UK Climate Policy

Two interesting points from Tuesday’s FT Global Energy Leaders Summit regarding the UK

Chris Huhne, Secretary of DECC when asked to defend the costs of increasing consumer bills to pay for renewables stated one thing while leaving out the other.  He said that the costs would only add 1% to consumer bills by 2020.  What he didn’t explain was that the first prediction depends on another prediction that gas prices will remain indexed to oil prices.  However both the IEA and the IMF, among many other observers  have recently stated that the oil link is fading away on a sea of shale gas.  Mr H’s predictions are also for oil prices $100 to continue.  Maybe they will, maybe they won’t.  If they don’t even oil indexed gas could be cheaper than renewables.

The other nutty thing that is a key tenet of UK government policy is the proposition that the £1 billion pounds the UK government is going to invest in Coal Carbon Capture and Storage will make the UK a world leader in the technology and will create a new industry with thousands of UK jobs selling it to places like China.  Let’s ignore that the UK can easily lead the world in CCS when they are the only player in a field of one. Another participant  probably more  well informed on China’s energy policy was Andrew Brandler of Hong Kong’s CLP (China Light and Power).  When asked was the £1 billion a wise investment he said he was glad he was no longer a UK tax payer and the money was sure to be a complete waste.

Gas buries Coal.

Interesting story here from the Marcellus.  First we saw  gas investment beating coal in electricity production, but now one of the biggest US coal producers is finding that extracting gas from the earth is more profitable than coal.

Drilling in the Marcellus Shale is becoming so profitable that Consol Energy Inc. is closing one of its coal mines to focus more resources on natural gas development.

The move to close Mine 84 near Washington, Pa., shows the company – which also owns and operates the Shoemaker and McElroy mines in Marshall County – continues ramping up its gas production. Consol’s natural gas subsidiary is CNX Gas Corp.

The big winner in all this, is of course the planet.

Halliburton sees “mad rush” for Polish shale

One favourite topic of the bah humbug brigade, who see European shale development as being either no big thing or one far off in the  future has been to concentrate on the lack of service industries to supply demand for European shale.  Apart from flying in the face of capitalist basics of  markets being balanced by supply meeting demand,  this is self serving to those who have a vested interest to see European gas at high oil linked prices.  That list includes not only the obvious like Gazprom, but also entrenched suppliers such as Centrica and GDF.  That ripples out to policy makers such as the UK’s DECC who see a continuation of the oil/gas link as rationale to foist expensive renewable projects on consumers.  Notably this also includes the Oxford Institute of Energy Studies, whose report last year emphasised the lack of service sector  as a problem, despite the obvious reasoning that there isn’t a big onshore service sector simply because there hasn’t been a demand for it.

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IEA and Statoil on Shale

Nobuo Tanaka in response to a question on the NYT article on Shale at FT global Energy Leaders in London today: We have studied the issue very carefully. he said gas has “huge potential” and noted Fracking has been around for over sixty years. John Knight of Statoil Global Strategy when asked directly about his views on the Marcellus: The volumes and EUR is “much greater” than we thought and “in excess of assumptions we made on entry”

Energy in Depth on the NYT

Energy in Depth is a site that is a bit too partisan and rough and tumble, and dare I say it, too American for European audiences.  But today’s riposte to the NY Times stories is just what was needed in a take no prisoners kind of way.  Especially enlightening is this bit which for me is the smoking gun of the Times attempt to poison the debate entirely.  For some background,  first to the Sunday story,  all reasonableness:

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IMF on gas

If the NYT is to be believed, the US natural gas industry is riddled with secret doubts over shale gas.  If so, they haven’t reached that other governmental organisation the International Monetary Fund:

We show that US natural gas prices have decoupled from oil prices following substantial institutional and technological changes. We then examine how this interrelationship has evolved in Europe using data for Algeria, one of Europe’s key gas suppliers. Taking into account total gas exports and cyclical conditions in partner countries, we find that gas prices remain linked to oil prices, though the nexus has loosened. Both high oil prices and a modest industrial recovery in partner countries have kept gas exports at low levels in recent years, suggesting changing market forces. The paper then shows how such shifts can have important macroeconomic implications for a big gas exporter such as Algeria.

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Doubts or Debate?

Where does legitimate debate over the depletion rates of shale end and deliberately creating doubt over shale to serve other agendas start?  It’s hard to tell from today’s installment in the continuing vendetta against shale from Ian Urbina of the NYT.

But the doubts and concerns expressed in the e-mails and correspondence obtained by The Times are noteworthy because they are shared by many employees, some of them in senior roles. The documents and e-mails, which were provided to The Times by industry consultants, federal energy officials and Congressional researchers, show skepticism about shale gas economics, sometimes even from senior agency officials.

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The Dimock millionaire victims of shale extraction

If shale gas is all one big Ponzi scheme,  let’s sign up to some more:

ALLENTOWN, Pa. (AP) — Two unexpected gushers in northeastern Pennsylvania are helping to illustrate the enormous potential of the Marcellus Shale natural gas field.
Each of the Cabot Oil & Gas Corp. wells in Susquehanna County is capable of producing 30 million cubic feet per day — believed to be a record for the Marcellus and enough gas to supply nearly 1,000 homes for a year. The landowners attached to the wells, who leased the well access, numbering fewer than 25, are splitting hundreds of thousands of dollars in monthly royalties.

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2011 Information on Shale

For the latest information and among the most even handed, it’s hard to beat the Barnett’s local paper, the Fort Worth Star-Telegram.  With almost 9 years worth of experience in shale gas and fracking, surely they would know by now if shale is a dangerous bust?  Particularly relevant today is their take on  the Exxon takeover of XTO last year.  At the time,  the markets said that XOM were crazy to get into a business so fraught with uncertainty over production.  That was then, this is now:

Does this sound like a bad investment in declining industry?

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