I wrote an article last December in which I noted that unconventional sources of natural gas, that is shale, tight sands and coal seam, were the true competitors of imported LNG, in that with finding costs as low as $3.00/mmbtu, these domestic sources would almost always undercut the cost of bringing LNG into the states.

The reality that the US sits atop, and can easily access, one of the largest natural gas reserves in the world is starting to have substantial impacts for non-US producers that had previously seen the US as a lucrative market for their product.

Last week Gazprom, the Russian gas export monopoly and one of the largest gas producers in the world, announced that they have agreed with their partners, Total and Statoil, to delay the development of the giant Shtokman field in Russia’s Arctic region due to “major changes in the global gas markets”. The announcement indicated that that gas delivered by pipe from the field would be delayed from 2013 to 2016, and LNG exports would not start until 2017.

If there was any doubt as to what the company meant by “major changes in the global gas markets”, those doubts were put to rest today when, according to Reuters, Gazprom’s deputy chief executive, Alexander Medvedev, attacked shale gas production in the US, saying of the massive hydraulic fracing used to open-up the shale reservoirs, “This technology endangers drinking water” and noting that the company was “keenly awaiting the results of investigations by the U.S. Environmental Protection Agency into shale gas drilling”. Mr. Medvedev did say, however, that despite the delays at Shtokman and growing gas production in the US, he still felt that LNG could effectively compete with US domestic gas sources and that they remain bullish on this market. What he did not say is whether or not the company still feels they can achieve a 10% share of the US gas market by 2014 as they had indicated last year.

Despite Gazprom’s confidence, and barring EPA or state intervention, US unconventional gas production is going to continue to grow and be a barrier to LNG imports. Whats happening in the coal seam, shale and tight sand gas fields scattered across the US is having, and will continue to have, impacts felt around the world.

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