Shale Gas and Venture Capital
There are many reasons why shale gas and venture capital is a dream match up. Shale gas, or shale oil, is a controversial subject that is often too hot to handle for conventional lenders while possessing tremendous profit potential.
Shale gas is a name given for a certain type of geological formation of rock that contains a substance known as kerogen. This material can be processed into a sort of crude oil substitute. The process that does this is known as pyrolsis. At the current time, this refining process is prohibitively expensive. Although shale gas can be used in less expensive applications already for a variety of energy applications, it is as a gasoline substitute that some people see as its future. Shale gas and venture capital investment go together very well for this reason.
It is estimated that the worldwide reserve potential of shale gas would amount to somewhere between 2.8 and 3.3 trillion barrels. The Green River deposit in the United States is said to hold more potential gasoline in its shale gas formations than the entire reserve oil located in Saudi Arabia. The proponents of shale gas see it as the way to free the United States totally from foreign oil dependence.
Some other countries have been in the lead in the use of shale gas deposits. One of these countries has seen its new industry virtually shut down by environmentalist concerns over the mining and production methods used. This is the crux of the controversy right now, but right along side is the fact that a viable and inexpensive way must be developed to convert the shale gas to usable gasoline. One expert predicts that shale gas gasoline would cost $33 a gallon at the pumps today.
Research is underway mainly to develop inexpensive extraction and refining methods. Companies that are engaged in this work find that conventional financing is hard to come by because of the risks and high probability of failure. On the other hand, any break through in technology could lead to a major shift in the whole economic structure of fuels. Many see shale gas as holding much more potential than any other form of replacement fuel including biomass.
Some venture capitalists, sensing the profit potential that underlies such risky, but cutting edge opportunities, have specialized in financing companies and research in shale gas technology. It is the ideal vehicle for venture capital to many in the industry. It encourages cutting edge technology while promising high returns should success come along. The increasing tension in the oil producing nations and the increasing price of gasoline have made alternative fuels a hot issue and drawn the attention of venture capitalists.