At least someone is realistic in Europe on shale gas

I’ve never been one to beat up on Gazprom, perhaps from my traveler days back in the USSR in the 1970’s, but I’ve also haven’t made the  common mistake most make to confuse Gazprom with Russia, however close they often seem. I’ve also met enough Russian diplomats and Energy Ministry people, as well as Gazprom employees, to know the Russian Energy Ministry plays a key role. The big news this week has been thought to be Gazprom’s abandonment of the Shtokmann LNG project, something where Jonathan Stern of OIES makes great sense at the FT:

 “This is positive,” says Jonathan Stern, director of gas research at the Oxford Institute of Energy Studies. “Finally, someone has blown the whistle and said this isn’t going to work and we don’t want to spend any more management time or money on this. I wish they’d do this more often.”

The question is that did Gazprom wake up to reality or did they have it banged into them? At the Moscow Times the Russian Energy Minister sounds as if they are reflecting not only the growing influence of new gas players in Russia but also realism we can only dream of from UK Energy Minister Charles Hendry:

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The long shelf life of the most expensive energy ideas

Yesterday in another reflection of realism entering gas markets Gazprom cancelled the Shtokman LNG project which was originally meant to supply LNG to North America, as insane a prospect as that now seems. Like many things in energy, the bigger they are, the longer they just pootle along.  If you’re going to have a multi-billion project, a few million on keeping the lights on at the office and/or hiring some PhD off the Chatham House taxi rank to occasionally spout rubbish long after the economics have sent the project south is neither here nor there. LNG projects due to their size are classic examples, but in the UK we’ve had the truly insane example of the Severn Barrage for several decades and now it has new life:

Plans for a £30bn barrage across the Severn estuary have been given a boost after Prime Minister David Cameron instructed officials to look into them.

It follows a meeting with Peter Hain, who left his post as shadow Welsh secretary to back the project.

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Shale Oil in Poland and Europe

If Europe has dithered about shale gas, it’s fair to say that shale oil hasn’t even been on the radar of almost anyone this side. Shale oil has been confused with oil shales for too long.  Essentially shale oil mean the accessing of oil trapped in shale rocks in a broadly similar way to shale gas, and using the same techniques of fracking and horizontal drilling. Oil shale is essential a precursor kerogen that can produce oil in small doses. If we wait  another few tens of millions of years, it will be worth extracting, but for now it’s a geologic footnote existing in places like Estonia, Jordan and Wyoming.

Even in the US, as the Artists against Fracking in New York City obsess about shale gas, the true energy story in the US is the oil story. First ,the Bakken Shale in North Dakota meant the state went from nowhere to out producing OPEC Member Ecuador. The Bakken was a really big deal late last year when the production reached 500,000 barrels a day. The play is the main reason for the plunge between WTI and Brent Crude and there is so much coming out that pipelines have been long overwhelmed:

Statoil ASA said it is leasing more than 1,000 railroad cars to carry crude oil from fields in North Dakota to refiners across North America, in a bid to overcome pipeline bottlenecks that plague the booming oil-producing region.

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Growth and shale gas

This time of year marks the start of what is called ‘La rentrée’  in France something akin to a second New Year, a re-entry into a new season of politics, art, education – and business.Things move so fast in shale that we need two New Years a year just to keep up. Let’s look at the first post I did in January this year in what was one of the most widely read pieces I’ve done.  

2012 will be the year when the acceleration in US economic growth becomes the global growth story]that came out of left field -just as shale itself appeared to most to come out of nowhere. Shale will be the story too big to ignore. The elephant in the North American room is becoming increasingly obvious, but here in Europe too many conventional economic experts have made the key mistake of listening to energy experts who constructed a peak oil scenario of scarce and expensive energy at at time when a glut of cheap (and clean!) energy is swamping North America. Those experts dismiss the impact of shale. They tell us that shale won’t work for any number of self-serving reasons constructed to serve their narrow interest: Europe is too crowded, shale is too dirty, the geology isn’t right and it destroys renewables are only some of those rationales.

And the result as far as the Uniited States shows, becoming glaringly obvious:

The US economy grew more than first estimated in the second quarter, according to official figures.

The US grew at an annualised pace of 1.7% from April to June, more than the 1.5% previously estimated, the Commerce Department said.

Evidently the US is growing as even Chinese demand is falling and the only good news in the US is shale energy. Imagine where the US and China would be if Europe could get its act together. But :

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Gazprom on shale gas reality

Given the influence of Gazprom on UK energy policy via Ofgem playing bottom to Centrica who in turn gets their orders directly from the company who supports their share price in Moscow Centre, we can predict a gradual change of tune in UK gas policy reflecting recent reality checks in Moscow. Only when the organ grinder changes the sheet music will the monkeys of Millbank change step.

Conventional UK/EU energy experts, as well as NGO’s such as Friends of the Earth, Greenpeace and WWF have spent the last few years going through similar psychological phases as Gazprom/Russia: Ignorance, Denial, Anger and finally, Acceptance.  

“Gazprom had undervalued the importance of shale gas, but is starting to look at it seriously,” Deputy Economy Minister Andrei Klepach said Tuesday as he presented a weaker outlook for the country in 2012 and beyond.

Gazprom’s top managers have for years said that shale gas production would never threaten demand for Russian gas.

Gazprom has recently started to change its view and set up a committee to look into whether to develop shale-gas projects.

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Not so controversial shale gas

The biggest controversy over shale gas I see these days is why do people insist it’s controversial when evidence shows that it isn’t.

Recently, Paul Stevens of Chatham House showing how important it is for conventional energy experts to be consistent instead of competent, alleged in his second shale gas report:

Growing opposition to shale gas is driven by concerns over the environmental impact of hydraulic fracturing and the impact on greenhouse gas emissions.

As people study the environmental impact and find the reality not as disturbing as the hype,  the only controversy I can find is why the media and those with other agendas insist a controversy exists. Remember the University of Nottingham opinion poll on fracking which found that most people who had even heard of shale gas  supported it. Considering that those who had heard about it must have done so  via overwhelmingly negative or dismissive UK media reports, one would expect a far higher rate of opposition.  

The reality via the Nottingham study is that there is a substantially higher level of support in the UK than in US opinion polls. This from New York State essentially duplicates similar polls in Pennsylvania and Ohio:

A Quinnipiac University poll released this week found 44 percent of New York voters oppose drilling for natural gas in the resource-rich Marcellus Shale region, compared to 43 percent in favor — an even split given the slight margin of error.

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The new shale atmosphere in Dimock

To shale antis, Dimock Pennsylvania has been the shale Chernobyl. Thanks to Gasland and a long running lawsuit, antis throughout the planet are convinced that the town suffered some kind of tragedy and even mainstream media like the BBC see the town as symptomatic of all that is evil, and unavoidable, about shale gas.

The more prosaic reality is well described in Seamus McGraw’s excellent (and neutral)  ‘The End of Country’ but the other reality is that the alleged pollution which had the starring role in Gasland was both short lived and localised. 

McGraw’s book will be the historical record on Dimock, but the curtain is finally coming down on this saga:

More than three years after residents in this Susquehanna County town complained that Marcellus Shale natural gas development polluted their private water wells, the lawsuits are getting settled, the activists are going away, and gas drilling is set to resume.

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Not in Vermont’s back yard

With the impending lifting or revisiting of shale gas bans in New York State, France and South Africa,  anti sites will be hard pressed to highlight examples of places that have actually banned shale:

Vermont will be the first state to outlaw a controversial oil and gas drilling method known as fracking when Governor Peter Shumlin signs a bill banning the practice, a largely symbolic move given the state’s apparent lack of energy reserves.

 Add in that the ban is as useful as Lancashire forbidding olive oil production, and prescribing Vermont’s approach to anyone else isn’t really convincing. But Vermont, apart from getting mighty cold, is like many places in New England far away from gas pipelines, which means rural poverty is aggravated by the oil heating costs. (Ironically the big program to combat fuel poverty in New England is to supply subsidised oil from shale hater Venezuela).

Many shale opponents don’t understand that natural gas makes up roughly equal parts generation, home heating and industrial use.  Which makes this proposal from Vermont sound sensible:

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August Shale Gas developments

The second half of August ended up with many key trends developing. I use Twitter to highlight stories that I sometime go back to here in more detail.  Alan Riley’s New York Times piece is going to end up being very influential; solving China’s climate crisis goes a long way to making Europe’s carbon crisis much less important. Much more on this soon.

Australia’s first shale production is a big story too, and it’s already changing the economics of LNG. This report from Rice University is going to be another of those quietly influential reports which blow conventional thinking out of the water.

With even the Dimock story finally drawing to a close, and taking the realisation that the United States has not had any mass poisonings or earthquakes, the strongest objection recently has been that the methane footprint of natural gas production and transport outdoes any good it does reducing carbon emissions during electricity generation. Bang goes that theory from two recent reports: the second was from the US National EnergyTechnology Laboratory 

A study from the U.S. Department of Energy (DOE) said that emissions from natural gas would mostly come from fuel combustion and not from resource extraction, such as hydraulic fracturing and horizontal drilling.

The current U.S. fleet of baseload natural gas power plants running on the domestic profile of natural gas has lifecycle GHG emissions of 514 kilograms of CO2 equivalent per megawatt-hour. If switched to an unconventional mix of natural gas, the lifecycle emissions of baseload power increase to 520 kilograms of CO2 equivalent per megawatt-hour, an increase of only 1 percent

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