Global Shale Gas: What Now What Next. This year’s model coming soon

Let’s imagine it’s February 2010

The conventional wisdom saw this:

On 10 February 2010 at the Royal Society, six UK companies – Arup, Foster + Partners, Scottish and Southern Energy, Solarcentury, Stagecoach Group and Virgin – joined together to launch the second report of the UK Industry Task-Force on Peak Oil and Energy Security (ITPOES).

The report, titled “The Oil Crunch – a wake-up call for the UK economy”, finds that oil shortages, insecurity of supply and price volatility will destabilise economic, political and social activity within five years.

The Task-Force warns that the UK must not be caught out by the oil crunch in the same way it was with the credit crunch and states that policies to address Peak Oil must be a priority for the new government formed after the 2010 election.

Well that worked out well. Surely all those brand names, reputations and prestige would ensure myriad investors that the future was something different than how it actually turned out.  Virgin and Arup changed their mind fairly soon, but I remember meeting someone from Stagecoach in 2012 who was congratulating themselves on getting an electricity price fixed until 2020.  But hey, they don’t have to pay for it. Only their passengers on my local SouthWest Train need pay for that.  It’s ironic given their chronic cancellations, that their passengers are paying the bill and getting taken for another ride.

Meanwhile, No Hot Air published an alternative view in November 2010. For those who seek a crystal ball, not a rearview mirror, I’m preparing a report this spring on the next ten years of shale gas and oil.  There is always a danger in relying on past expertise as indicator of future performance, but my track record from the executive summary stands up to the test of time fairly well.

The Imminent Global Impact of Abundant Natural Gas

  1. Shale Gas is a generic term referring to the technology of a new form of natural gas extraction pioneered only recently in the USA

2. Shale Gas has led to a stunning increase in actual production of natural gas and assessment of future reserves.

3. The sudden emergence of shale gas is mirrored by a future permanence. In any business, suddenly out of date strategies based on energy as being in short supply,expensive or carbon intense need to be corrected to mirror today’s reality.

4.  Production started in the geologic formation called the Barnett Shale under Fort Worth,Texas. Within the first four years of production, the single area produced 6% of entire US production.

5. In 2009, respected US geologists of the Potential Gas Committee increased recoverable reserve estimates compared to 2007 by over 35%.

6. The shale process was originally thought uncompetitive with conventional gas production.It is now considered cheaper.

7. The reality behind shale gas is that actual environmental issues tend to be over-stated.

8. North American success is being replicated worldwide. There are political constraints, but not geologic, environmental or economic ones.

9. The Barnett Shale is now considered the smallest of the eight major shales in NorthAmerica. The Marcellus Shale centered in Pennsylvania, saw reserves estimate go from effectively zero in 2006 to being the second largest gas field in the world by 2009. The impact of the Marcellus, due to both size and location near major cities will be seen assimilar to the first oil discoveries in Texas, Iraq and Iran just over a hundred years ago.

10. Shale gas will not only make fears of rising energy insecurity irrelevant, it will make holding those fears one of the biggest risks enterprises can hold today.

11. Discoveries in the US and Canada are large enough that both countries are set to export gas to both Asia and Europe via Liquified Natural Gas tankers from 2014. Combined with existing LNG oversupply, and via the role of gas in generation, gas and power prices will be stable and lower worldwide.

12. Shale gas extraction has both an immediate impact on prices in the UK and Europe and will continue to be a significant trend in Europe, India and especially China.

13. Shale gas will be found in Europe in significant enough quantity to have a permanent impact on energy prices within five to seven years.

The subject of shale has already engendered some myths instead of realities addressed in this report. The report details the reality of environmental impact of shale on water resources and the local environment. We point out that many environmental organizations support shale gas an important, immediate and most of all cheap way of providing a bridge fuel that complements renewables, not competes with them.

15. Exaggerated and unrealistic fears over energy insecurity are the greatest energy risk companies face. Strategies based on rising energy costs and/or fear of shortages or blackouts are outdated, expensive and dangerous.

16. Energy strategies need to be updated to reflect the fast moving, paradigm shifts that shale gas is causing.

17. Shale gas is a true inflection point. Beyond it, everything changes, and for most people,for far the better. Before it, one should consider how many energy experts completely failed to predict shale’s appearance or impact. True experts understand this and are intelligent and astute enough to realize what need to change. Others are unaware, or worse, hostile to the rise of shale due to the impact it will have on revenue streams based on suddenly obsolete theory.

 

I made three errors

a) I underestimated the bounty of US natural gas. It’s produced far, far more than even the most optimistic predictions I made at the time.

b) I underestimated the impact of transferring shale techniques to oil, although in defense, very few realised how that was bubbling under even back then. Think of how much trouble I could have saved OPEC

c) I was too optimistic in the time frame for European shale gas. Although today I would say 7 to 10 years.

Compare and contrast the above and get in touch for this year’s version. No one would want to be caught on the wrong side of history again.

Here is the complete 2010 report, it would have set you back $3000 at the time.  Get in touch for a pre-publication discount on this year’s $4000 price.

GlobalshaleNovemberRM

These were our core values then:

Market intelligence: we study all energy markets everywhere. We learn lessons on a global scale to provide local solutions.

Unconventional Wisdom: This not only refers to unconventional gas, but to our belief that the old way isn’t working and a definition of insanity is to keep doing the same thing expecting different outcomes.

Positively Disruptive: We have ideas that turn conventional wisdom upside down, but always positively. We think it’s more important to be right than consistent.

Rationally Optimistic: We think society could be on the verge of something wonderful, in any number of fields apart from our expertise in energy

They remain so today.

 

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