The Impact of Shale Gas on Energy Markets

The UK Parliament Energy and Climate Change Committee has just announced an enquiry into the impact of shale gas on energy markets. :

This inquiry will follow up on the Committee’s previous report and investigate the different estimates made for recoverable shale gas reserves in the UK (on and offshore), Europe, and the rest of the world and the implications of the “shale gas revolution” for energy markets around the world.

The Committee invites written evidence from interested parties addressing some or all of the following questions:

  • What are the estimates for the amount of shale gas in place in the UK, Europe, and the rest of the world, and what proportion is recoverable?
  • Why are the estimates for shale gas so changeable?
  • What are the prospects for offshore shale gas in the UK Continental Shelf?
  • Should the UK consider setting up a wealth fund with the tax revenue from shale gas?
  • What have been the effects of shale gas on the LNG industry?
  • Could shale gas lead to the emergence of a single, global gas market?
  • What are the effects on investment in lower-carbon energy technologies?
  • What is the potential impact on climate change objectives of greater use of shale gas?

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A great European editorial on shale gas

Le Monde is considered to be not only the best newspaper in French but a world class paper up there with the WSJ, NYT, Irish Times and the FT on a good day.  We won’t mention the rest of what the UK mediaverse laughably call the “quality press”. So next time you hear that the debate on shale in France has been closed down, ask yourself, how does this editorial fit in then?  Anyone, anywhere in French politics of the centre left has read today’s editorial and so should you.  This was cleaned up by me after Google Translate, which is getting better all the time but must be close to it’s limits.

The energy world is experiencing a mini-revolution. In the case of the United States it is more than that: the exploitation of shale gas in America is an economic upheaval and large-scale strategic (change). European geology is probably not so well provided, but the old continent can not but ask the question: is it really necessary, a priori, to reject this resource?

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Shale Politics in UK and France

From what I understand, shale gas has been collateral damage in the pointless politicking over the UK onshore wind industry. This was a strange case of something increasingly inconsequential holding up the main event of shale. The fact that Ed Davey and the Guardian got so exercised over whether the wind subsidy cut would be 10 or 25% of an ROC (renewable obligation certificate) speaks volumes about how the kind of fantasy world they live in – they can’t even talk about real money. Wind is not going to suddenly create hundreds of thousands of jobs as Davey told the BBC earlier today because the costs are 10 per cent either way. The market doesn’t give a toss about on-shore wind and isn’t that thrilled about off shore either.  Neither are markets going glowing green nuke or rushing to embrace CCS.  Markets don’t actually need the long term regulatory certainty for generation, because one can pay off small scale CCGTs in ten years or less. It’s only big old fashioned central power station dinosaurs that need multi year commitments.

What is important that shale goes ahead, and the only question now is whether the decision will be pushed back into September, or snuck in under the Olympic radar. According to the Telegraph,  this looks like giving Davey a victory on wind as gas wins the long term battle:

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Gazprom’s old tricks

A rather pathetic example of Gazprom’s old tactics of misinformation on shale,  in light of recent developments that Gazprom’s new thinking is evolving.

Gazprom, the world’s largest gas company, has been working with Pace Global Energy Services, a consulting firm in Fairfax, Virginia, to analyze how much money US gas companies are spending on hydraulic fracturing and horizontal drilling. Because the two technologies are facilitating the production of so much cheap gas from previously inaccessible shale formations in Pennsylvania and other states, some US companies now want to export their gas to more lucrative markets in Europe and Asia.

But Sergei Komlev of Gazprom Export, the Russian gas giant’s exporting arm, says those would-be exports are not likely to materialize for economic and regulatory reasons — at least not on the scale that American companies are hoping for.

“We think the current US gas market model is unsustainable in the medium- and long-term,” Komlev told Platts via email. “We forecast that soon, the disparity between the shale gas costs and sales price will disappear. When it happens, it will make the US plans to become a major gas exporter economically nonviable.”

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Bad Science

This is more of compilation than any revelation: Some fracking critics use bad science.  

Critics of fracking often raise alarms about groundwater pollution, air pollution, and cancer risks, and there are still many uncertainties. But some of the claims have little _ or nothing_ to back them.

For example, reports that breast cancer rates rose in a region with heavy gas drilling are false, researchers told The Associated Press.

Fears that natural radioactivity in drilling waste could contaminate drinking water aren’t being confirmed by monitoring, either.

And concerns about air pollution from the industry often don’t acknowledge that natural gas is a far cleaner burning fuel than coal.

Let’s talk about the Big C. If you can’t scare people by telling them 4,000 trucks are going to go through their village or that stuff that’s in toothpaste will  ooze from the earth and poison generation unto generation, then you can always fall back on cancer.

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Emissions: We do not have time to be purists.

I”m not a scientist. But if the overwhelming majority of scientists are convinced that climate change is happening that is good enough for me.  Similarly, the vast majority of scientists tell me shale gas can be extracted safely, then that’s good enough for me too.  Anything else, in either subject, is nit-picking that distracts us from a rapid uptake of natural gas in generation, vehicle transport and the connected carbon reductions.  Gas can be good for the enviroment and the economy. It’s not either/or. It’s both. 

What we need to talk about when we talk about shale is pragmatism, realism, science and no extreme positions either side. Right wingers can choose shale for economic reasons but it will lead to carbon reductions that they might otherwise see as a socialist plot. The left can still have less carbon, but also free up economic resources to provide for other projects.  

Unfortunately there is very little leadership from progressives on shale.  They seem to feel more comfortable with fighting each other  or simply getting comfortable jobs where they get paid good money to talk about carbon reductions but not actually achieve them.  They also seem to confuse shale as a victory for the right when it’s more complex than that. I recently came across this from last year, but it remains valid:

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The easy shale bans

This from Platt’s Barrel describes the ideal situation for the media, fractivists and gas companies themselves: Ban shale gas where there isn’t any.

The venue for political environmental theater expanded this week with Ohio Governor John Kasich signing an executive order re-establishing the state’s ban on drilling for gas and oil on Lake Erie.

“I really don’t see what public good that does besides making people who don’t like oil and gas drilling, particularly on Lake Erie, cheer,” Tom Stewart, executive vice president of the Ohio Oil and Gas Association, scoffed. “So, hurrah”

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Total’s angle on French Shale

As the French national oil champion Total has such a huge impact on the French economy that it’s shares make up over 14% of the CAC 40 index alone. Total has also invested heavily in shale both via $2.3 billion deal with Chesapeake in the Utica shale and a tie up with Sinopec in Chinese shale.

For some reason they don’t point out the craziness of not being able to drill for shale oil within sight of the top floors of the Total HQ at La Defense near Paris, while they export billions of Euro comfortable French pensioners of the Midi, who are the loudest opponents in France, use to remain so.

Now the government is pushing the debate forward, Total is making a contribution. This from Le Figaro:

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Obama says US should welcome shale gas

Domestic US politics will mean that you’ll read about this in the Pittsburgh Post-Gazette but for opposite reasons it may get buried or ignored in  either the WSJ or NY Times. Over here, you won’t see it in the Guardian anytime soon, but on the other hand it could be a long wait for the Daily Telegraph on the right to publish it too.

That’s because Democrats seem to have made opposition to fracking as some kind of left wing litmus test.  But on the other hand, the Republican right go nuts when they see the President supporting shale. Their narrative is meant to run that ‘socialists’ like Obama are enemies of growth etc etc. They see Obama cheating by stealing their issue.

So it’s hard to see who is going to more annoyed by this,  which will mean that both will be united for once in ignoring it.  I’ll keep pushing this one with the press here in Europe who insist that shale is eternally “controversial”.  Let’s recall that the President mentioned shale in very positive terms in the State of the Union address, but the press have forgotten about that one.  The  fact that Obama is now elaborating on his views on shale gas and coming out with even clearer support is significant.  It’s of course doubly significant that he said it in Ohio one of the key must win states with Pennsylvania which equally are at the centre of US shale.  This is not leaving much room for doubt as to where he sits :

CINCINNATI — President Barack Obama said at a campaign event Monday that the nation should “welcome” the natural gas exploration boom and hydraulic fracturing technology as part of the answer to making the United States less dependent on foreign oil.

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CO2 reduction again..

Robert Howarth’s rather unlikely assertions that shale gas is actually dirtier than coal have been leaped on by shale opponents. After all, carbon reduction is the game and if they can prove  shale doesn’t provide any CO2 cuts or even the opposite, this would be a major defeat for shale.

Despite the distance between proof and assertion, in the media universe the first assertions out of the blocks have a long half-life. Just as the Tyndall Centre here in the UK reprinted Howarth’s assertions as gospel, the trick is to not to repeat the far more numerous rebuttals. Howarth is a very aggressive defender of his theory,  but the battle continues on home turf.

Switching from coal to natural gas will cut greenhouse gases 40 percent, even if getting the natural gas requires hydrofracking, a Cornell University professor said in a recently published paper.

Lawrence M. Cathles said switching to natural gas is a smart move because it’s a “natural transition fuel.”

“From a greenhouse point of view, it would be better to replace coal electrical facilities with nuclear plants, wind farms and solar panels, but replacing them with natural gas stations will be faster, cheaper,” and achieve 40 percent of the benefits of doing away with fossil fuels, he said.

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