Good news. Not that “experts” believe it

One objection I hear all the time from the conventional energy experts is that cheap energy is bad because people will use more of it. I also get surprised at the high regard the energy experts still hold for the Jevons’s Paradox

In economics, the Jevons paradox (sometimes Jevons effect) is the proposition that technological progress that increases the efficiency with which a resource is used tends to increase (rather than decrease) the rate of consumption of that resource.[1] In 1865, the English economist William Stanley Jevons observed that technological improvements that increased the efficiency of coal use led to increased consumption of coal in a wide range of industries. He argued that, contrary to intuition, technological improvements could not be relied upon to reduce fuel consumption.[2]

Under this theory, if my gas bill goes down, I move from heating the room at 21C and go to 22, 23, 24 etc. If natural gas got really cheap, I would be lying naked in a sauna with the windows open. At the same time,  energy efficient light bulbs won’t do anything for lowering carbon either. Instead of replacing a 60 reading  lamp with a 4 watt LED, I’ll  squander energy by installing 15 lights instead of one.  

Efficiency is incredibly good news. And despite those who cling to an outdated theory that pre-dated Edison and Tesla by a quarter century, I can see that energy efficiency is not only good for consumers and good for the planet, but it works:

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If Japan can pay spot prices, so can we

The Confederation of British Industry is meant to represent all their members but it appears that Centrica is more equal than others. They certainly repeat the old gas prices are always going up poison. Perhaps they do this simply out of habit, but if the CBI can’t be bothered to study energy more than once every couple of years what hope is there for anyone else:

The CBI has distanced itself from growing calls for a “dash for gas”, arguing that while the UK will need to increase gas power capacity in the coming years, large-scale deployment of new gas plants would jeopardise carbon targets.

Too much gas would bust our carbon budgets. But even if you forgot about carbon momentarily, look at European gas price projections. They all disagree on the number, but they all agree on the direction – up. European shale will help, but not on a US scale. Imports from the US will need to factor in liquefaction and transportation costs, and demand from the BRICs is set to increase

I’d love to see more than one projection from this year that says that, but surely the point is the CBI should be up to date. Simply put, prices in Europe are higher than in the US entirely due to the oil gas link. As pointed out recently here we have the issue of Centrica buying Gazprom gas at NBP prices, Qatar losing the case in the Arbitration Court on the oil link in LNG contracts and finally the EU Competition Commission suing Gazprom over the link. I’m sure he doesn’t read No Hot Air, but one would hope that the leader of the CBI would flick through The Economist from time to time.

On September 4th the commission launched an antitrust probe based on three charges: preventing gas trading across national borders; hindering diversification of supply; and unfairly linking gas and oil prices.

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How much gas do you want?

The best reason to attend conferences such as the Shale Gas Environmental Summit on Tuesday or the following days at the UK Shale Summit are often for what you learn on the sidelines, which generally remains confidential. Some things that didn’t:

First from Francis Egan, new CEO of Cuadrilla: It’s not how much gas do we have, but how much do you want? From Huw Clarke Geologist of Cuadrilla showing a video of a core spuming gas. “The sound you hear is of dollars reaching the surface”.  One could say to take Cuadrilla’s words with caution.  But when the DECC Chief Geo scientist says “I don’t want to take away (from the upcoming recoverable reserve estimate), but the numbers will be very impressive” as she shows slides of the Bowland Shale extending far beyond the Cuadrilla license it’s clear that the resource deniers like Greenpeace and Centrica are going to look ridiculous sometime in the near future.  

The shale deniers, in government,  NGO’s,  or the green business lobby are sounding increasingly separated from both policy and reality in their self-serving predictions of UK shale as non game changer. They  should really stop digging their hole any deeper. I have absolutely no doubt that UK shale drilling will go ahead. When? I don’t want to give you that .This may happen with a release of reserve estimates to provide a rationale. How much?  Enough to settle the argument. If pressed I would add that I have a consistent history at No Hot Air of saying things that sound hugely improbable at the time but get proven ultimately to be mistaken in their caution. That trend will continue. The decision will come about when the stars align to an intersection of politics, geology and economics. Prior to the Winter Solstice?

Meanwhile a FT story on Wednesday was subject of much derision at the conference.

Continue reading How much gas do you want?

We are prepared to adjust to revolutionary thoughts

No, the title isn’t lifted from a Red Guard self-criticism session, it’s a quote from XOM!

TOKYO, Sept 21 (Reuters) – Asia’s energy-hungry nations may be finally making headway in their push to scrap oil-linked natural gas prices as the high cost of the fuel threatens economic growth, especially in Japan, the world’s top importer of liquefied natural gas.

Removing the link between gas prices and oil and moving to the so-called hub pricing would drastically cut the cost of importing natural gas, but producer countries like Qatar have long opposed such moves.

LNG is expensive in Asia at about five times the cost of natural gas in the United States where a shale oil and gas boom has driven down prices.

We are prepared to adjust to revolutionary thoughts. I do think we are hearing this message,” Thomas R. Walters, vice-president of Exxon Mobil Corp and head of its gas and power marketing arm, told a conference of LNG producers and consumers this week in Tokyo.

Wow! Did he really say that? Yes he did, and the obvious question for people as disparate as WWF, Gazprom, Greenpeace, Centrica, DECC and Ofgem is: What about you guys? When are we going to hear people facing up to facts,instead of same old tired excuses:

And we’re competing with fast-growing economies which are hungry for gas. Demand in the Middle East is rising steeply; the IEA think it will rise 20% in the next five years, outstripping supply. China alone is expected to double its demand by 2017. No wonder the consensus is that gas prices will either remain high, or go higher.

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British Gas says nyet to UK shale, da to Russian imports

Here’s an interesting bad news/good news story about a deal between two companies that have consistently played Dumb and Dumberer on shale gas,  Gazprom and Centrica.

The bad news is that when these two crooks work together, consumers generally pay the price. The good news is that it could be a lower price.

The background is how liquidity already present in world gas markets as a result of the US no longer needing LNG thanks to shale, is causing the oil gas price link to break. Gazprom has been playing hot and  cold on the trend. Until recently they were pushing a relentlessly ostrich response, saying shale would never work, it was bad for the environment, Europe was too crowded, blah, blah, blah. At the same time, despite aggressively talking the talk on how important the oil link would forever be to supply security, they sheepishly slithered into reducing price or take and pay adjustments with several European gas customers who can now buy LNG cheaper.

Meanwhile Centrica is spinning and don’t know what to do. They have a lot financially vested in a high gas price scenario which provides rationales for products which they call providing the the security of a fixed price, or what I call overpaying to solve a non-existent issue. 

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How to save the earth in two easy steps

This from The Atlantic is worth reading in full, as it fleshes out a bit of my recent thinking over how shale gas can not only slow down climate change but actually start to reverse it. Here are some highlights:

You may not believe me, but I have news about global warming: Good news, and better news.

Here is the good news. US carbon emissions are decreasing rapidly. We’re down over 10% from our emissions peak in 2007. Furthermore, the drop isn’t just a function of the Great Recession. Since 2010 our economy has been growing, but emissions have kept on falling. The reason? Natural gas. With the advent of “fracking” technology, the price of gas has plummeted far below that of coal, and as a result, essentially no new coal plants are being built. Although gas does release carbon, it only releases about half as much as coal for the same amount of electricity. This is why — despite our failure to join the Kyoto Protocol or impose legal restrictions on CO2 — the United States is now outpacing the rest of the developed world in reducing our contribution to global warming.

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The long half life of outdated shale reports

The Institute of Mechanical Engineers report  on shale published yesterday includes this rather sweeping statement:

Analysts currently suggest UK resources are unlikely to lead to national gas price reductions similar to those experienced in the USA[13].
.In  the UK, and Europe more widely, the market structure and dynamics are different and the costs of exploitation are very uncertain
as there has been no production outside the USA to benchmark against[14]
. European geology appears to be less amenable, and the environmental requirements across the EU
are potentially tighter. Consequently, future exploitation of the UK resource is anticipated to have only a small impact on gas prices, but it
could make a positive strategic contribution to energy security by providing less dependency on major overseas sources[15]


If this sounds like deja-vu all over again, then it is.  Here are the sources

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The UK (EU) is too crowded for shale gas myth

One thing the industry in Europe needs to underline is the actual visual impact of shale gas. We can complain about nimbyism and how difficult it is to build absolutely anything in some places, but the concern is legitimate. We can see how from a debate in Westminster recently reported via the FT where two local MPs noted:

Eric Ollerenshaw MP; Fracking also has an impact on the scenery. If, in addition to the pylons and wind turbines, storage wells are to be built all over that part of Lancashire, the natural scenery will be destroyed. I am also concerned about the new substations and pylons needed for the transportation of the gas….

 Mark Menzies MP:  “Many people in Fylde are concerned about fracking. I call on the Minister to recognise that what I am pushing for is tight, robust regulation that is fit for purpose. We also have to take into account population densities, because as my hon. Friend mentioned, our area is not like Wyoming or South Dakota. Lancashire is a densely populated place, which must be a major factor.”

I’ve mentioned landscape impact right from start four years ago, because it’s such a key issue. I’ve mentioned the Europe is too crowded myth over 40 times over the years.  Yet, its another of those ones with an incredible half life.  OIES mentioned it first,  Pøyry mentioned it second and every shale denier mentions it constantly. Wells in the original US shale in the Barnett  Shale in Fort Worth rarely had horizontal fracs of more than a 1,000 feet. Schlumberger estimates that if the Barnett were drilled today, lateral lengths of several miles would mean that only 15% of existing welll pads would be necessary. It’s also worth pointing out that that the Fort Worth is far more crowded than South Dakota, Wyoming, or more to the point Fylde. The not so wide open spaces of Tarrant Couny have a population density of 809 per sqKm whereas the allegedly chock a block Fylde is positively empty at 460 per sqKm. Similarly, Lebork County in Northwest Poland’s shale epicenter has a density of  230. The Oise department in the Paris Basin oil shale’s population density is a mere 140.  But the deniers of all stripes never fail to mention the Europe is too crowded angle.

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