As often happens, technology is changing the conventional wisdom. Over the past five years the combination of two technologies has transformed the energy market in the United States and now threatens to do the same elsewhere in the world.

The first new technology is horizontal drilling, which allows one vertical well to tap widely into a whole layer of oil or gas. The second is hydraulic fracturing, or "fracking," which involves pumping mixtures of water and chemicals into certain rock formations, particularly shale rock. This breaks up the shale to release the oil and gas that had been trapped in the rock.

This "fracking" is a game-changer, unleashing our access to oil and gas that were hitherto out of reach. In June 2009 the U.S. Potential Gas Committee reported that advances in extraction technology meant they could estimate U.S. gas reserves as being 35 percent higher than they were in 2007.

"Our knowledge of the geological endowment of technically recoverable gas continues to improve with each assessment," commented John Curtis, lead author of the report. "Furthermore, new and advanced exploration, well drilling and completion technologies are allowing us increasingly better access to domestic gas resources -- especially 'unconventional' gas -- which, not all that long ago, were considered impractical or uneconomical to pursue."

Five years ago the United States was planning on building new terminals for importing liquefied natural gas. But now some industry experts expect the United States to become a natural gas exporter. The heady predictions that Qatar and Russia would become major exporters to the United States have to be revised. Russia's huge investment in the Shtokman field in the Barents Sea was predicated on exporting gas to the United States, and suddenly that market may no longer exist.

"Proven U.S. reserves have risen to 245 trillion cubic feet in 2008 from 177 tcf in 2000, despite having produced nearly 165 tcf during those years," says Daniel Yergin of Cambridge Energy Research Associates. "With more drilling experience, U.S. estimates are likely to rise dramatically in the next few years. At current levels of demand, the U.S. has about 90 years of proven and potential supply -- a number that is bound to go up as more and more shale gas is found."

But this technology is not limited to the United States. Stephen Holditch, professor of petroleum geology at Texas A&M University, told the Groningen (Netherlands) Gas Conference in June 2009 that transferring the technology currently used in the United States would increase worldwide available gas reserves nine times.

Based on American experience, Holditch estimated total world shale reserves as being more than 16,000 tcf. Annual gas consumption of the developed economies is currently around 50 tcf. Holditch suggested reserves of some 500 tcf in Western Europe, 2,500 tcf in the Middle East and 3,500 tcf in China.

Where does that leave Gazprom, flagship of Russia's energy industry, which had assumed massive future markets for its gas exports in Europe, China and the United States?

John Harpole, president of U.S. company Mercator Energy, thinks he knows the answer.

"It is hard to fully appreciate the historical significance of shale gas production," Harpole told the monthly American Oil & Gas Reporter. "It may sound overly dramatic, but I think it will do more for freedom than anyone today can imagine."

What he means is that Europe would no longer be so dependent on Russian gas, and Gazprom would lose much of its pricing power.

"With global shale gas development, it will be very difficult for any one country, cartel or company to force any group of users to accept a gas price," Harpole said. "I will go a step further and say that the United States should be exporting gas to Europe."

The "fracking" revolution carries some further implications. Most electricity around the world is currently produced by coal. "Fracking" allows the coal to be replaced by much cleaner natural gas, which releases less than half as much in carbon emissions.

Moreover, gas-fueled power stations are fast and easy to spin up to full power. This makes them the perfect partner for solar and wind technologies, which need backup power stations to take over the load when the wind drops or the sun goes down.

In short, "fracking" means the world may have much more semi-clean energy available than was assumed when the Kyoto Protocol targets on CO2 emissions were first proposed. It is not a perfect cure because natural gas is still a fossil fuel and still emits carbon, but it changes the time horizons.

Of course, there is a catch. Environmentalists worry that hydraulic fracturing can pollute underground water sources, although gas reservoirs tend to be at deeper levels. There is also concern that breaking the rock structure can result in subsidence or even localized earthquakes.

Nonetheless, the real "fracking" earthquake is the way it shifts the geopolitical thinking in Moscow. But if it drives the Russians to develop a broad-based modern economy that is not dependent on the export of oil and gas, it may prove to be a blessing in disguise for Russia's future.

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