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How Will the Shale Gas Boom Impact North American Companies and the Economy?
NEW YORK and TORONTO, Feb. 26, 2013, 2013 (Canada NewsWire via COMTEX) --
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
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
To view this news release in HTML formatting, please use the following URL: http://www.newswire.ca/en/releases/archive/February2013/26/c8216.html
SOURCE: RBC
SOURCE: RBC Capital Markets
Media Inquiries: Sanam Heidary, 212-618-5589 Gillian McArdle, 416 842-4231 Julia
Ehrenfeld, 212-279-3115 x223
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