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Centrica is a larger international diversified energy organisation marketing essay

Introduction Since 2000, there has been substantial change in field of global energy market, with the significant change in preferred global energy sources.

This topic has gained much more attention with the emergence of shale gas revolution in US. This further has raised concerns about the stability of gas and energy market globally Ho, 2013. This section of dissertation attempts to explore the projected impacts of shale gas revolution on global energy demand and supply.

It also highlights on future repercussions of shale gas on economies of Qatar, which primarily rely on export of energy resources for their income. Evolution of Shale Gas Market Although this source of energy is available in different parts of the world, still United State has made significant development in this field.

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Earlier, for many years United Stated was dependent on other countries for requirement of natural gas and therefore, has to import large quantity of natural gas from other nations. However, after the development in the field of extraction of shale gas, it is expected that United State will become an exporter of the shale gas. This is because of available of shale gas in plenty in this region and expansion of shale gas production Ho, 2013.

As per the report published by IEA, by 2035, around seventy per cent of the gas supply in the United State is expected to be consisting of unconventional gas which will include shale gas, coal-bed methane and tight gas. If this happens, then the United State will emerge as energy self sufficient by 2035. The two chart below shows map of major shale gas estimated resources in the world and energy self sufficiency of different nations by 2035 respectively Ho, 2013.

Since there is large reservoir of shale gas in the United State, it is definitely going to impact the United State market and overall gas demand and supply. Primarily, if we have a look at the consumption pattern of energy, demand of oil primarily generates from the transportation sector, while the demand of natural gas is mainly from the commercial and residential sector.

Apart from this, natural gas is also demanded by power generation sector and industrial sector Ruhl, 2014. As per the recent research study conducted by US Energy Information Administration, China is considered as the largest shale gas reserve with 1100 tcm i. This is followed by Argentina with 802 trillion cubic meters, United States with 665 tcm and at last Canada with more than 500 tcm EIA, 2010. The evolution of shale gas is considered to be a serious energy issue for Russia.

For centrica is a larger international diversified energy organisation marketing essay, Russia has remained the main gas supplier to many developed and developing countries in the world. Further, international energy community is having a positive outlook on rapid development in the field of shale gas extraction and production in North America.

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This shows that there is ample of availability of natural gas which will help in diversifying the energy mix, will reduce emission of gases and will contribute in the energy security. But this rapid development will undermine Russian leadership in the global gas market Ruhl, 2014.

Rise in unconventional shale gas production in the countries like United State, China and European region could result as nightmare for the Russia in respect to energy scenario. The United State is producing shale gas since 2009, and in addition to this, China and several other European Nation may also come up as producer of the shale gas to meet their energy requirements Mathiesen, 2014. The main strategic repercussion of this will be that, Russia, which is the largest producer of natural gas, will lose its attractiveness as a gas exporter.

This will not only weaken its strategy related to foreign policy tool, but simultaneously the country will experience decline in its export revenue which significantly supports its national budget. Although European nations will need to pay almost 50 per cent more to replace Russia with USA, but in the long run it will be beneficial for them as it will reduce their reliance on Russia Shiryaevskaya centrica is a larger international diversified energy organisation marketing essay Strzelecki, 2014.

Gas is responsible for twenty five percent of primary energy demand in US, with total annual consumption of gas of 700 billion cubic meters Huntington, 2007.

The major sectors using natural gas include power plants, residential and industries. United States has played dominant role in unconventional gas reserves production such as coal-bed methane, tight gas and shale gas. Share of shale gas with total gas production has increased from 9 percent in 2007 to over forty percent in 2012 in US Huntington, 2007.

Unique circumstances and an organized framework allowed the development shale gas production technology such centrica is a larger international diversified energy organisation marketing essay hydraulic fracturing and horizontal drilling in US and thus have lead to shale gas boom in the country.

One of the primary reasons for sudden increase in shale gas production in US has been upward trend in prices of natural gas during an initial period after 2002 Gaward and Bugarski, 2013.

In addition to this, the success of development of Shale gas in US is mainly attributed to varied factors including favourable geographical conditions and expertise, availability of efficient industry service along with development of new technologies and tax exemption Gaward and Bugarski, 2013. For more than century, United States has acquired considerable experience as well as technology in drilling in order to extract primary resources of energy such as natural gas and oil.

This in turn has given the country a head start when exploring rocks that contain shale gas. In America, Shale gas resources are usually situated in relatively shallow layers and in less populated areas. Therefore, pollution and other environmental concerns do not act as barrier in production of Shale gas in US, like in many parts of Europe Ho, 2013. Several specialized companies in US own technologies such as hydraulic fracturing and horizontal drilling that aid in liberating shale gas.

Alternate tax reduction offered by the 1980 Crude Oil Windfall Profit Tax Act on production of unconventional gas is also one of the most important success factors of shale gas revolution in US Gaward and Bugarski, 2013. These factors have made production of shale gas economically viable. Additionally, extensive network of pipeline for natural gas existed in US before shale gas became the key gas resource.

As well, open access to natural gas pipeline made it possible to produce, store and transport large quantity of shale gas. Apart from that, shale gas production has evolved at rapid pace is due to the fact that in United States, any minerals found below ground particularly belong to surface landowner EIA, 2010.

Therefore, they directly receive monetary benefits, in form of royalties from shale gas production. Many small-scale business corporations have availed the opportunity to immediately close deals with surface landowners for shale gas production Hoda and Dahlan, n.

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This means that large share of shale gas production in United States is covered by small-scale oil and natural gas companies. Another reason that contributed to boom in shale gas production is the high importance given to fuel independence in US energy policies.

Shale gas production has reduced dependence of US on fuel imports and thus has been strongly promoted by policy makers EIA, 2010. Shale gas production in US has boomed during last few years.

In 2010, total shale gas production amounted to more than 5 tcm. Furthermore, according to Energy Information Agency, this number will get tripled by 2035 Boersma and Johnson, 2012. Louisiana and Texas have been at forefront of production of shale gas, while production is continuously rising in other states such as Oklahoma, Pennsylvania, Wyoming and Arkansas. As a result, wellhead natural gas prices in US have dropped since 2008 Boersma and Johnson, 2012.

Throughout the past half decade, the substantial increase in shale gas production in United States has led to national self-sufficiency and enabled the country to export gas to Mexico and Canada. This essay is an example of a student's work Disclaimer This essay has been submitted to us by a student in order to help you with your studies.

This is not an example of the work written by our professional essay writers. Become a Freelance Writers Place an Centrica is a larger international diversified energy organisation marketing essay 2. Shale gas production and United States Petrochemical industry The petrochemical industry has witnessed remarkable breakthrough during the last- century; these discoveries include nylon, PVC plastic, polystyrene and synthetic rubber.

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Ethylene and other intermediaries such as butadiene, propylene and benzene are considered as essential component for manufacturing chemical related products. The production of these components is based on two types of feedstock namely naphtha and NGL or Natural Gas Liquids such as propane, ethane and butane Rao, 2012.

This implies that shale gas revolution tends to have great impact on chemical industry through plummeting prices of key feedstock, particularly ethane, for petrochemical industry. Traditionally, the petrochemical industry of US relied on naphtha which is produced from oil, in order to produce centrica is a larger international diversified energy organisation marketing essay, benzene and propylene. This process involved huge amount of financial resources as well as time.

The US chemical industry experienced a real challenge in long run due to high production costs Hoda and Dahlan, n. In that period, companies such as Dow chemical were planning to shift their operations and future investment toward the Middle East. However, soon after the shale gas revolution, the situation changed completely. First of all, the prices of natural gas were affected soon after the boom; the prices went down to 68 percent Hoda and Dahlan, n.

It can be inferred from above figure that prices of natural gas in US are considered as one of the lowest all around the world by 2012. But still the fact is that United States is back from years of extremely high prices Mansour, n.

Earlier, petrochemical industry of US was not so much dependent on NGLs as a feedstock in order to produce propylene and ethylene due to high natural gas prices, but it has changed dramatically after boom in shale gas production. The global competitive scenario for petrochemical industry has been reshaped due to lower prices of feedstock and natural gas resulted for shale gas production boom.

Moreover, the increased amount of ethane and other feedstock drove the American gas market to seek new ways to optimally use it. In 2005, the production of the key intermediate ethylene for petrochemical industry was primarily depended on Natural Gas Liquids from unconventional gas by 65 percent, NGLs from Naphtha by 32 percent and shale gas by 3 percent Nash, 2010. The increased shale gas production led to rise in the share of NGLs from shale gas reached to 19 percent in 2010.

The percentage of shale gas as feedstock in ethylene production is expected to reach 28 percent by 2015 Nash, 2010. The competitive marketplace for global petrochemical industry has been restructured due to drop in prices of natural gas and development of feedstock from exploration of shale gas. The new and relatively lower prices of natural gas pushed the US petrochemical industry total production cost to some extent lower levels than that in Europe, Chine and Latin America Pirog and Ratner, 2012.

The prices of gas in Europe are three to four times higher in comparison to US.

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As a result US gas market has acquired competitive advantage over many international gas markets in production of petrochemicals. In accordance with that, many petrochemical companies all around the world started to operate few of their projects in US market so as to take advantage from boom of shale gas production Pirog and Ratner, 2012. As well, Energy Information Agency predicts that US marker will have 14 new projects to manufacture propane, ethane and other intermediates with a capacity of more than 10 million metric tons per annum.

Shale Gas revolution and US petrochemical industry: Threat of new entrants: The threat of new entrant is minimal in case of petrochemical industry as this is capital intensive business and one has to invest lot of upfront fee in the form of purchasing equipments, license fee, etc. Secondly, running this kind of industry requires lot of technical expertise. Thus, threat of new entrant is minimal.

There are many players in the US petrochemical industry; therefore there is intense competition among the players. But, since prices of petrochemicals are market driven, price competition is less. The negotiation power of buyers is high as there has been shift from petrochemical to shale gas.

Now buyers have alternative available with them so they can switch to the other alternatives. There are many suppliers available in the market as a result of which supplier power is low in the petrochemical industry.

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With the drop in gas price and exploration of shale gas, there is higher threat of substitute in the market. The above figure shows a comparison between leading chemical companies of world in 2002 and 2011 on the basis of revenue. It can be inferred from the figure that the revenues of US chemical companies were among the highest than other global companies.

As per the study conducted by the American Chemistry Council, the rise in supply of ethane by 25 percent is the consequence of the boom in production of shale gas. Further, the study concluded that this revolution is going have following impacts on US gas and energy market: It will create approximately 400,000 new job opportunities in related industries and chemical industries EIA, 2010. Qatar Petrochemical Company to produce Ethylene as well as polyethylene.