Northern Sky Research

"Unconventional" Equals Oil & Gas Growth Opportunity

Apr 24th, 2012 by Brad Grady   More from this Analyst | Profile

With virtually the entire Oil & Gas industry focused on North American Shale Gas, it is easy to forget the unconventional resource movement spans the entire globe.  Shale Gas, an unconventional resource, should be read by the satellite industry as – “Long to extract, and requires sophisticated technology which means making more money” – and can be found from the South China Sea to under the Arctic Oceans.  Furthermore, the satellite industry will experience the biggest growth from unconventional resources not from North America, but from Asian and Latin American deposits. 

As NSR projects in its Oil and Gas via Satellite, 2nd Edition study, North American Exploration and Production VSAT In-service Unit growth from 2011 - 2021 will be less than 5%, well behind the 13% or 14% growth of Latin America or Asia, respectively.  This lack-luster long-term growth in North America stems from a robust terrestrial infrastructure that will be installed as the Shale Gas industry transitions from the “exploration” to “production” stage.

Pennsylvania – a hotbed of Shale Gas activity – recently proposed legislation that would require real-time monitoring and communications at over 5,000 current and planned natural gas sites within the state.  In addition, O&G industry representatives state that less than 5% of well-sites are covered by terrestrial infrastructure… a sure sign that satellite will play a critical role in well-site communications.  Yet, Pennsylvania has one of the most aggressive rural broadband deployment plans with every town, village and city having access to broadband connectivity by 2015, and the legislation was announced at the facilities of a terrestrial network provider.  Combine the two, and satellite growth becomes murky in the long-run for North America.

Instead, service providers should primarily focus on opportunities outside North America.  Not only are these deposits (and therefore activity) larger, but the deposits are found both on- and offshore, and in remote environments where terrestrial networks are unlikely to have high penetration.   Overall, satellite service providers will enjoy stronger growth from unconventional resources in Asian and Latin American markets, rather than well established markets in North America or Europe.

Bottom Line

The Shale Gas exploration “Boom” throughout North America will transition to a production “fizzle” as existing O&G well-sites throughout the region move to long-term assets, which brings terrestrial network infrastructure.  The remote On- and Offshore unconventional resources of the rest of the world will provide strong growth prospects for satellite service providers, and account for 34% of a $1.1 Billion dollar industry by 2021.