MISTRE Mélodie, Morgan Crénes, Manfred Hafner

This paper aims at better understanding the potential future of shale gas in the light of the evolution of its wellhead production costs. Based on the most recent literature, we focus on cost data in the US to identify the structure of shale gas costs, their evolution and drivers. In particular, while the role of technology, which has led to a 25%–30% decline of unit capital costs since 2012 is emphasized, the relevance of considering additional risk factors when analyzing future costs is discussed. Further, we investigate future shale production costs on the long term by simulating contrasted supply and demand scenarios (from the authors, as well as replicated IEA scenarios) with consideration of different cost curves adjusted with the latest EIA cost data. Modelling results show costs ranging from $2.5/MMBtu to $6.0/MMBtu in 2040, with the conclusion that shale production costs are expected to remain relatively moderate until 2040, whereby the role of technological progress is deemed to be crucial. The paper finally assesses the key determining factors explaining the current gap in shale gas production costs between the US and other world regions.