Bishop Hill Lean over the top
Sep 22, 2012 Energy: gas Geoffrey Lean's latest article has an air of panic about it as it becomes increasingly clear that his battle to prevent the shale gas revolution is being lost. Accusing the Conservatives of insanity, he goes on to launch a barrage of disinformation on the new energy source:
But what about shale gas, which has seen prices plummet in the US? I was one of the first British journalists, back in January 2010, to report on its “game-changing” potential, but I must admit it seems to have been overhyped. The US cost crash arose from a glut of wells coming on stream as the economy flatlined: prices are now increasing and are expected to double within three years.
Gluts of energy are, indisputably, good for consumers. And that prices are rising in the US is, frankly, not an issue. If they double, the price might hit the dizzy heights of five or six dollars per thousand cubic feet, levels at which frackers can get an economic return. This is still half the price in the UK.
Even then, it is widely agreed, shale gas will be more expensive to exploit in Europe, and its contribution will be limited.
This has indeed been argued, although there is much less to the argument than meets the eye. The main barriers to shale exploitation are governmental in nature and can be dealt with by a sufficiently determined administration. Arguments that there are insufficient drilling rigs in the UK - an oft-put reason for the alleged limited impact of shale - are almost preposterously short-sighted when one realises that these rigs are built to be tranportable and can be put on the back of a lorry.
While the Conservatives seem to be moving in the right direction on shale, they are very much dragging their feet. UKIP, however, are racing ahead, issuing a new energy policy that seems like something from an older, better era:
We believe that the market should play a key role in the selection of technologies in this (and other) industries — although we recognise that given the very long investment horizons of major infrastructure development, there may be a case for government guarantees. In this context we criticise the EU for creating serious market distortion by favouring some lowcarbon technologies (wind, solar) over others (e.g. nuclear). There are, however, some clear priorities: gas, nuclear, and coal.
While the Conservatives are trying to replace the free market in energy generation with something resembling the CEGB of the 1970s, UKIP seem quite happy to endorse economic liberalism.
Reader Comments (90)
The BBC, the greens and the renewable industry will go into high gear to denigrate shale gas and UKIP. I agree that the global warming alarmists and renewable industry are in extreme panic mode. That is a clear sign that we are nearing the end of the twin scams.
What's the URL for Leans article?
Regards
Mailman
Here we are, Mailman:
http://www.telegraph.co.uk/earth/energy/gas/9557916/The-Tories-are-clean-out-of-their-mind-to-want-new-gas-plants.html
http://www.telegraph.co.uk/earth/energy/gas/9557916/The-Tories-are-clean-out-of-their-mind-to-want-new-gas-plants.html
Has lying become mandatory in order to be "green"?
No, but the willingness to lie always has been mandatory.
In a related article, Danny Alexander in the Guardian...
As someone who did Production Engineering as part of my degree, using essentially the same principles that started the Industrial Revolution, the use of the term Luddite is applied incorrectly.
Luddites were fighting against the progress of economies of scale. A fight that they could never win. They wanted to keep prices high and products few.
We put a man on the moon. I now have a GBP 100 phone in my pocket the computing power of which would have cost millions to purchase and need a team of expensive people to look after, 30 years ago. All driven off the back of "Luddite fossilised" technology.
Wind and solar technology do not work. If they did work they would be used. This technology itself has not progressed much over the last 30 years.
Forcing old and inefficient technology to detriment of progress, the market and he advancement of human progress.
I have never encountered a "denier" who is against technological progress - shale gas advances that progress.
It is actually proponents of wind and solar who are the Luddites.
From now on I shall refer to 'AGW' as 'ASF', standing for 'Anthropogenic Subsidy Farming'.
Question for Jimmy Wales .
How many internet searches has there been for the Word Shale on Wilkipedia.
And not forgetting Google Trending on Twitter ,Telegraph, Guardian , BBC , Daily Mail, Sun and the Oxford English Dictionary online ?
Shale continues to Decarbonises Fossel Fuel Geofrey Lean and Monbiot wont have much left write about.Maybe a paragraph about Badgers with TB.
They will be down the Job Centre with Yeo and Gummer.
Finding a new resource followed by a glut followed by price recovery is preferable to faceless, nameless bureaucrats in Whitehall thinking they know what the price of gas should be.
Low US gas price has decreased the number of rigs drilling for gas but there has been a more or less coincident rise in the number going after oil. There has also been a movement of rigs from North America to other parts of the world. Basically, market forces are distributing the rigs and the balance of gas/oil.
US gas prices will rise a bit but it is likely (possibly already being seen) that oil prices will fall.
"The BBC, the greens and the renewable industry will go into high gear to denigrate shale gas and UKIP."
Evan Davis (R4) did a piece this morning on UKIP - generally positive, but including a long list of things they were against, with the notable exception of wind farms.
There must, surely, be an internal memo in the Beeb advising reporters which subjects to avoid - will no-one set it free..?
Sorry, but Geoffrey Lean is nuts. He's anti-technocracy in the Lorenzian sense (as in Konrad) and has a weekly go at absolutely anything that might constitute "development".
This comment on Lean's article by "shalegasexpert" was very telling:
But the most egregious argument that Lean makes is that wind is beginning to match the price of gas! Of course, in Lean's world, the cost of backup gas generation is not factored into the cost of wind.
Gas is so cheap in the USA that it has forced production to be shut in and projects to be scaled back. This is good news for Americans because it points to availabilities of cheap gas for a very, very long time.
AGW stands for 'Anthropogenic Grant Wangling'
Poor old private Godfrey. The smell of napalm in the morning ...
Pointman
"there may be a case for government guarantees..."
With all due respect to the UKIP, the best government guarantee is to promise to keep out of the market for at least X years, where X is long enough for a payback of capital outlay, perhaps 10. Even better if such a promise is renewed every year or two. "Keep out of the market" means no subsidies, stable tax rates without special (focused) ones, no new onerous regulations [cf. EPA's new mercury rules in the U.S.].
I am guessing Geoffrey Lean is keen to reduce GHG emissions? If every country on the planet did what the USA were doing (replacing coal with gas) then the global emission issue would go away. Gas Beats Down Carbon Emissions Again: US Emissions Drop Another 6% So Far In 2012 http://bit.ly/S00Gy0
The discovery of shale gas is not just a US story though. Massive amounts are being found all over the globe and this will have an immediate impact of gas as a global commodity. Even the Russians are worried: “Shale Shocked: Gazprom Rethinks Shale As European Gas Prices Sink “ http://bit.ly/PuWyrs
So even if the UK shale bonanza fails to materialise we are entering into an era of very cheap gas for the next 300 years. The EIA predicts that the US will begin exporting gas by 2016 http://bit.ly/wfxBrP . Australia is making a bold move as LNG supplier http://1.usa.gov/SvzQEo a massive $170 billion development bigger than Qatar (the current biggest exporter). Massive quantities of shale gas have been found in Australia that can catapult its LNG business to unprecedented heights. http://bit.ly/U3n8YL Argentina could become a gas exporter soon http://bit.ly/Oskehc it has the world's third-largest shale gas reserves. China’s race for shale gas continues http://bit.ly/SvBi9U the EIA estimates that China has 1,275 trillion cubic feet. There are others with massive reserves – Mexico, South Africa, India ... the list goes on.
Even Israel, who used to reliant on others for their energy, have discovered a massive gas field. The Leviathan field is the world's largest offshore find of the past decade. Israel will begin exporting gas http://reut.rs/NWyRuU into the Med supplying energy hungry Europeans.
This glut of gas will not stop either. There is over a thousand years of cheap gas at our finger tips. In twenty years the technology to access Methane Hydrates is predicted to be ready. The US Energy Department is advancing research on Methane Hydrates – the world’s largest untapped fossil energy resource http://1.usa.gov/PGCWhy .
The UK needs to prepare for all of this. LNG imports already meet 25% UK gas needs via two terminals in Pembroke, one in Kent, one in Essex and one on Teeside. We will need more if we want to be at the centre of gas trading in the future. In future it is unavoidable that all of our energy needs will be met by cheap gas – other energy sources will just not be able to compete. If we do not do this our manufacturing industry will become uncompetitive and be left behind.
Chairman Al
USA will be exporting gas by 2015, British Gas signed a contract over a year ago plus Methane Hydrates technology exists already, the USA and Japan ran a well off Alaska and produced gas for 31 days before plugging it. That was earlier this year.
Ref Mr Lean, some comments on his article from his Telegraph blog ^.^
What 'experts' would that be? All experts are now predicting much lower gas prices in Europe. keep up Mr Lean - this is recent analysis your analysis is at least 5 years old.
As for the analysis on the £150 increase in energy costs - even if this was correct, you cannot use old figures to predict future trends. Market fundamentals are always changing, please keep up. What an idiot.
Prices for hydrocarbons in the exploration and production business have always been highly cyclical. It's a boom and bust industry. High prices stimulate investment which— in turn— results in oversupply and low prices.
Those who forecast hydrocarbon prices (and those who believe forecasts of hydrocarbon prices) are eventually humbled.
Meanwhile, in Westminster fantasy land, Alexander and Davey will be calling at the Lib Dum's conference for electricity to be made 'almost entirely from green sources by 2030', on the back of the belief of 'advisers' from the Committee on Climate Change that it is '..essential for Britain to "de-carbonise" its electricity by 2030 to help tackle climate change'. Lean is an idiot, but a harmless one (evident from reading comments to his articles) - it's the eco-loons in high places that we need to be concerned about.
Diogenes, I beg to differ.
Petrochemicals suffer from cyclic markets but oil and gas production has no such phenomena. It is purely a matter of supply - prices go up and down on the back of availabilities or threats to availabilities (tension/wars). This is why the OPEC cartel has been successful in 'managing' prices for oil - they controlled marginal supply. This cartel has now been broken with changes to more efficient vehicles in western societies, higher blends of biofuels and abundant gas in multiple regions. The 2007 energy security act implemented by George W Bush was designed to do this - you could say that it was the most successful piece of legislation ever enacted by a US president in living memory - it has worked.
It easy to predict where gas prices are going due to the glut of gas supplies that are going to be around for next 300 years. it is also a very versatile product - high energy, clean burning and transportable. Low prices are already seeing truckers converting trucks to burn gas in the USA - the low cost of fuel offsets the extra $70k cost for the truck. Gas To Liquid technology is also becoming economic - so cheap gas will have an impact in the liquid transport market as well as the power market.
Even the Russians, who thought they could control the gas and oil markets into Europe, are having to change their strategy because they know cheap gas is coming. Energy forecasters get it wrong when they try to predict short term impacts. This is different - this is a long term fundamental shift in supplies that will not be impacted by short term impacts. Predicting that gas prices in Europe will be lower is a no-brainer, there is no chance of energy forecasters being wrong on this one.
http://sixtyminutes.ninemsn.com.au/stories/8495029/the-carbon-cowboy
The Gullabal Niave and Good Intentioned Smug people are so easily seperarated from their money.
Watching Click With Spencer Kelly this morning on BBC News24.
They have put up a couple of Solar Powered with Diesel Generators Phone masts in the Amazon Rainforest.
So the local tribes People have got Mobile Phone Coverage and internet access.Ok great.
Then typical worthy BBC PC Harrabinish, Blackish Climate Changish they said they could use their Iphones to trade Carbon Credits.Which got me all annoyed . So i went looking on Google and i found this bloke .
I give you The Carbon Cowboy.
Options;
1 GW nuclear, 4 acres, 24/7/365, reliable, sustainable with re-processing, possible future thorium.
1 GW solar, 5,000 acres, 4/7/365, nothing at night.
1GW wind, 60,000 acres, 6/7/365, nothing when calm/stormy.
1GW coal, 15 acres, 0/7/365, reliable, sustainable but nothing with CCS mandated.
1GW gas, 2 acres, 24/7/365, reliable, sustainable with local/friendly shale.
As a successful whelk stall operator, I choose nuclear and gas. My mate, who organises piss-ups in breweries, agrees.
GEOFFREY LEAN - WHY HE IS STILL THERE AT THE TELEGRAPH - THE FACTS
1.Lean is SHELL OIL's man, not the Telegraph's.
2.Lean is hated within the DT and by the readership, but the money is too good.
3. SHELL UK'S Chairman Graham van't Hoff, is part of the group of Emissions Traders within SHELL.
4. van't Hoff said recently in the DT - "Developing ways to capture & store the CO2 that comes from burning (fossil fuels) is ESSENTIAL. Carbon Capture & Storage (CCS) is currently the only technology available to mitigate emissions from large-scale fossil fuel use".
5 CCS cannot possibly work. SHELL know this.
6. The Emissions Traders within SHELL will pay ANY price to kill the Shale Gas revolution.
7. if we embrace Shale Gas our CO2 emissions will fall.
8. Falling emissions are bad news for Emissions traders .
9. The Emissions Trading Market will be three times the size of the Oil Market.
10. The Emissions Traders within SHELL aim to control the Global Market in emissions.
11. David Hone, SHELL's Senior Climate Change Adviser and Chairman of the International Emissions Trading Association explains exactly how he intends to achieve this on his blog.
ssat
Is your mate willing to stand for parliament?
DaveS
The Committee on Climate Change is now chaired by a man who sees no need to talk about Climate and so the advice to Davey is related to sustainability and the UN plot that spawned it. Not totally sure but did somebody pass a Sustainability Act while I was not looking?
toad
van't Hoff lied. There is another way to mitigate emissions from fossil fuel use. Forgive me if you already knew but MIT are working on a filter made from nano-particles of Gold and Copper which takes CO2 from power plant emissions and turns it into Methane or as we know it; Natural Gas ^.^
If they double, the price might hit the dizzy heights of five or six dollars per thousand cubic feet, levels at which frackers can get an economic return.
Both sides of this issue have been very wrong in their approach. The AGW promoters have attacked shale production falsely by claiming that there are environmental issues that cannot be handled and by overestimating dangers. The trouble for them is that fracking is quite safe and if performed using industry standards poses no danger to the public. The problem for the other side is the unwillingness to look at financial reality. Shale gas is expensive to produce and is not economic except in core areas of the better formations. While some of the core are still undeveloped the production for most has already peaked without generating positive cash flows that are sufficient to cover the shortfalls for production in the marginal areas. When gas prices were high and demand for drill crews and services was still reasonable the CEOs of gas companies were very honest. They pointed out that break-even for most US formations required around $7.50 per Mcf. As the prices collapsed the discussion around costs no longer included the sunk costs and a number of other categories. On the conference calls the optimism was reduced by references to funding gaps and the need for asset sales. It soon became clear to investors who wanted to pay attention that shale operations could not be self financing unless prices rose much higher.
The trouble is that energy that is required to drill and operate wells is sometimes higher than the energy that is contained in the gas that is being produced. That makes shale a very tough business that cannot be a foundation for any energy policy. In the case of the UK costs would be even higher because there are not many capable drill crews that can do the jobs that are required and no infrastructure in place to handle waste water treatment and containment, not enough access roads, pipelines, etc. Sadly, the supply chain issues are too complex at this time to make shale gas viable in any but the core locations in the best formations. And there isn't enough gas in those areas to provide much of the energy needed.
And objective observer would be looking at the EURs, cash flow statements, and the handling of debt loads on the balance sheets. If debt is being managed by asset sales you are looking at a greater fool situation as early players who have failed to make money try to stay alive for as long as possible by dumping their holdings on newcomers looking to prop up shares or for promotional opportunities. If the write-downs that we have seen with a few of the players continue the bubble may be getting ready to pop. Frankly, a much better solution is coal and nuclear but both the greens and their critics seemed to have missed the ball by concentrating on shale.
Empirical data show that the freezing of the Rhine is linked to low solar activity: http://notrickszone.com/2012/09/22/solar-influence-on-winter-severity-in-central-europe-dispels-junk-claim-a-warm-arctic-causes-cold-winters/
'Freezing of the Rhine occurred from 1780-1963 regularly during sunspot minima.
Coldest winter continue to occur during sunspot minima even today.'
dung
'van't Hoff lied'
Would you be tempted to lie if there was $176,000,000,000 at stake ?
or even $176,000 ?
One might be tempted to try to convince oneself that black was white, if you could live with your conscience.
Vangel
Your description of the problems for shale are misleading in the extreme however I agree about coal being the best option. Nuclear should be ignored until we can use Thorium reactors.
The biggest problem in the USA is that the market has not yet adjusted to the levels of production. It is not possible to switch from Coal to Gas overnight, nor is it possible to create massive storage facilities for gas overnight and most importantly it is not possible for a previously gas importing country to instantly start exporting.
All of the Liquid Natural Gas facilities in the USA were import facilities and these are very expensive highly complex installations. The USA has been working to convert these installations to export terminals but is not due to have one up and running until 2015.
Until the USA has adjusted there will be more gas available than they can use, store or export but all of those options are changing fast. Long term shale gas is a rock solid industry.
toad
This will sound false I know but; no I would not be tempted to lie for 176 trillion dollars ^.^
I have never aspired to being rich simply to being financially independent which fortunately I am. I would not sell my beliefs on right and wrong for any amount of cash.
http://www.carbontrust.com/news/2012/05/the-awkward-realistic-choices-on-low-carbon-electricity
THE MAN WHO STARTED IT ALL - JAMES SMITH
Yes he's still around and every year David Cameron gives him £44million of your money to promote 'Offshore Wind' .
TRUE !
James Smith is now Chairman of the Carbon Trust, a totally pointless Quango that does little else but promote Wind Turbines out at sea, along with any other 'eco-friendly' cause that Smith chooses.
James Smith WAS Chairman of SHELL.
He got SHELL to fund the London Array Offshore Wind Farm
and also to 'invest' in Emissions Trading.
No-one has explained why he was 'outed' from SHELL but they soon abandoned all 'renewables' except 'bio-fuels'
Smith's 'work' within SHELL is carried on by his protege David Hone.
There is an excellent video of Smith & Hone 'working on' poor old James Lovelock just prior to Copenhagen. (before he 'recanted' of course)
http://blogs.shell.com/climatechange/2009/07/meeting-james-lovelock/
SHELL'S EMISSIONS TRADERS 'GET TO MEET' JAMES LOVELOCK
David Hone & James Smith meet the old man, prior to Copenhagen
If you Lean too far over the top, you'll fall on your face. Geoffrey, pick yourself up!
dung
You make my point exactly. Neither would I.
I don't need the money. I wouldn't if I did.
But as we've seen in these columns there are plenty of men, even some men chairing committees, who have no such scruples.
unlikely?
So is Vangel a shill for the greenies, or the voice of reason in a sea of gas-hype? We need a major skeptic player to look into the situation and produce a rational analysis. If there's already an unbiased site we can go to to figure things out, could someone point it out? This reminds me of 20 years ago or so when I decided I needed to go figure out if the Global Warming wailing was true or false. I was inclined to think it was false, but was willing to be convinced either way. Unfortunately, all the sites I went to were just propaganda for the CAGW crowd. It's still the case that an intelligent layman with math training can't find a CAGWland site which makes a clear, unbiased technical argument.
BTW, in case there are some warmers out there who think there is such a site, please realize that to be unbiased, a site must present the best arguments of the skeptics in addition to the reasons CAGW considers them wrong. If you want to be unbiased, you need to speak to the best arguments of your opponent. To fail to do this is politics, not science. This simple fact is extremely important since it means that one can judge an argument you can't follow in detail by seeing whether the arguer does a good job of presenting the other side's arguments. This is what made me certain that the skeptics have the correct position. E.g. I can follow Steve McIntyre's arguments sufficiently well to know that, for example, Real Climate does not present his position even approximately. Therefore they are wrong automatically. Note: Theoretically you can nitpick at my test, but practically speaking it works every time and the failure of the CAGW crowd to even make an attempt to be even-handed speaks encyclopedias.
Dave Dardinger
Welcome sir and no we do not know of any such site but we do get visits from some high profile warmists like Richard Betts from the Met Office.
Most posters on this site would argue that there is no empirical evidence to support the CAGW theory although our host (his grace) remains open to being pursuaded hehe.
I am not sure what Vangel's loyalties are but I do think he is wrong about shale.
Mr Dardinger
You appear to have "previous" hehe (in the UK this is a criminal record)
From Real Climate:
Well, this is an entirely correct statement, from which Lean goes on to draw goofy conclusions. If that's disinformation, what should we call the IoD's artful decision not to dwell on this downer ending to the $2/mcf gas miracle at all?
$6 is two-thirds the current ($8-)$9 cost of UK gas (source: IoD). Less of a quibble is that $6 may not be the upper limit for US gas prices, or below the break-even point for large-scale shale gas extraction. (Apparently the current NYMEX futures put $7 Henry Hub gas well within the 95% upper confidence interval for the end of 2013. My uninformed gut feeling is that we'd be unlikely to reach $7 that quickly, though that reflects my lack of faith in the general economy rather than faith in the economics of shale.)
None of which is to deny that domestic shale gas production which was viable at, say, $7 would probably be a very good thing for the UK. The other concern, though, is that the shale-gas hangover isn't just about prices, but also (or really, in the first place) about what production volumes are long-term commercial at what prices.
Gluts of energy directly benefit consumers in the same way that public subsidies of energy do. If public subsidies of energy (like the petrol and nat-gas price subsidies in many developing countries) were a good idea for the economy as a whole, then perhaps the destruction of wealth through bad energy investments would be too. Since it's generally agreed that such subsidies aren't a good idea... Of course, to the extent that UK shale gas overinvestment would be funded by foreign investors, the UK might get the benefits without the costs. On the other hand, to the extent that investors have now learned not to put their foot back in the beartrap of uncommercial shale investments then there will be no repeat of the US supply glut and price plunge in the UK.
@Dung
Additional sources of demand may help to make the US shale investments commercially viable, but they're unlikely to contain any rise in the cost of production - quite the opposite. (Also, as far as I can see, if one believes that the US is going to be profitably selling nat-gas on export markets for Henry Hub prices plus $4 or $5 per thousand cubic foot, then one is more or less giving up on the idea that there are copious amounts of cheap shale gas distributed all over the world.)
Anonym
I do not think Lean's statement (which you quote at the beginning of your post) is correct at all which is what I tried to say in my previous post.
The glut was caused by sudden huge production of gas in an economy unable to adapt overnight and unable to export their bonanza until expensive export LNG terminals could be created, these are all short/medium term problems. It had nothing to do with a flatlining economy.
I agree that we do not know where the US price of gas will settle and we will not know that until the economy has fully adapted.
The post by his grace (about the "Highway" technology) tends to suggest that production costs will fall as technology improves, this is a young industry and there will be many improvements if history is any guide ^.^
In terms of exporting LNG the contract British Gas signed was at Henry Hub plus 2% plus $2 and that is set in stone.
I meant to say "any rise in the market price for US gas". Either is true though.
Henry Hub price at yesterday's close was $2.76 (per MMBTU of LNG or Million British Thermal Units which for some reason is the standard measure) so BG would today be paying $4.82 which would be a pretty hot price ^.^ You would need to add to that the cost of transport and the cost of degassification at the destination.
Dung,
Re: your comment "MIT are working on a filter made from nano-particles of Gold and Copper which takes CO2 from power plant emissions and turns it into Methane or as we know it; Natural Gas."
That can't work without putting energy IN. If there was a nuclear power plant next door then it becomes feasible, but then why would you have the conventional combustion plant at all?
The MIT press release I read was confused and confusing [press releases of science&technology frequently are]. It could make sense in a context of cheaper energy storage for irregular wind/solar power supplies, or converting CO2 into chemical feedstock. But there are other issues with that.
From @ Chairman Al - 1:29 PM
"Lean: Official figures show that gas has caused two thirds of the recent £150 average increase "
Mr Lean is well-versed in the "art" of Lies, damn lies & statistics.
If a 100% reliable, 100% available fuel, causes only 2/3 the increase that unpredictable, unreliable, least-available-when-most-wanted sources do, then it proves gas is supreme value-for-money.
@ 7:36pm My comment should read
"If a 100% reliable, 100% available fuel, causes only twice the increase that unpredictable, unreliable, least-available-when-most-wanted sources do, then it proves gas is supreme value-for-money."