearly identify and differentiate the missions and responsibilities of the different authorities, so as to avoid inefficiencies and overlap.

In particular, in relation to ANP (the National Agency of Petroleum, Natural Gas and Biofuels) and PPSA (Pré-Sal Petróleos SA, the sub-salt company) the study should consider a transition phase, where ANP will act as PPSA. Thus, the study should suggest what would be the decision-making processes and the major administrative tasks that should be incorporated into ANP which will subsequently be transferred to PPSA.These objectives are consistent with the country strategy in two key areas: (a) productivity and infrastructure ... to use public-private partnership models in new investments ... and (b) modernization of the state and institutional strengthening (as contained in the document GN-2570 of May 4, 2010).

IDB. IBR-T1206 : Institutional Framework for Sub-salt Oil Productions

Study shows significant reductions in CO2 emissions from ships from IMO measures

Briefing: 57, November 14, 2011, IMO. An International Maritime Organization (IMO)-commissioned study into the impact of mandatory energy efficiency measures for international shipping shows that implementation of the measures will lead to significant reductions of greenhouse gas (GHG) emissions from ships, specifically reductions of carbon dioxide (CO2), resulting from enhanced fuel efficiency.

The study found that, by 2020, an average of 151.5 million tonnes of annual CO2 reductions are estimated from the introduction of the measures, a figure that by 2030, will increase to an average of 330 million tonnes annually. CO2 reduction measures will result in a significant reduction in fuel consumption, leading to a significant saving in fuel costs to the shipping industry

The study, Assessment of IMO mandated energy efficiency measures for international shipping*, was launched on Monday (14 November) ahead of the forthcoming United Nations Climate Change Conference, to be held in Durban, South Africa, from 28 November to 9 December, 2011.

IMO will report to that Conference on the breakthrough adoption, in July 2011 at IMO’s Marine Environment Protection Committee (MEPC), of mandatory technical and operational measures to reduce GHG emissions from international shipping. Amendments to the International Convention on the Prevention of Pollution from Ships (MARPOL), Annex VI Regulations for the prevention of air pollution from ships, add a new chapter on Regulations on energy efficiency for ships. The regulations will apply to all ships of 400 gross tonnage and above and are expected to enter into force on 1 January 2013.

This new chapter makes mandatory the Energy Efficiency Design Index (EEDI), for new ships, which, in essence, requires new ships to be designed to be more energy efficient (and thereby release less greenhouse gases). The regulations are non-prescriptive: as long as the required energy-efficiency level is attained, ship designers and builders are free to use the most cost-efficient solution or solutions for each particular ship.

The new regulations also make mandatory a Ship Energy Efficiency Management Plan (SEEMP) for all ships. This is a plan which sets out, for an individual ship, how energy savings can be made. There are a variety of options to improve efficiency – speed optimization, weather routeing and hull maintenance, for example – and the best package of measures for a ship to improve efficiency differs to a great extent depending upon ship type, cargo, route and other factors. The new regulations make such a ship-specific plan mandatory thereby encouraging the shipping industry to review its practices in a systematic way to find the best balance.

Amongst the key findings, the report (undertaken by Lloyd’s Register (LR) in partnership with Det Norske Veritas (DNV)) found that:

• By 2020, an average of 151.5 million tonnes of annual CO2 reductions are estimated from the introduction of the EEDI for new ships and the SEEMP for all ships in operation, a figure that by 2030, will increase to an average of 330 million tonnes annually.

• Compared with Business as Usual (BAU), the average annual reductions in CO2 emissions and fuel consumed are estimated between 13% and 23% by 2020 and 2030 respectively.

• CO2 reduction measures will result in a significant reduction in fuel consumption, leading to a significant saving in fuel costs to the shipping industry, although these savings require deeper investments in more efficient ships and more sophisticated technologies, as well as new practices.

• Significant reduction of CO2 emissions from ships due to EEDI and SEEMP regulations is foreseen to 2050 with emission reduction due to SEEMP likely to be realised more rapidly than that for EEDI, as the effect of EEDI will occur only as and when older, less efficient, tonnage is replaced by new, more efficient tonnage.

• The estimated reductions in CO2 emissions, for combined EEDI and SEEMP, from the world fleet translate into a significant annual fuel cost saving of about US$50 billion in 2020 and about US$200 billion by 2030; using fuel price increase scenarios that take into account the switch to low-sulphur fuel in 2020.

• Mandatory application of EEDI will drive more energy-efficient ship design and realise the CO2 emission reduction potential associated with technical innovation and the use of lower or no carbon fuels.

• The mandatory use of SEEMP based on current IMO regulations will provide a procedural framework for shipping companies to recognise the importance of the operational energy- saving activities. It will significantly boost the level of awareness and, if implemented properly, will lead to a positive cultural change.

• Investigations show that ship hydrodynamic and main engine optimisation will bring about energy-saving opportunities of up to around 10% with no significant additional cost of shipbuilding.

The IMO regulations represent the first-ever mandatory energy efficiency measures for an international transport sector and their adoption followed several years of work on the matter. Work is now progressing on market-based measures, with intensive work to review a number of different proposals, submitted by Governments and observer organizations.

Further work will be carried out on market-based measures in 2012. Such measures would place a price on greenhouse gas emissions, thereby providing both an economic incentive for the maritime industry to invest in more fuel-efficient ships and technologies and to operate ships in a more energy-efficient manner and a mechanism to offset growing ship emissions in other sectors. In addition, these measures can generate funds that could be used, for example, for projects to mitigate climate change in developing countries.

Study shows significant reductions in CO2 emissions from ships from IMO measures

ASSESSMENT OF IMO MANDATED ENERGY EFFICIENCY MEASURES FOR INTERNATIONAL SHIPPING. ESTIMATED CO2 EMISSIONS REDUCTION FROM INTRODUCTION OF MANDATORY TECHNICAL AND OPERATIONAL ENERGY EFFICIENCY MEASURES FOR SHIPS

Members Discuss Natural Gas Revolution With Leading Energy Experts

November 15, 2011. WASHINGTON, DC – Members of the Energy and Commerce Committee met with leading energy policy experts this week to discuss the natural gas revolution. Hosted by Rep. Bob Latta (R-OH), Monday’s bipartisan Jobs and Innovation Forum explored how new technologies to capture shale gas have transformed the nation’s energy landscape and economy. In recent years, our ability to access massive supplies of natural gas has brought down energy prices, created hundreds of thousands of jobs, and generated billions of dollars in economic output.

"It is clear the natural gas revolution is here to stay and the economic impact of natural gas development is great, bringing tens of thousands of jobs to different states, like my home state of Ohio, that have shale formations," said Latta. "The key to harnessing positive economic development is striking the right regulatory balance that allows for job creation, energy innovation, and environmental safety across this country. This meeting was one of many conversations that will help legislators develop pro-growth policies in the shale arena."

Daniel Yergin, Chairman of IHS Cambridge Energy Research Associates and author of The Quest: Energy, Security, and the Remaking of the Modern World, described the dramatic job growth that has resulted from shale gas development. “This is the biggest energy innovation of its scale in the last 20-30 years, and with that has come an enormous growth in jobs,” said Yergin. “We are taking about hundreds and hundreds of thousands of jobs that have been created since this technology has been developed. And the impacts in terms of supply chains reach very deep into our economy.”

Cal Dooley, President of the American Chemistry Council, spoke about the positive impacts of natural gas development on chemical manufacturing in the U.S and predicted that the chemical industry is “poised to see a tremendous growth domestically.” Dooley cited a new ACC study showing a 25% increase in natural gas supply would result in $16 billion in capital investments from the chemical industry, creating more than 400,000 new jobs and generating over $4.4 billion in government revenue. “If we do the shale gas right, it has the potential to really contribute to a renaissance in manufacturing in the United States,” said Dooley.

Conversations also focused on the safety of hydraulic fracturing and the regulation of natural gas drilling. Panelists agreed that state regulators are the most competent at managing risks and providing regulatory oversight. David Neslin, Director of the Colorado Oil & Gas Conservation Commission, described Colorado’s successful regulatory framework which he believes “strikes a responsible balance” of promoting development and offering adequate protections.

Larry Nichols, Executive Chairman and Co-Founder of Devon Energy, touted the strong safety record of hydraulic fracturing, a drilling process that has been practiced for over 50 years. He noted that there has never been one instance where natural gas has leaked into groundwater from fracking. Nichols pledged the industry’s commitment to the continued advancement of drilling technologies to make natural gas extraction more efficient and environmentally friendly.

In addition to Rep. Latta, members attending Monday’s forum included Energy and Commerce Chairman Fred Upton (R-MI), Chairman Emeritus Joe Barton (R-TX), Rep. John Sullivan (R-OK), Rep. Michael C. Burgess M.D. (R-TX), Rep. Mike Pompeo (R-KS), and Rep. Mike Doyle (D-PA).