How Will the Shale Gas Boom Impact North American Companies and the Economy?

 How Will the Shale Gas Boom Impact North American Companies and the Economy?

PR Newswire

NEW YORK and TORONTO, Feb. 26, 2013

RBC Capital Markets and Economist Intelligence Unit release special report

  *73 per cent of respondents expect an increase in the price of natural gas
    of 10 per cent or more in the medium term
  *Low cost a positive impact on manufacturing, but not a significant
    positive impact on the overall U.S. economy; competitive advantage
    anticipated for U.S. and Canadian companies

NEW YORK and TORONTO, Feb. 26, 2013 /PRNewswire/ - On the heels of record-low
natural gas prices, RBC Capital Markets and the Economist Intelligence Unit
published a report today focusing on the U.S. shale gas boom and its
implications for North American economies and businesses. The report examines
how the surge in unconventional gas production is transforming sectors such as
energy and transportation.

"We are entering a paradigm shift in the way that businesses and national
governments look at energy, particularly as it relates to underlying market
drivers, business models, risks and economic impact stemming from the shale
gas boom," said Marc Harris, RBC Capital Markets' Co-Head of Global Research.

"The coming years will be transformative for companies, particularly those in
the energy, infrastructure, manufacturing and transportation sectors, which
will, in turn, create opportunities for both investors and corporations,"
added Richard Talbot, Co-Head of Global Research, RBC Capital Markets.

Key findings from the research include:

  *Most Exploration & Production (E&P) market participants believe shale gas
    prices have bottomed out: The vast majority (87 per cent) of survey
    respondents predict natural gas prices will stay the same or increase over
    the next two years. In fact, 73 per cent of respondents anticipate a price
    increase of 10 per cent or more in the next five years. Until then, E&P
    companies are moving away from dry gas and are focusing instead on
    liquid-rich plays, such as wet gas and shale oil.
  *The shale gas boom is making U.S. companies think twice: Companies in the
    energy, manufacturing and transportation industries are reassessing
    underlying market drivers, business models and risks as a result of the
    shale gas boom. On an economy-wide level, respondents expect that shale
    gas will improve country competitiveness in both the U.S. (52 per cent)
    and in Canada (48 per cent).
  *The shale gas boom is impacting industries differently - consider
    manufacturing and transportation: Low cost shale gas will be especially
    beneficial to companies that rely on feedstock or direct energy usage to
    compete on a global level. In industries like petrochemicals and
    fertilizers, where feedstock or energy inputs can account for up to 90 per
    cent of total production costs, low priced shale gas will be a game
    changer. The impact on the transportation industry will be more subtle;
    rather than a complete transformation to gas-based usage, diversification
    will likely take place across the industry.
  *Impact on the U.S. economy: According to more than half (54 per cent) of
    those surveyed in the report, shale gas could lead to natural gas becoming
    a significant U.S. export in the medium term. However, revenues generated
    from natural gas exports will not necessarily have a significant positive
    impact on the state of the overall U.S. economy. The implications on job
    creation will be positive, but energy security and environmental concerns
    could limit the scale of natural gas exports in the U.S.
  *Lack of transparency remains an obstacle to investment: A lack of
    transparency  regarding chemical usage from producers is a deterrent to
    gas-related investments, according to 25 per cent of institutional
    investors responding to the survey. While the industry does engage in some
    reporting on the topic, some of it remains incomplete or inaccurate and
    presents an issue for potential and existing investors. Improved
    transparency, increased environmental risk management and implementation
    of best practices will help the industry maintain its license to operate
    while at the same time capturing the benefit of production currently lost
    to fugitive emissions.
  *Infrastructure will be challenged to keep up with demand dynamics: While
    sourcing infrastructure investment capital is unlikely to be a major
    bottleneck to the growth of the gas industry, regulatory risks remain
    prevalent. Regional pipeline supply dynamics are rapidly changing in
    response to changing demand conditions. Notably, an increase in NGL demand
    production has created an infrastructure bottleneck in some regions, for
    example in North East U.S.

About the Survey
Implemented by the Economist Intelligence Unit and sponsored by RBC Capital
Markets, the report draws insight from a survey of 357 North American C-suite
executives across a variety of industries; in-depth interviews with key
experts and leading companies involved in the shale gas boom; and desk
research based on the latest data, documents and reports from within the
industry.

About RBC Capital Markets
RBC Capital Markets is the corporate and investment banking arm of RBC and is
consistently ranked among the top global investment banks. With over 6,300
employees, RBC Capital Markets is active globally in fixed income, foreign
exchange, infrastructure finance, ECM, metals & mining and oil & gas. Working
with clients through operations in Asia, Australia, the UK, Europe, and in
every major North American city, RBC provides capital markets products and
services from 75 offices in 15 countries. RBC Capital Markets has major hubs
in New York, Toronto, London, Sydney, Hong Kong, and Tokyo. For more
information, please visit www.rbccm.com.

About the Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the world's leading resource for
economic and business research, forecasting and analysis. It provides accurate
and impartial intelligence for companies, government agencies, financial
institutions and academic organisations around the globe, inspiring business
leaders to act with confidence since 1946. EIU products include its flagship
Country Reports service, providing political and economic analysis for 195
countries, and a portfolio of subscription-based data and forecasting
services. The company also undertakes bespoke research and analysis projects
on individual markets and business sectors.

More information is available at www.eiu.com or follow us on
www.twitter.com/theeiu.

SOURCE RBC

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