Water everywhere

Or at least in the news today:

Here is an inconvenient truth about renewable energy: It can sometimes demand a huge amount of water. Many of the proposed solutions to the nation’s energy problems, from certain types of solar farms to biofuel refineries to cleaner coal plants, could consume billions of gallons of water every year.

“When push comes to shove, water could become the real throttle on renewable energy,” said Michael E. Webber, an assistant professor at the University of Texas in Austin who studies the relationship between energy and water.

Don't even ask about water and nuclear by the way:  Every summer we see stories about French and German nukes unable to produce power due to low river levels.  Energy and water seem to go together, as do some objections about shale gas.

On water, as in carbon, with friends like the Robert F. Kennedy's Waterkeeper Alliance and the Sierra Club on shale's side, at least some people realise that there is never a perfect solution. And we can't afford to wait for one.

Converting rapidly from coal-generated energy to gas is President Barack Obama’s most obvious first step towards saving our planet and jump-starting our economy. A revolution in natural gas production over the past two years has left America awash with natural gas and has made it possible to eliminate most of our dependence on deadly, destructive coal practically overnight – and without the expense of building new power plants.

America’s cornucopia of renewables and the recent maturation of solar, geothermal and wind technologies will allow us to meet most of our energy needs with clean, cheap, green power. In the short term, natural gas is an obvious bridge fuel to the “new” energy economy.

Since 2007, the discovery of vast supplies of deep shale gas in the US, along with advanced extraction methods, have created stable supply and predictably low prices for most of the next century. Of the 1,000 gigawatts of generating capacity currently needed to meet national energy demand, 336 are coal-fired. Surprisingly, America has more gas generation capacity – 450 gigawatts – than it does for coal.

However, public regulators generally require utilities to dispatch coal-generated power in preference to gas. For that reason, high-efficiency gas plants are in operation only 36 per cent of the time. By changing the dispatch rule nationally to require that whenever coal and gas plants are competing head-to-head, gas generation must be utilised first, we could quickly reduce coal generation and achieve massive emissions reductions.

In an instant, this simple change could eliminate three-quarters of America’s coal-burning generators and save a fortune in energy costs. Around 920 US coal plants – 78 per cent of the total – are small (generating less than half a gigawatt), antiquated and horrendously inefficient. Their average age is 45 years, with many over 75. They tend to be located amidst dense populations and in poor neighbourhoods to lethal effect.


When will gas run out?

A question that Aubrey McLendon of Chesapeake can answer, and does in the WSJ

Asked recently when output from North America's prolific shale-gas resources would peak, Chesapeake Energy's chief executive, Aubrey McClendon, quipped: "With all due respect to you and to me, we'll both be dead."

Barring sudden discovery of the elixir of life, he is surely correct: Navigant Consulting puts recoverable resources at 118 years of supply.

Don't depend on generation or electric vehicles to have a long term impact either:

But U.S. energy officials expect electricity-demand growth to average 0.8% a year to 2020, down from 1.3% over the past decade. Crowding into this is an expected 267 gigawatts of renewable capacity like windmills, which, Barclays Capital points out, might obviate the need for any growth in gas-fired electricity output. Energy-efficiency initiatives, which McKinsey reckons could cut projected 2020 electricity consumption by about a quarter, represent another game-changing threat.

In reality, intermittent renewable-electricity generation requires backup fossil-fuel capacity, for which flexible gas-fired plants are well-suited. Vehicles represent another opportunity, although more likely via causing more demand for electricity rather than a mass conversion to natural-gas-powered cars. Still, energy consultancy GSW Strategy Group estimates even if a fifth of vehicles were plug-ins by 2020, this would add only a few percentage points of demand to the grid…..The risk is that a combination of huge shale-gas resources and low demand growth weighs on prices for years to come.

October…

October, start of the heating season, the gas year and the traditional time for energy traders to talk up any risk at all. And the traditional start of the time for energy users to act like suckers and buy into energy risk catastrophic scenarios.

Last year some energy buyers who congratulated themselves by not being suckered into £1 a therm fixed price, bought at 65. That ended up being a dumb move. Come January, Russia and Ukraine kicked in and the coldest winter in almost twenty years started. And worst that day ahead index could come up with was 48 pence per therm in January. 

This winter, the same old stuff.  Buy now and pay the fear premium. Pay on the day, and pay for reality.

Gas traders here and in North America are praying for a cold winter. It still wont' help. 100% storage capacity has never been reached this early in the year.  Bulls are also depending on a recovering economy. But a jobless recovery won't be an energy using recovery. Gas use won't' rise if someone buys a derivative of whatever, or sells someone a PowerPoint presentation. Gas use needs car factories and steel mills and paper mills and chemical plants and all the associated suppliers. We don't see the demand destruction of last winter being reversed anytime soon, and the refusal of UK domestic suppliers to pass on price drops is short-sighted. The domestic market fell last winter, the first time this previously inelastic sector dropped use. Ripping users off is a great way to push up the next quarter, but not as long term business strategy.  Unless of course they are confident that the regulator and whichever government comes in next year, will leave them alone. People are more aware of alternatives, number one being: turn down the thermostat or switch off the light. High price provide incentives for even lower actual use even when prices do come down.

But the surge in US production, coming to a continent near you sooner than anyone knows, is going to continue. What will happen next spring when storage is still full and even more shale gas hits the market? US production will come across the ocean, along with everyone's spare gas. A mild winter in the Northern Hemisphere could see single figures sometime in Q1 2010. And that's before a single kWh of European shale gas gets produced. Prices may correct themselves, and it would be healthier if they do.

Our guess for average day ahead October 1 to March 31:  19 pence per therm. Almost 50% down on today's fixed price.  We'll do another story on April 1. It won't be foolish.

A lot of bread. And toast

For landowners in Pennsylvania, the amount of cash falling from the sky is like manna from heaven

Hundreds of people from far-flung farms and rural communities across a large swath of northern Pennsylvania trekked to an American Legion post this weekend to have checks — often for large, life-changing amounts of money — pressed into their hands.
It went on throughout the day yesterday and continued this morning. Some people cried with happiness.

The land owners formed a group to negotiate leases of their land with Chesapeake, a major gas industry player, and they reached a collective deal that fetched $5,750 per acre for drilling rights on their total of 37,000 acres, with more money to follow in the future in the form of royalties.
"God has put the Marcellus Shale underneath our property," said Lines-Burgess, a spokeswoman for the group. "We are about the luckiest people in the whole world right now."

One of our theories about the lack of news over European shale is discretion on the part of gas drillers.  Take heed:

Jim Grimsley had lived in New York City. He had fixed machinery in an industrial- sized bakery for 27 years. He and his wife picked a rural corner of Pennsylvania for retirement. They bought a house and 30 acres on a hilltop in Susquehanna County.
The visitor who came in 2006 represented a gas company. Grimsley and his wife agreed to lease their land for $25 an acre. They got a check for $750 and life went on. A year or so later, they learned neighbors were getting $2,000 an acre.
In the past few weeks, they heard of group lease negotiations, like the one culminating with the Black Walnut signings this weekend, that ended at $5,000 to $6,000 an acre.
"We didn't know,: Grimsley said.

And no one's saying in Europe for sure!

Alberta is Canada's oil and gas producer, but as it's conventional gas and they're far away from markets, the cost of conventional is now more expensive than "unconventional", which has suddenly become the new normal.

Conventional natural gas, the kind that roars from the Earth when its reservoirs are pricked by wells, has for decades been the bedrock of the province's economy. Until this year, when a nosedive in prices helped sink the province into a $7-billion deficit, natural gas brought in fully a quarter of Alberta's annual budget. Last year, Alberta collected $6-billion in natural gas royalties, fully 50 per cent of its revenue from non-renewable sources. The vast majority of that came from conventional gas.

But analyst Brent Watson has blunt words for the province: even after this downturn, it's not coming back. "Conventional is kind of toast, really," the Cormark Securities analyst said.


And if China gets shale?

Speak to some UK energy buyers and they often parrot a line that energy consultants, who have a vested interest in stoking up fear instead of revealing facts, have also succeeded in pushing on to the UK press.

Xenophobia makes the narrative simple and besides Russophobia and the UK rampant EU phobia, energy consultants can always add the story of the UK facing gas shortages and  price squeezes because China will compete for LNG supplies with the rest of the world.

The China story is getting frayed quickly, but some energy buyers who haven't read a paper since the Beijing Olympics in smog stories of two years ago still think that China is a problem.  We've said several times that China has no interest in replicating the "developed" world's mistakes.  Core future energy tech like  solar, wind, electric vehicles, Super Critical Coal, LED lighting and energy efficiency will help China surge forward and leave some countries in the dust fretting about nuclear and lights out.

China is using much more natural gas in common with other energy resources of course. But since far more gas is available in the Pacific Basin thanks to Australian, Indonesian, Papua New Guinea and Russian Sakhalin LNG either present today or available in the near term, any idea that Asia sucks up world gas and pushes up UK prices is based more on energy policy as anecdote than on boring old facts.

But the real impact on world prices would be if China was able to repeat the US experience on shale gas.  China has all the indicators of shale starting with it's own massive coal reserves.  Robert Holditch assesses China shale potential as north of 3,000 TCF.  But this ConocoPhillips story buried elsewhere shows that if is looking more like when.

U.S. oil major ConocoPhillips (COP.N) on Sunday signed an memorandum of understanding with top Chinese oil firm CNPC to develop shale gas in Sichuan province.

Specific plans still need to be worked out, Yan Cunzhang, a senior CNPC official, told Reuters.

Yan also said substantial progress in joint gas exploration and production by Royal Dutch Shell (RDSa.L) and CNPC in Sichuan would be seen in the near future.

ConocoPhillips are the same US major who we've previously noted are enthused about the potential for Polish shale gas.  Also of interest is the main part of the story, that China is thinking twice about nuclear.

China may have to put the brakes on the construction of nuclear power plants to ensure the plants are safe, the country's top energy planning official told reporters on Sunday.

Zhang Guobao, head of the National Energy Administration, warned of signs of "improper" and "too fast" development of nuclear power in some regions.

Is there a connection?  And should the UK learn from China?

Can Shale Gas transform UK energy policy?

2007: Natural gas production is considered a declining, insecure and expensive energy source.

2009: Natural gas has been transformed by new extraction technologies, successfully demonstrated every day in North America. Technology transfer promises to expand the success throughout Europe and the world. Geologists agree that natural gas is now abundant and widespread on a planetary scale. Prices are predicted to stabilise downwards in both price and volatility. Natural gas has the potential to transform energy and not only achieve carbon targets, but to do so far earlier and far cheaper than envisioned.

The problem for natural gas has changed from supply to demand.

UK Energy Policy needs to be updated to reflect the very recent and far- reaching developments in natural gas extraction technologies. The new methods of accessing natural gas offer potential for transformative changes that disrupt almost every aspect of present UK energy policy.

Background:

Shale gas is a generic term for natural gas production until recently was known as “unconventional” gas. The existence of the gas was widely known historically, but with no technology to remove it from shale rocks available, conventional natural gas was easier to extract even in deep water locations. Shale gas production remained a specialist technique providing marginal impact on reserve accessibility.
High natural gas prices met computing power to provide technological advances in extraction which changed the game for natural gas in general and energy policy in particular, within a very short time scale. Highlights include:
•    A transformation in the energy fortunes of North America, from shortage to surplus in less than three years.
•    Several world leading petroleum geologists have publicly stated the technology is transferable to almost any part of the world.
•    Companies including BG, BP, Shell, ENI and Statoil-Hydro have made investments in the US to access the new extraction technologies
•    Independent US oil and gas companies have been active throughout Europe, Australia and China.
•    The new technologies can both extend the life of existing fields and access many new provinces previously considered uneconomic.
•    Using actual North American experience, a conservative estimate would be for a tripling of accessible gas reserves worldwide. Geologists holding impeccable academic and industry credentials have made estimates of up to a nine-fold increase in reserves.
This briefing aims to highlight how rapid and very recent changes in natural gas extraction technologies must lead to an update of UK energy thinking. The only uncertainty lies in how up-to-date UK policy will be. While the overall impact will be positive, it must be emphasised that there will be a period of disruption. Widely, strongly and long held opinions over key issues will be found to be no longer applicable in a world where accessible natural gas reserves have grown so rapidly.
The US Potential Gas Committee reported in June 2009 that the advances in extraction technology meant that they could increase their estimate of US gas reserves as being 35% higher than in 2007.
Dr John Curtis was the lead on the report and said at the time:
Our knowledge of the geological endowment of technically recoverable gas continues to improve with each assessment. 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.
Dr Curtis has told the author that there are no geologic constraints on shale gas technology being applied worldwide, including some specific European locations.
Stephen Holditch, Department, Head of Petroleum Geology at Texas A&M University said at the Groningen (Netherlands) Gas Conference in June 2009 that transferring the technology currently used in the United States would increase worldwide available gas reserves 9 times.
Based on the US experience and other studies, he estimated total world shale reserves as being over 16000 TCF (trillion cubic feet). The distribution included 509 in Western Europe, 627 in the FSU, 2547 in the Middle East and 3526 in China. Total OECD annual gas use is 50TCF, of which the UK has 2.5 TCF.
Dr Holditch made specific references to the Southern Permian Basin, which includes both on shore and offshore UK areas stretching eastwards from Central England, under the North Sea and extending to Poland in the East.

It’s worth noting that during the conference, anonymous voting revealed that in the specific case of the Southern Permian, 56% of the audience agreed with Dr Holditch’s assessment of a nine fold increase in reserve availability.

What’s the catch?

A natural reaction is to be highly cautious when presented with potentially disruptive information. However, careful study of current US shale experience has meant that up to now, assessment of potential gas reserves have tended to err on the side of caution.
Nassim Nicholas Taleb wrote in a 2007 book about low likelihood, high impact, highly improbable events that he named Black Swans.
Almost by definition, Black Swans have negative connotations as being events such as tsunamis, terrorist attacks, financial crises etc. But statistically speaking, chance can also throw up positive events. Shale gas has the possibility of being a millionaire ticket to be shared among everyone.
Three key questions must be asked.
• • •

Are the reserves economical?

Are they accessible?

Are there any environmental constraints?

Economic background

Shale gas exploration in the US arose during a period of high prices, and initial exploration was predicated on prices of $6MMBTU (1MMBTU= 10 therm) continuing.
However, the surge in production has seen prices fall to $2.50 and producers can still make money at those levels. Some US producers have said they can make money at $1MMBTU or below, especially considering how close new supplies are to population centres.
North American shale gas already has a significant indirect effect on UK, European and World Gas Prices. Even in the unlikely event that there are no UK shale plays, the UK, due to exposure to international market forces, will be in the position of benefiting from an acquired immunity which will provide low prices for natural gas for many years to come. Some observers believe that volatility will also ebb and that prices will be both low and stable.
The US, Europe and North East Asia are the main consuming areas in world gas flows. The development of a world LNG market has caused convergence in prices as all gas can flow to a variety of markets without previous physical constraints preventing development of a varied mix of supply alternatives.

A core assumption underpinning development of an international LNG market was the US, via both domestic demand and excess storage capacity, providing a market of last resort and a floor price. However, domestic US over production caused by the shale revolution caused LNG exported to the Gulf of Mexico to seek other markets. For example a number of LNG cargoes from Trinidad have been diverted to the UK and Europe during 2009. Similarly, cargoes destined for the US from Algeria and Norway also were diverted to European destinations. European gas markets, already well supplied from Norway, the Netherlands and Russia have also seen prices fall due to new Qatari LNG supplies and falling demand fro m both domestic and industrial sectors.

As of September 2009, the US is facing the unprecedented possibility that storage capacity, already equivalent to the rest of the world combined, will reach physical limits sometime during October 2009. This will lead to production cuts once capacity limits have been breached. We have also seen an extraordinary switch from coal to natural gas for generation already developing in the South Eastern US. This is particularly noteworthy given the lack of a US carbon market.

In another exceptional development, ConocoPhilips recently applied to the US Department of Energy for permission to export LNG from the same terminals which had been constructed to import LNG on the back of dire predictions of US energy shortages.

Are shale reserves accessible?

Are there environmental considerations?

Geologically speaking, shale is the most common of sedimentary rocks, which themselves form +/-70% of the earth’s surface.

Shale gas deposits have been found both in known hydrocarbon areas such as Texas and Pennsylvania, and in completely new areas, such as New Brunswick, Quebec, Michigan and California.   Given the prevalence of shale plays in North America, No Hot Air felt it was impossible for the rest of the planet not to have similar reserves. We have confirmation of this in principle from a number of US geologists who cannot speak on the record.

There is a natural discretion on the part of European shale gas prospectors, but recently some of the biggest players are admitting the potential for shale exists world wide. For example,  Exxon Mobil has extended the estimated life of the largest European on-shore gas field in the Netherlands by 35 years through techniques first used in US shale plays.

Other possible areas include existing coal rich areas such as Poland and Eastern France, as well as areas previously barren of any hydrocarbons such as Sweden and Switzerland.

The Middle East and FSU are anticipated to have shale gas reserves far in excess of those found in the EU.

Shale gas is also under development in the Northern Territory of Australia and in the Patagonia region of Argentina.

While South Korea has an active program to find shale reserves, the true prize is naturally considered to be China, and the Chinese government has mentioned shale gas technology transfer during visits by both the US Secretary of State and the US Energy Secretary.

Possible plays in the UK that have been mentioned include Surrey, Kent, Hampshire, Cheshire and Nottinghamshire.

Shale technology is underpinned by three breakthroughs:
1. 3D Seismic Imaging makes prospecting for hydrocarbons much more reliable. Two thirds of oil and gas wells drilled achieve commercial potential compared to one third as little as 20 years ago. Some US shale wells have a 100% success rate.
2. Horizontal Drilling. One gas well can work in a much wider area than a single vertical well. This has enabled the first giant US shale play, the Barnett Shale to successfully drill for gas with minimum disruption in the large urban environment of Dallas/Fort Worth.
3. Hydro-fracturing has been the key technique in shale’s success. While there have been some environmental objections it should be pointed out:
•    The initial shale play, the Barnett, is arid compared with the UK, and this has caused no constraints.
•    There have been full US EPA investigations of shale’s impact on water supply.
•    Objections on environmental grounds have not increased markedly even as shale production has expanded to states and provinces such as Pennsylvania, New York State, British Columbia and Quebec with higher green sensitivity.

Many US environmental organisations have not only a positive view of shale gas, but also actively lobby the US Congress to increase use of gas over coal to reduce emissions. These include the Sierra Club, the oldest and most conservative of US environmental organisations.

What are the challenges to UK Energy Policy?

It is vital that UK policy makers realise that even if not a single kilowatt hour of shale gas is produced in the UK, there will be significant positive impacts accruing via shale gas extraction worldwide.

Only one example would be the impact of shale gas development in China, where many players are active and the Chinese government is actively engaging with both small and large oil producers. Any effective withdrawal of Chinese gas demand from world markets would remove another leg of the three legged stool of European, US and Asian LNG demand.

All current assumptions on UK energy policy need to be revisited and updated according to new realities, not past dogma. But transformational change can be disruptive to some individuals and groups.

For example several assumptions underlying the 2007 Energy White Paper are no longer valid. This is not a criticism, simply an observation that the study was predicated on a natural gas shortage that no longer exists. This may lead to a “denial” phase following the initial “disbelief” stage, where entrenched energy actors fight a rearguard action to preserve influence built up in a world that (correctly at the time) considered natural gas to be a finite and constrained resource.

Most energy experts, and the general public have been told for many years that UK natural gas is in terminal decline, prices will inevitably rise and that “security of supply” will be a continuing issue.
•    UK natural gas production levels will be increasingly irrelevant in an over-supplied globalised market.
•    Over supply will lead to lower prices. Lower prices may make carbon taxes to tackle carbon production and use a more palatable alternative.
•    Security of supply is no longer an issue when either the UK itself or nearby producers find themselves undergoing the paradigm shift of a glut of low cost, low environmental impact natural gas with reserves equal to many lifetimes usage.

•    Such rapid changes in thinking may anger some members of the public and lead to negative impacts on institutions including government, regulators, utilities and environmental organisations.

Natural gas is not a low carbon alternative. But the public will be aware that it is a least carbon intense and more economical alternative to oil and coal. Who will make the case? None of the political parties and few energy or environment professionals appear to have the knowledge about the new gas paradigm and an up-to-date view. The potential is for natural gas to be a bridge to a no carbon future, even as it provides a substantial reduction in carbon use in the short to medium term. This is a positive good news message that all should welcome. Any energy actors who act in an overly skeptical or obstructive manner will simply be swept away by events.

No Hot Air has consistently pointed to the French and Japanese experience with nuclear power as being key to economic success. We have no objection on principle to nuclear generation. But nuclear success was built on the fundamental assumption of insecure alternatives. We hope that this document, and the links within it, will go some way towards disproving that case. We don’t make any value judgments, no one is right or wrong. We just ask that people live in the real world where when facts change, opinions change.

Cheap, plentiful, secure and lower carbon natural gas will have a significant impact on both nuclear and renewable energy. We sketch out only a few scenarios that can transform UK energy policy:

1. Apart from political constraints, it will be physically possible, economically attractive and environmentally sound to switch most, and possibly all UK coal fired generation to natural gas. Natural gas produces half the emissions of coal. This would mean that 2020 reduction targets would be exceeded a nd achieved earlier and more economically.

2. The possibility of lights going out in 2016 or at any other time appears to be increasingly unlikely.

3. Any requirement of increased UK gas storage would be either negligible or non-existent. Massive quantities of gas will be coming out of the ground. Returning volumes significantly over current storage levels is likely to be uneconomic.

4. Nuclear power may be unable to compete on economic terms without higher direct or indirect subsidies.

5. Natural gas can provide a reliable, resilient and economical back up to wind or any other renewable source. This could lead to significantly greater wind generation at lower overall cost.

6. As wholesale prices continue to fall, suppliers, and regulators, with outmoded hedging models will struggle to explain to the public why retail prices have not moved in tandem.

7. Natural gas could have an increased role in distributed generation and small scale CHP, further removing waste, carbon and cost from electricity transmission networks.

8. Low cost and reliable natural gas, combined with existing proposals for mileage efficiency, can provide a further boost to the electric vehicle market. At the same time there may be uses of natural gas either directly or in GTL (Gas to Liquid) form to reduce oil and carbon use in transportation.

9. Coal Carbon Capture and Storage models would need to be revisited.

10.There may be negatives impacts as current “conventional” North Sea natural gas extraction technologies may be supplanted by on shore supplies from international or domestic locations.

11.Geopolitical alliances based on a perceived need to ensure security of energy supply may need to be revisited.

Further reading:

There is a substantial body of links to Shale Gas stories at the Shale Gas category of www.nohotair.co.uk, dating back to July 2008. Some are cited here:

http://online.wsj.com/article/SB123378467642449289.html
The conventional wisdom said that the U.S. would soon become a big importer of natural gas. The conventional wisdom blew it.
http://www.nytimes.com/2009/06/18/business/energy- environment/18gas.html
The report by the Potential Gas Committee, the authority on gas supplies, shows the United States holds far larger reserves than previously thought. The jump is the largest increase in the 44-year history of reports from the committee.
http://online.wsj.com/article/SB124813163539766707.html

Energy companies operating in Europe are turning to more unorthodox sources of natural gas to get around maturing gas fields and the European Union’s worries about its dependence on Russian fuel.

http://www.cera.com/aspx/cda/public1/news/pressReleases/pressReleaseDet ails.aspx?CID=10179
CAMBRIDGE, Mass., March 23, 2009 – North American natural gas is entering a new era in which supply is no longer constrained, according to a new Cambridge Energy Research Associates (CERA) multi client study, Rising to the Challenge: A Study of North American Gas Supply to 2018. A revolution in technology has unlocked “unconventional” gas resources, dramatically changing the prospects for the market. Demand, rather than supply, will be the challenge for the market going forward, accentuated currently by the economic crisis.
http://www.nytimes.com/gwire/2009/04/22/22greenwire-no-need-to-build- new-us-coal-or-nuclear-plants-10630.html?ref=energy-environment

No new nuclear or coal plants may ever be needed in the United States, the chairman of the Federal Energy Regulatory Commission said today.” We may not need any, ever,” Jon Wellinghoff told reporters at a U.S. Energy Association forum.

http://www.calgaryherald.com/business/Shale+supply+half+North+America/ 1484658/story.html
Despite a far-reaching industry downturn, a new report says unconventional natural gas from shale is expected to account for more than half of North America’s gas supply by 2020.
According to Calgary-based Ziff Energy Group, unconventional gas production from shale, coal beds and “tight” sandstones will more than double to 46 billion cubic feet (bcf) per day from 21 bcf per day in 2000.
About 16 bcf per day—more than Alberta’s current gas output from all sources—will come from shales in Canada and the United States, where prolific deposits such as the Horn River in northeastern British Columbia are thought to contain trillions of cubic feet of potential resources
http://www.eia.doe.gov/oiaf/ieo/nat_gas.html
Much of the increase in U.S. natural gas reserves results from expanded knowledge and exploration of shale resources. Outside the United States there has been almost no exploration of shale resources, and correspondingly little is known about the resource potential in other countries. Technologies that have greatly improved the economics of U.S. shale plays, including horizontal drilling and hydraulic fracturing, probably can be adapted to resource plays in other parts of the world. These technologies may, for instance, be applied in Europe before too long. A few North American energy companies have begun to explore potential shale plays in Central and Western Europe. At the same time, a few European energy companies have invested in North American shale plays. As the technologies are applied in other regions, economically recoverable natural gas reserves in the rest of the world are likely to increase, as they have in the United States.
http://www.oxfordenergy.org/geny.php#
Can Shale Gas be a Game-Changer for European Gas Markets?

The purpose of this analysis is to assess whether unconventional gas resources in Europe can be developed and produced in Europe on a scale that would affect future gas market fundamentals, as has been the case in North America, and what conditions would be required. The focus will be on shale gas. This topic is currently gaining a lot of attention within the industry. Research on European unconventional gas, albeit progressing, remains limited. In this context, the main contribution of this study will be to produce a new and concrete evaluation of shale gas potential in Europe, emphasising in particular investment and policy aspects, and place the conclusions within the bigger gas supply picture.

No Hot Air is a blog aimed at UK Business Energy users. The publisher, Nick Grealy, has had 15 years of experience in the UK gas sector. The opinions expressed both here and on-line are his alone.
We have been surprised how many highly placed UK energy experts have expressed little if any understanding of shale’s impact on world gas fundamentals and we seek to both inform and engage them. It seems to us that the very recent and sudden developments in what has been considered a mundane and unexciting energy area up until now have a capacity to make almost any other area of UK energy policy irrelevant within a short time-scale.

It will happen here….

Another week, another slew of shale stories from North America, another week of silence from the UK energy experts.  The Telegraph still trots out lights out stories, latest today with the usual outdated solutions:  CCS, Storage, Nuclear and not one single word about gas. The UK gave up on gas years ago.  No matter. The Telegraph can write stories like that till the end of time, and probably will. But whatever we do, or to be exact don't do in the UK, won't change a thing.  We'll be up to our ears in gas, it will just be that we'll be paying other European countries for it. We point out that in a globalised market we won't be paying much for it, but shouldn't we be maximising  British jobs and taxes out of our energy?

Out in the rest of the world, shale marches on.  It's getting closer….  Remember all those Polish plumbers that disappeared once the going got tough in the UK?  At least they'll find some jobs once they go home:

ConocoPhillips (COP), one of the largest natural gas producers in North America, sees a future in Europe's gas deposits. And it isn't the only U.S. major to think so.

Through a recent foray in Poland, the Houston-based company has become the latest U.S. oil giant to explore European unconventional gas resources as a potential source of growth. Exxon Mobil Corp. (XOM), the world's largest publicly traded oil company, already has significant acreage in Germany and a venture in Hungary.

The move comes at a time when demand for gas produced in Europe is expected to grow vigorously as countries intensify their efforts to reduce their dependence on Russia as a supplier. ConocoPhillips and its rivals are hoping that Europe's unique need for new local supplies will help their investment on the continent to hold up better than in the U.S., where heavy development of unconventional gas has contributed to a glut that recently sent prices to a seven-year low.

The UK hangs on to outdated concepts. The Europeans get the jobs and the Americans make money. We get money thrown down various holes called storage, CCS and nuclear.

But U.S. oil majors are directly testing their expertise in Europe as well, where reservoirs could be as promising as those in the U.S., analysts said. The potential resources for unconventional gas in Europe are large but still unproven in most areas. More importantly, the amount that will be converted to commercial reserves and the speed with which it can be extracted remain uncertain.

Companies like BG, Statoil and Eni are a good example of three companies that want to take advantage of the U.S. natural gas space," said Rhodri Thomas, Europe and Sub-Saharan Africa upstream research manager at consultancy Wood Mackenzie. "But clearly there is potential learning they could apply elsewhere."

Actually, we won't get any money thrown away on CCS or storage or nukes. UK policy makers may believe in them, but there isn't a bank on the planet that will finance such outdated schemes, with or without government guarantees.

Carbon Capture

Interesting, balanced article from the NYT earlier this week on  how Carbon Capture in West Virginia may not yet be running, but it is at least up.

A behemoth built in 1980, long before  global warming stirred broad concern, Mountaineer is poised to become the world’s first coal-fired power plant to capture and bury some of the carbon dioxide it churns out. The hope is that the gas will stay deep underground for millennia rather than entering the atmosphere as a heat-trapping pollutant.

The experiment, which the company says could begin in the next few days, is riveting the world’s coal-fired electricity sector, which is under growing pressure to develop technology to capture and store carbon dioxide. Visitors from as far as China and India, which are struggling with their own coal-related pollution, have been trooping through the plant.

Lets make the aside that the UK has it's own vague plans on CCS, which hopefully include this:

Yet the economic viability of the Mountaineer plant’s new technology, known as carbon capture and sequestration, remains uncertain.

The technology is certain to devour a substantial amount of the plant’s energy output — optimists say 15 percent, and skeptics, 30 percent. Some energy experts argue that it could prove even more expensive than solar or nuclear power.

The obvious question must be that if we have now entered the world of abundant natural gas, do those economics stack up anymore?  Whether the technology works is irrelevant. CCS depends on the perception and reality of natural gas being considered as finite, insecurely sourced and too expensive. Do the economics of CCS make the transition to a world of abundant natural gas?  Time for a re-visit a the very least. 

A revisit is happening here in the UK according to the Guardian, but we assume independently of any sudden knowledge of gas in the DECC.  No,  CCS, which is yet another of those things like Wind Energy and Smart Metering where ministers existing and shadow,  trumpet the UK's ambitions while ignoring realities.  The usual British all mouth and no reaching in the trouser pocket.

The government's claim to be a world leader in developing clean coal technology has been dented after officials warned privately that public spending constraints could force them to cut the £10bn programme.

Officials have admitted that securing the necessary investment is "challenging in the current climate".

Bureaucratese for don't hold your breath.

It will also take years for those plants which are promised funding to be built. Ministers will use a "gradualist" approach, staggering the tenders to build the new plants, which will also have the effect of deferring public spending commitments. The current tender, which began in 2007, may not be concluded until 2011.

Translation: Gradualist =  We'll be gone then anyway.

If it's challenging in the current climate, how challenging will it be in the Grand Energy Transition ?

The Grand Energy Transition, The GET, is an ongoing, powerful evolutionary energy transition that is bringing civilization out of a millennia long epoch of limited, unsustainable dirty, solid fuels, into the later stages of what history will record as a relatively short liquid transition to a future epoch of sustainable, virtually limitless, clean gaseous fuels – called by the Author, the Age of Energy Gases.

 

 

Statoil Hydro opens up even more…

It figures.  Do one Statoil Hydro story and another comes along the next day. 

"Natural gas is an attractive energy source for the future," said Rune Bjørnson, StatoilHydro's executive vice president for natural gas during a press seminar in Oslo on Thursday, 24 September.

StatoilHydro is currently the second largest supplier of gas to Europe, and the group helps secure a stable supply of energy to Europe through export of gas from the Norwegian continental shelf (NCS) , as well as holding significant international gas positions in Algeria, Azerbaijan and in the USA.

"I am convinced that natural gas will be a competitive energy source for many decades to come," said Bjørnson.

He pointed out that natural gas is an important bridge towards a low carbon economy because it is the cleanest burning fossil fuel, with much lower emissions of greenhouse gases than coal and oil. Replacing older coal power plants with new gas power plants can reduce carbon dioxide emissions by as much as 70 per cent. Provided that all of StatoilHydro’s gas export from the NCS in 2008 substituted coal generated power in Europe, the total CO2 emission reduction would have been approximately 220 million tonnes. As a comparison, total Norwegian CO2-emissions were around 44 million tonnes last year.

Europe still uses more coal than gas to produce electricity. Gas from the Norwegian continental shelf is an attractive energy source seen in an overall climate perspective, thanks to low greenhouse gas emissions during production and its proximity to the market .