US energy companies have in recent years swooped on a revolutionary technique that taps inaccessible natural gas hordes, and now it seems leading fund managers have started to take note. Tipped by BlackRock’s Catherine Raw, who co-manages the Gold and General fund alongside Evy Hambro, and CQS’ Will Smith, shale gas is fast becoming one of the most keenly watched commodities. ‘We think shale gas is going to be a very interesting story over the next few years. It has revolutionised gas production in the States [by] making so much of it and at such a cheap cost,’ Smith pointed out. In just a short space of time shale, a gas extracted from layers of black rock known as shale, has noticeably diminished demand for oil and other forms of energy – a pattern traceable over the last five years, since shale gas supplies in the US came on. Moreover, a report by the Baker Institute of Public Policy found shale gas production in parts of America and Canada alone could loosen the stranglehold of Russian and Persian Gulf countries on the price of gas exported to Europe. Until now, though, the commodity seems to have gone unnoticed by the bulk of investors and outside of the specialist commodity investment community shale has only gained a chink of notoriety through a ban on fraccing, a process used to tap unconventional natural gas deposits, in France. There is also little by way of actual production taking place at the moment, which means much of the value lies in the ownership of land home to prospective shale wells. Having pinpointed sites in Austria, Hungary, Germany, the US and Canada, gas exploration firms are shifting their focus to Argentina and North Africa. The main risks are political While the use of fraccing means future use of shale is highly politicised, energy experts at prominent research institute Rice University believe extensive use of the commodity could cut global warming because the gas produces fewer greenhouse emissions than oil and coal. China and India are just two countries earmarked to benefit from any shift to shale, as both have growing economies heavily reliant on coal, using it to generate in excess of 2 trillion kilowatts of electricity, collectively, each year. This means the two emerging nations harbour huge potential to convert use of finite resources such as oil and coal into consumption of shale as increased supplies come on board. The pace of this could even be hastened as environmental lobbyists turn up the heat on the world's biggest energy consumers to cut pollution. ‘Once politicians get their head around [shale] this is an untapped resource that will revolutionise energy,' Smith, who runs investment trusts City Natural Resources High Yield and Geiger Counter, argued. 'I don’t think it’s unreasonable to call it a game-changer,’ the manager added. The shares to back Investing in undiscovered commodities is fraught with risks, however there have been significant strides forward in the exploration and production of shale.

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