In a report completed last month by IHS Global titled “Oil and Natural Gas Transportation & Storage Infrastructure”, IHS found that the future of unconventional oil and gas production in the U.S. is bright. Not only did the report find that the U.S. is the world’s largest natural gas producer but that the U.S. is now the “global growth leader in crude oil production capacity."The report focused on the growth in investment in oil and gas transportation and storage infrastructure and the resulting economic impacts in terms of associated employment growth, contribution to GDP and tax revenue.
IHS estimates that in 2014 “$85-$90 billion of direct capital will be allocated toward oil and gas infrastructure” in the U.S. IHS further estimates that more than “$80 billion will be invested annually in U.S. midstream and downstream petroleum infrastructure.” While the IHS's projections are impressive, the report highlights a bourgeoning interest in the U.S. in shale gas production.
This most recent IHS report comes on the heels of another IHS study which looked specifically at shale gas production and the impact it would have on the U.S. economy over the next few decades. Specifically the development of shale gas production is projected to – create jobs, reduce consumer costs of natural gas and electricity, stimulate economic growth and bolster federal, state and local tax revenue.
Job Creation
- Shale gas supported more than 600,000 jobs in 2010
- Shale gas is projected to support nearly 870,000 U.S. jobs by 2015
- “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”
Reduction in Consumer Costs
- “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”
- The $926 figure is projected to increase to more than $2,000 per household by 2035 on an annual basis
Economic Growth Stimulation
- $1.9 trillion in cumulative capital investments are expected to be made between 2010 and 2035
- Annual capital expenditures will grow to $48.1 billion in 2015
- Shale gas contribution to the U.S. GDP was more than $76.9 billion in 2010 and will rise to $118.2 billion by 2015 before tripling to $231.1 billion in 2035
Tax Revenue
- 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
A specific case example of the economic potential of shale gas comes from Pennsylvania and the Marcellus shale formation. The Marcellus shale is a geological formation which contains huge reserves of natural gas. “Wells in the Pennsylvania part of the Marcellus produced 895 billion cubic feet (bcf) of gas in the first half of 2012, up from 435bcf in the same period in 2011 and almost nothing as recent as 2008." The most recent estimates indicate that the Marcellus maintains over 100,000 jobs in Pennsylvania, a figure that is expected to grow to 220,000 by 2020. Shale gas production gave the local Pennsylvania economy a $14 billion boost last year and is projected to rise to $27 billion by 2020. This $14 billion boost generated nearly $3 billion in tax revenue for the State of Pennsylvania.
Along with these results in Pennsylvania, states such as Arkansas, Louisiana, Oklahoma and Texas have all had comparable results from shale gas production. As capital investments in unconventional oil and gas production in the U.S. grow in the New Year, American consumers can expect job creation, reduced consumer costs, a burst of economic growth and increased tax revenue.