A tangible
reduction in energy costs will inevitably lead to industrial modernization and
an attempt by the United
States to repatriate some of its
manufacturing base. According to Mikhail Delyagin, director of the Institute of
Globalization Studies, up to a quarter of manufacturing capacity that was
previously outsourced to Asia for cheap labor could return to the United States.

China, which is America’s main rival, lags behind the U.S. in shale
development and would only be able to meet 7 percent of its consumption with
shale natural gas, according to International Energy Agency (IEA) experts.

Russia, rich in natural gas, has always been skeptical of shale projects.
But even Russian experts admit that the outcome of the shale revolution would
have a substantial impact on the global energy market. A reduction of prices in
America
to below $100 per 1000
cubic meters (roughly 35,000 cubic feet)
over the first seven months of 2012 was quick to re-align the energy industry
there toward natural gas. Oil has all but disappeared as a source of
electricity in America,
while natural gas has been actively penetrating the transport sector there,
said Laszlo Varro, head of the Gas, Coal and Power Division at IEA.

Falling energy
costs not only bolster the United
States’ competitive position amid an
approaching acute phase of the global economic crisis, but they also facilitate
re-industrialization. According to Delyagin, the U.S.
is transforming into a low-cost energy zone, along the lines of the former Soviet Union and the COMECON member countries it used to
supply with cheap energy.

Re-industrialization,
in turn, should put a limit on American natural gas exports. For example,
Laszlo Varro believes that the U.S.
would be able to export only around a third of today’s Russian exports over the
medium term.

Meanwhile, demand
for natural gas is growing in China.
The Skolkovo Business School
Energy Center
experts believe Chinese demand will almost quadruple to more than 400 billion
cubic meters by 2030. Moreover, the growth of non-traditional natural gas
production in China
would increase consumption there without affecting the import market niche.

A  baseline scenario suggests that production of non-traditional natural gas will
only reach 50 billion cubic meters, while a best-case scenario estimates 150
billion cubic meters with imports at 200 billion.

China’s problem is
exacerbated by the fact that Asia is home to at least two more large buyers of
liquefied natural gas (LNG) – Japan
and India.
According to Skolkovo experts, Japan’s
demand for natural gas will increase by just over 30 percent to more than 120
billion cubic meters by 2030.

IEA experts are
confident that Japan,
which had decided to stop using nuclear power, will not be able to follow
through. “We don’t believe that Japan,
an extremely overpopulated country, will be able to ditch nuclear energy any
time soon,” Varro said. In his opinion, in order to replace nuclear power
completely, Japan
would need to spend a huge amount of money and fully deplete one of the world’s
largest natural gas deposits.

That being said,
there is no shortage of natural gas supply sources in the world today. Asia has become a destination for some of the LNG
previously consumed by the United
States. In addition, a flow of LNG from Australia will
hit the market soon. Australian gas, however, is more expensive because some of
it is produced offshore.

Furthermore, the
next 20 years or so will see the proliferation of resources from East Siberia
and Russia’s Far East. Skolkovo
Business School
Energy Center
experts believe these sources may reach 110 billion cubic meters by 2030. Large
natural gas deposits have been discovered along Africa’s east coast, off the
shores of Tanzania and Mozambique; these are geographically
pre-ordained to flow to Asia’s market.
However, since both countries are poor, they will have to find foreign
investors and specialists to develop those deposits.