This blog post provides a comprehensive overview of shale gas formation and extraction technologies, the industrial resurgence in the United States and the responses of Obama and Putin, technological monopolies, examples of regional economic recovery and concerns about environmental pollution, structural changes in the international energy market and regulatory and policy responses, as well as cases of overseas expansion and future prospects.

The Concept and Formation of Shale Gas

Shale gas refers to natural gas contained within rock layers formed by horizontal sedimentation of mud. Although the existence of shale gas has been known for over 100 years, it could not be extracted due to technological limitations at the time. However, with the development of new technologies in the 21st century, shale gas has finally established itself as a viable energy resource. Jack Welch, former CEO of GE, stated that shale gas presents an opportunity to reindustrialize the United States and restore it to its position as a global leader.
Shale is a type of rock composed of clay and sand, and the gas extracted from it is called shale gas. Generally, the darker the rock, the greater the amount of gas it contains. The gas within shale is formed through the following process: Organic matter, such as algae that once swam in the ocean, dies and sinks to the seabed, where it is incorporated into the rock. Subsequently, under high-temperature and high-pressure conditions, these organic materials undergo chemical reactions and transform into substances like kerosene; when further pressure and heat are applied, they turn into oil and natural gas. However, since the shale rock layers are not highly permeable, the gas does not penetrate easily unless there are cracks in the shale.
The estimated volume of shale reserves in the United States is 862 trillion cubic meters, which is said to be enough to supply the country for about 100 years. While such shale rock layers may exist in Korea as well, some analyses suggest that gas may not have been preserved in Korea’s black shale layers due to unfavorable conditions. Meanwhile, another characteristic of shale rock is that, due to insufficient pressure and temperature, the chemical reactions necessary for gas generation may not have occurred, meaning gas may not have been produced. In other words, the shale layers that may exist in Korea could have already lost all their gas, or gas may not have been produced because the conditions necessary for gas generation were not met.

Extraction Technology and History

The fact that shale rock contains gas has been known for a long time. Shale contains the raw materials for traditional energy sources that oil and gas companies have been developing over the past decades and centuries. However, because these deposits are located 2 km underground, extracting the resources was difficult, and the technology to extract shale has only advanced in the last few years.
To produce shale gas, drilling must first proceed vertically until the shale layer is reached, at which point the path must be shifted horizontally. Subsequently, electrical shocks are used to create fractures in the rock, and a mixture of water, sand, and chemicals is injected at high pressure to create microscopic cracks extending hundreds of meters. This process is then repeated in the opposite direction of the horizontal drilling. The basic extraction process involves collecting the natural gas that escapes from the fractures created in the rock layers through this repeated process. This extraction technology requires highly advanced machinery to operate deep underground, and currently, only the United States and Canada have mastered this technology. To acquire this advanced technology, foreign oil companies, including those from South Korea, are acquiring stakes in projects in this region.

Economic and Political Impacts, Regional Cases, and Environmental Issues

In President Obama’s January 2012 speech, one could sense his confidence in the recovery of the U.S. economy. He stated that the United States possesses enough natural gas reserves to last for 100 years and predicted that this would create 600,000 new jobs by 2020. In contrast, a somewhat gloomy tone was evident in President Putin’s speech at the Russian Parliament in April 2012, ahead of his inauguration. He argued that the United States had actively developed shale gas production technology over the past few years and predicted that shale gas would completely transform the hydrocarbon energy market. The confidence and apprehension expressed by the presidents of these two nations are linked to shale gas, which is attracting global attention.
Shale gas is not merely being highlighted as a new energy resource in the United States to aid economic recovery. If the U.S. produces and exports shale gas, significant changes are expected in the global flow of energy resources. Consequently, this could even affect the survival of a nation’s government and alter the interests of various authorities. Therefore, shale gas holds significance beyond that of a simple energy resource.
While shale gas is garnering attention as a key driver of global economic growth, there are also significant voices of opposition and concern regarding its development. This is primarily due to environmental pollution issues arising from the shale gas extraction process. Opponents of shale gas extraction argue that we must consider not only past pollution problems but also future environmental conservation, advocating instead for the use of renewable energy. It is a matter of great interest to many whether shale gas, which emerged like a comet alongside new technological developments, can overcome this dramatic conflict and revive the stagnant global economy of the 21st century.
Generally, when new alternative energy sources begin to be developed, one can consider issues such as what changes will occur in the existing energy resource market, and how developing and non-developing countries should forecast and respond to the future economy. In this case as well, considering that shale gas is an alternative to oil, one can expand the discussion to include how cartels like OPEC will respond, as well as issues regarding prices, trading volumes, and the countries with which trade must be concentrated.
Susquehanna County in Pennsylvania is a typical rural area where most residents are engaged in dairy farming. A farmer named “Eric” whom I met there was using a tractor worth over 100 million won. The reason his life—which had been ordinary for 30 years, raising cattle on vast pastures—suddenly became prosperous was precisely because shale gas was discovered beneath those pastures and he received compensation for its development. A geologist demonstrated the presence of gas by breaking a piece of shale from a hill that had risen to the surface. He explained that if that hill had remained underground, a large amount of gas would have remained trapped there rather than escaping. In other words, the numerous shale rocks observed on the hill are buried beneath the pasture, and profits are being generated by extracting that buried shale gas.
Shale gas development has also contributed to the recovery of the local economy. A hotel owner in Pennsylvania experienced an unexpected boom, with the entire hotel fully booked for a year thanks to a single company, and there have been reports of local economies improving despite the nationwide recession, all due to shale gas. Many jobs were created, and there was an influx of people. In this way, shale gas development alone can gradually revive local economies and bring about unexpected positive outcomes.
Shale gas also helped build a positive image for Obama. In 2009, the United States surpassed Russia to become the world’s top natural gas producer, and during a visit to India, Obama pledged to establish a new clean energy research center and conduct joint research on various energy efficiencies, including shale gas. In Europe, discussions on joint shale gas development took place, with arguments that shale gas could present a significant opportunity for nations seeking energy self-sufficiency. Among Eurozone countries, there were regions where the potential for shale gas reserves was identified, and Poland was highlighted as the first country to begin development.
At the time, U.S. shale gas development companies entered the Polish market, but shortly thereafter, ExxonMobil—which had entered Poland—withdrew, claiming that the shale gas there was unprofitable. While expert opinions on this were divided, some practical analyses suggested that external pressure from Russia was the cause. Russia possesses the scale to supply natural gas to all Asian nations, and Gazprom produces approximately 20% of the world’s natural gas. Furthermore, since the gas sector accounts for a significant portion of Russia’s GDP, shale gas development inevitably has a major impact on Russia’s existing energy market.

Energy Relations Between Europe and Russia and the Impact of Shale Gas

European countries are highly dependent on Russian natural gas. Eastern European nations, in particular, are known to be even more reliant. It is reported that 40% of the total gas consumed by the 27 member states of the European Union is imported from Russia. In contrast, Eastern European countries such as Bulgaria, which are geographically close to Russia, have a dependency rate of nearly 100%. In many countries, including Ukraine, protests have erupted demanding an end to this dependence. This is because Russia exports gas at prices higher than those charged domestically. It is said that even if a Russian household uses gas freely for a month, the cost—converted to Korean currency—is less than 5,000 won. This is five times cheaper than the price in Europe. Russia faces strong criticism for supplying gas cheaply to its own citizens while recouping those losses by selling it at high prices abroad. Putin used this method to grow the economy, which had been stagnant since the collapse of the Soviet Union; however, the resulting profits were not distributed throughout society but were monopolized by a small elite class, leading to numerous problems. Amid this global backlash, U.S. shale gas has finally emerged as a wild card capable of shaking Putin’s political dominance.
Not only have political changes occurred, but there have also been significant shifts in existing energy resource distribution channels. The Middle East, which had been exporting LNG to the U.S., no longer needed to supply the same volume to a country now producing shale gas. Faced with export refusals, the Middle East turned its attention to Europe to resolve the issue. As a result, Russia’s monopolistic market dominance, which had primarily supplied the Eurozone’s energy needs, faced a crisis. As Russia’s foothold in the European market gradually shrinks, it is turning its attention to the Northeast Asian market. A prime example of this is South Korea. South Korea’s natural gas import prices are among the highest in the world. Consequently, there were high expectations for a natural gas pipeline project that would allow the country to import cheap natural gas from Russia. Since the natural gas pipeline runs geographically from Russia through North Korea to South Korea, the restoration of inter-Korean relations was an essential factor in finalizing this agreement. However, as inter-Korean relations have steadily deteriorated, the project has been virtually suspended. Just a few years ago, Russia attempted to make numerous contacts with both North and South Korea to complete this project. Russia’s crisis does not appear to be limited to a decline in its market share in the energy sector. Furthermore, university research institutes have suggested that Russia’s foreign policies, which relied on its existing natural gas market share, will gradually lose their effectiveness due to U.S. shale gas. The Harvard Kennedy School has also noted that shale gas will bring about significant changes in international relations.

Economic and Environmental Issues Surrounding Shale Gas Development in China and the U.S.

While shale gas is bad news for Russia, where it has a negative economic impact, unlike other natural gases, shale gas is distributed across many parts of the world. Among these, China is home to particularly large reserves. China’s shale gas reserves are the world’s largest at 134 cubic meters, accounting for one-third of global reserves. China, which has been experiencing rapid growth recently, has relied on coal as its primary energy source. The resulting air pollution problem has been a major concern for the country. One expert predicted that shale gas could make a significant contribution to the national economy as a whole, not only by addressing these environmental issues but also by boosting GDP and creating jobs. The expert also noted that if an energy structure conducive to low-carbonization is established—by reducing carbon consumption and increasing gas usage—it would have a major impact on reducing oil consumption. China is well aware of this, which is why its stance on domestic shale gas production is very proactive. Although it is still in the experimental stage, Chinese officials claim that a production system will be in place within the next three years. However, many foreign companies view this unrealistic goal with skepticism. The main reason is that China’s water shortage makes it difficult for a viable business model to take root. Therefore, China argues that it will only be able to launch full-scale operations after about 10 years, once population density has decreased to normal levels and the water shortage has been resolved.
Meanwhile, at a shale gas expo in the United States, where shale gas development is booming, compressed natural gas (CNG) vehicles were particularly eye-catching. Since natural gas prices in the U.S. are cheaper than oil prices, automakers are racing to develop CNG vehicles. They are developing CNG vehicles based on the expectation that even if gas becomes more widespread and prices rise, the increase will not be significant. Of course, they say that even at higher prices, CNG will still be cheaper than gasoline. Additionally, gas-powered trucks—which appeared 10 years ago but disappeared from the market due to high prices—are expected to reappear thanks to shale gas. Trucks are not the only products to have made a comeback after being driven out of the market. Refineries that had to shut down due to a lack of competitiveness have also recently resumed operations. Sufficient resources have been secured to operate these refineries normally, and as a result, local residents are once again able to pursue well-paying jobs. In this way, specific regions in countries developing shale gas are reaping significant benefits from it.
However, not everyone in the United States views shale gas solely in a positive light. A scene from a documentary—in which a family held a flame near their kitchen faucet and a large fire erupted—was widely publicized, bringing the environmental pollution issues associated with shale gas back into the spotlight. The documentary revealed that the fire was caused by methane gas mixed into the tap water. It is said that gas traveling through shale gas pipelines leaks into groundwater, and when this leaked gas flows through water pipes into homes, methane—the primary component of natural gas—flows out along with the water. Because of this, many people who had previously been ardent supporters of shale gas have turned their backs on it and risen up in opposition to its development. The documentary’s producer, “Fox,” argued that the 21st century should rely on future energy sources such as solar, wind, geothermal, and hydroelectric power. He likened shale gas to a pollutant of the past and urged an immediate halt to its development. However, in stark contrast, a verification study funded by shale gas producers maintains that methane gas cannot possibly leak due to the pipes’ design, leading to a fierce standoff. They argue that methane was already mixed into the water supply, causing the tap water to catch fire. They support this claim by asserting that the water caught fire even before development began. While it remains unclear which side is telling the truth, another case of alleged harm caused by shale gas is introduced. Recently, as the number of gas wells has exploded, an increasing number of residents are claiming that their drinking water has been contaminated. They claim that the color of the water has changed due to chemicals. While there were hotel operators who saw their businesses thrive thanks to shale gas, there are clearly also people who continue to suffer consistent harm. This raises the question once again: can we truly say that shale gas creates new economic value under these circumstances?
A professor at Cornell University explains that methane leaks into the atmosphere when drilling begins for the first time. He argues that shale gas development will have a more detrimental impact on air quality than on water quality, because methane is a more potent greenhouse gas than carbon dioxide. He states that a small leak of methane has an effect similar to a large leak of carbon dioxide. They also concluded through a study that an increase in shale gas usage is unlikely to reduce greenhouse gas emissions. However, there were professors who held the opposite view. A professor in the Department of Geology at Cornell University argued that while methane is indeed a more harmful greenhouse gas than carbon dioxide, it does not pose a significant air pollution problem because it remains in the atmosphere for a shorter period of time compared to carbon dioxide. While carbon dioxide remains in the atmosphere for a very long time, methane is said to dissipate within a few decades. The argument is that if large amounts of carbon dioxide are released into the atmosphere now, it will remain there for a long period of 500 to 1,000 years, whereas methane will almost completely disappear in as little as 20 years. As such, experts hold a wide range of positive and negative views on shale gas.