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« Mr Opportunity - Josh 198 | Main | Climate tummy tickling »
Wednesday
Jan302013

Mistress of understatement

Prof Catherine Mitchell, who is professor of energy policy at Exeter, has written a critique of Dieter Helm's book (which I must get hold of soon).

I enjoyed the wonderful understatement on shale gas:

Helm’s final piece of the jigsaw, which he sees as the outcome of his solutions, is for gas to displace coal and to be the short to medium term transitional fuel until these ‘future’, including renewable energy, technologies kick in. This requires abundant global gas and although we know the recent shale gas finds have increased the global gas resource we still do not know what either its environmental or economic costs will be, particularly if large swathes of the globe move to gas. This policy therefore risks security and (increasing) price problems; including greater numbers of fuel poverty.

I don't think the expression "increased the global gas resource" quite does justice to the shale gas revolution of recent years.

As to not knowing the economic costs, that seems a bit of a stretch. The consensus is the USA seems to be that shale gas extraction will be economic at $6/mmBTU, a figure that will no doubt fall as the technology develops. In the UK, where shale gas seems to be in much thicker deposits, we might hope that extraction will be cheaper still.

The environmental costs again are very much a known quantity - fracking is of course a venerable technology and there can be little doubt that it can be done with minimal impact on the environment. Environmental risks seem to be very small. In fact it's hard to imagine a more benign form of energy.

I worry when university people speak about shale gas extraction as being an environmental concern because it suggests that they are publicly funded campaigners rather than objective researchers.

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Reader Comments (83)

a figure that will no doubt fall as the technology develops. In the UK, where shale gas seems to be in much thicker deposits, we might hope that extraction will be cheaper still.

Depends on the amount of Govt regulation applied, this will be huge as a backdoor method of stamping it out if the Libs,NuLibor are involved.

Jan 30, 2013 at 11:08 AM | Registered CommenterBreath of Fresh Air

Another person who mistakes what they emotionally want to be true, with the objective reality.

All the degrees in the world won't get you past that problem -- in fact, they make it worse because you have the intelligence and education to make your wishes seem plausible.

Jan 30, 2013 at 11:23 AM | Unregistered CommenterRick Bradford

How the heck can finding a new supply of fuel in your own back yard "....risks security and (increasing) price problems; including greater numbers of fuel poverty."?

I suspect a professor has had a Logic-ByPass.

Jan 30, 2013 at 11:24 AM | Unregistered CommenterJoe Public

I've crossed verbal swords with this academic and some of her Exeter compatriots (over 4 years ago in the Western Morning News for starters). She is a history graduate in the department of geography where she is Professor of Energy Policy. The whole department is full of greens who haven't a clue about the real world of energy. And of course, she is a lead author of AR5 WG3. Just look at http://geography.exeter.ac.uk/staff/index.php?web_id=Catherine_Mitchell

Jan 30, 2013 at 11:35 AM | Registered CommenterPhillip Bratby

Also check out Bridget Woodman with whom I've also crossed swords:
http://geography.exeter.ac.uk/staff/index.php?web_id=Bridget_Woodman
Richard Betts is also there in the dept of geography, although he doesn't appear to do anything:
http://geography.exeter.ac.uk/staff/index.php?web_id=Richard_Betts.
Shane Fudge (a sociologist) is also there:
http://geography.exeter.ac.uk/staff/index.php?web_id=Shane_Fudge

The list goes on and on.

Jan 30, 2013 at 11:41 AM | Registered CommenterPhillip Bratby

This is a variation of the Precautionary Principle (TM). Some Very Concerned People are worried, and we cannot completely assuage their fears, at least not for a very long time, so we should not take this path, because it will upset someone. The insecurity relates to the fears of the unknown, and the "fuel poverty" really relates to the possible unemployment of the energy fear-mongers, who will have to find something else to complain about.

Jan 30, 2013 at 11:44 AM | Unregistered Commenterrxc

To recover so-called tight gas, fracking has been applied worldwide by many companies for many decades at many locations without giving any major environmental problems. So what are we talking about?

Jan 30, 2013 at 11:54 AM | Unregistered CommenterGasman

Shane Fudge - what a wonderful name for a sociologist

Jan 30, 2013 at 11:55 AM | Unregistered CommenterDavid Chappell

It's not that they doubt the economics and game-changing quality of shale, any reasonable person would. It's that they don't want the work done to find out.

It's not that they doubt a lower value of sensitivity, any reasonable person would, it's that they don't seem to see it as good news if true.

It's not that they are wrong to see CAGW as a possibility, any reasonable person might, it's that they seem wedded to the hypothesis as an article of faith which must not be questioned.

Jan 30, 2013 at 11:57 AM | Unregistered Commenterrhoda

Incidentally, isn't it curious how these arts graduates (and I have nothing per se against arts graduates) get appointed to positions that one would imagine required a scientific and/or mathematical competency. I'm sure that if a scientist or mathematician were made a professor of English or History there would be hell to pay.

Jan 30, 2013 at 12:01 PM | Unregistered CommenterDavid Chappell

did anybody notice that china now consumes as nearly as much coal as the rest of the world (which was Dieters point, the China coal elephant, and India, etc)

Guardian: China burns half of coal consumption worldwide,
http://www.guardian.co.uk/environment/2013/jan/30/china-burns-half-coal-worldwide?intcmp=122

Dieters point is to be against gas, just means more coal will be burnt (and gas less co2 than coal)

economic facts that were wasted on the IPPR and Bryony Worthington..

Jan 30, 2013 at 12:01 PM | Unregistered CommenterBarry Woods

Rick Bradford.

"All the degrees in the world won't get you past that problem -- in fact, they make it worse because you have the intelligence and education to make your wishes seem plausible"

They may have the education but I disagree that they have intellegence.

Jan 30, 2013 at 12:06 PM | Unregistered Commenterpesadia

cue vangel; to tell us again that shale gas is an economic disaster......

Jan 30, 2013 at 12:12 PM | Unregistered Commenterdiogenes

@David Chappell:
"Incidentally, isn't it curious how these arts graduates (and I have nothing per se against arts graduates) get appointed to positions that one would imagine required a scientific and/or mathematical competency."

Are you claiming that the study of policy is a science?

Jan 30, 2013 at 12:16 PM | Unregistered Commenterdiogenes

There's always wind.....


http://2.bp.blogspot.com/-ZyHqGOZyz0E/UQkDJYZlTVI/AAAAAAACU6Q/xc9Sj9TJyuA/s1600/PDJ%2B30%2B%25286%2529.jpg

Jan 30, 2013 at 12:17 PM | Unregistered Commenterbones

David Chappell - like Science Editor at the BBC perhaps?

It does seem astonishing that a History graduate can become a Professor of Energy Policy at a university like Exeter. She will doubtless be held up as one of the majority of "scientists" that support CAGW.

Jan 30, 2013 at 12:22 PM | Unregistered CommenterBuck

Having reading the prof's critique all it said to me was that her position is that nothing that could possibly stop her politcal objective of killng off capitalism and replacing it with a centrally planned world order can be considered. Helm may not be right in many things proposed, but her alternatives are far worse and are based on an extreme political view which does not take any account of scientific learning, technological reality, economic common sense or a concern for the environment.

Jan 30, 2013 at 12:40 PM | Unregistered Commentersir_edwin

Shale oil find potentially worth $20 trillion putting Australia just behind Saudi Arabia in oil reserves. Although I don't know why the estimates spread between 3.5 billion and 233 billion barrels. Any mining assayists amongst you?

Mind you, the Greens will no doubt discover the three legged desert newt that will face extinction if the project goes ahead.

Jan 30, 2013 at 12:46 PM | Registered CommenterGrantB

She can probably tell you who was at 1066 but ask her to give a basic idea of energy conversion from natural stored energy to grid electricity and she'll probably mumble something about name plate capacity or wave power.

Just a sample from the link 'Given that renewable energy has been widely supported since 1990, there is a great deal of evidence about what policies are successful in terms of deployment; cost reduction and so on. We know that learning by doing through deployment as a result of the market pull technology specific policies creates a virtuous cycle when linked to R&D' - Ego bigger than their intellect.

Jan 30, 2013 at 12:48 PM | Unregistered CommenterShevva

It seems academics now seem to be able to invent their own job titles.

It's possible (likely even) that they are taking a lead from local councils across the land who have been debauching the language for some time when it comes to pompous inaccurate job titles.

As with councils, the titles have more to do with their own high opinion of themselves (+ extended pay and perks) than any core expertise in the subject that they presume to pontificate about.

How, really - how did we end up here?

Third tier politicised activist chancers in provincial edukayshun institutions.

Ah... like Lewandowsky = Exeter in the west, like Perth, Australia - makes sense now (not)

Jan 30, 2013 at 12:59 PM | Registered Commentertomo

Fracing, as it applies to shale, is not such a "venerable technology". That is industry spin. Take a look at
this video by Dr Anthony Ingraffea. The speaker has many years' experience with shale gas. Its environmental effect is also not as minimal as you like to claim.

Jan 30, 2013 at 1:27 PM | Unregistered CommenterBitBucket

@ David Chappell

isn't it curious how these arts graduates (and I have nothing per se against arts graduates) get appointed to positions that one would imagine required a scientific and/or mathematical competency.

I'd agree with you except that I' ve seen no evidence at all that climate science, for example, requires such competency. In fact, institutionally it is profoundly hostile to those not of the circle who do have it.

It is understandable if climate science is a social / political movement rather than a proper discipline, because in that case, you don't need to be right, only to think you are.

Jan 30, 2013 at 1:30 PM | Unregistered CommenterJustice4Rinka

One of the many ironies I am enjoying watching the enviro-extremists demonstrate is that at heart they are reactionary, anti-progress, and deliberately ill-informed. Add to this the misanthropy so many of them poorly hide. This gives some insights as to why time after time the enviro/climate kooks choose rejection of the obtainable good in pursuit of the unobtainable (alleged) perfect. Of course when these kooks stick to their position no matter the facts in pushing wind and solar down the throats of the tax payers, and at the same time seem to be lining the pockets of themselves and their pals, more cynical motives can be inferred.

Jan 30, 2013 at 1:38 PM | Unregistered Commenterlurker, passing through laughing

I don't think the expression "increased the global gas resource" quite does justice to the shale gas revolution of recent years.

What revolution is sustainable when a decade after it begins the companies that created it cannot make a profit from it? There is no single shale gas producer that I have been able to find that has a self financing field in production. Given the depletion rates you need to keep drilling a new replacement well for the well that you just drilled every two years just to keep production from falling. It is ironic how a blog that accuses the AGW frauds of not doing the math is full of commentators who do the same.

Jan 30, 2013 at 1:43 PM | Unregistered CommenterVangel

Seems that shale gas isn't the solution to all our problems, better start digging up more coal :-)

Jan 30, 2013 at 1:58 PM | Unregistered Commentersir_edwin

Jan 30, 2013 at 1:27 PM | BitBucket

Dr. Ingraffea just lost me.... with his garden hose analogy - which he over-egged to the point that he was just plain wrong - which is a shame as his biog is far more interesting than Josh Fox's. I'll watch the whole thing but the devil as ever is in the detail.

It is important that enhanced gas recovery techniques are safe and economically viable. The way to actually achieve that is to try them out under properly controlled and monitored circumstances - not to sit around imagining reasons not to - that has a place obviously - but it's only part of the recipe.

At the moment we are in the early stages of exploration / development and it's important to get reliable information upon which informed decisions can be taken. Appropriate techniques for a specific geology is one area that simply hasn't had much attention outside the immediate technical community around the enhanced gas recovery industry.

The tactics adopted by the "anti fracking" movement mainly rely on a highly emotive implementation of the precautionary principle coupled to outright and calculated lies. I am hoping that Dr Ingraffea will be able to balance that perception with some practical, real world observations - nonetheless - interesting.

Oh, and Vangel - be a helpful chap and post some links or even write a piece ... I assume your vehemence is based on solid information?

Jan 30, 2013 at 2:06 PM | Registered Commentertomo

Guess I'll open the fireplace up and install a woodburner. That'll get 'em going. It isn't tech they're against, it's people. Look at the greens, they want the UK to have a "sustainable" 13 million population. What they are careful not to mention is that birth control not only won't do it, it will lead to an unbalanced population. The only thing that will work, a d they know it, is both birth and death control. Send your gran and grandad to the green gas ovens.

Jan 30, 2013 at 2:13 PM | Unregistered CommenterJohn

@ Vangel 1:43 PM

I've spotted your typo.

"What revolution is sustainable when a decade after it begins the companies that created it cannot make a profit from it? There is no single wind farm that I have been able to find that has a self financing field in production."

Jan 30, 2013 at 2:32 PM | Unregistered CommenterJoe Public

diogenes @ 1216

"Are you claiming that the study of policy is a science?"

No, that it not what I said or implied. What I said was that it does/may require scientific or mathematical competency which, as a sweeping generalisation, is not noted amongst arts graduates. I emphasise, that is a sweeping generalisation and the will be exceptions to it.

Jan 30, 2013 at 2:34 PM | Unregistered CommenterDavid Chappell

Who will map the intricate hinterland that exists to produce and support uncounted numbers of such as the professor around the world?

Their jobs due to the mighty groupthink of carbon dioxide alarmism. Their future sustained by agit-prop organisations such as the Wold Future Council (from which, by the way, our own born-again eco-opportunist Lord Deben has apparently resigned - https://notalotofpeopleknowthat.wordpress.com/2013/01/29/gummers-carbon-footprint/).

Just take a look at the WFC website: http://www.worldfuturecouncil.org/about_us.html . A modern equivalent of the World Federation of Trade Unions? Grand aims, but at heart just front organisations? WFTU was a front for the Soviets. What might the WFC be a front for? The Club of Rome? A virtual entity produced by Internet Assisted Groupthink? A Soviet Loyalist Group hidden away in the Urals? A Secret Cabal in the UN? A Bunch of Stockmarketeers? Dr Evil? You could go crazy speculating ... :(

Ms Mitchell won't know. She's most likely just another victim.

We need that map!

Jan 30, 2013 at 2:49 PM | Unregistered CommenterJohn Shade

I'm pleased to see that you mention the probable SALES costs of $6/mmcf. Which is twice what the selling costs are right now, so you can see how the household costs are going to rise.

Thicker shale does not necessarily mean better production/well, but more wells. Production costs have gone up, not down, though recoverables have risen, too. As the fields develop costs go down because the facilities are already in place, but drilling and completions are unlikely to do so. That is why we are at $6/mmcf: this gas is more expensive even after experience.

The enviromental impact has five aspects.

The first is undoubtedly the use of freshwater in the completion process. During initial field development this is huge, as these wells are drilled multi to the square mile over many square miles. Pipelines have to be put in place, further disturbing the land. After this, the water issue and surface disruption problems go away.

Second: frac fluids coming up the wellbore-casing interface is a technical problem in that it does occur, but is rare, though the locals may find one in their backyard one too many.

Third, access roads cut through the countryside to the ire of the locals.

Fourth, surface installations of compressors, dehydrators with tankage, shacks, flare lines (always a little), are an eyesore you can't avoid.

Fifth, compressors are LOUD. You can put silencers on them, you can put trees around them, but they have big, exterior venting heat removal fans. They create noise. Locals can be very vocal about these: this is probably the most easily argued case for locating compressors far from habitation, which is often not reasonably possible (everything is possible if money is no object, of course).

Surface landowners get paid for all this disturbance ON THEIR LAND, of course, but the amount of money is not that significant except in financially difficult areas. And neighbours get nothing. Annoyance is inversely proportional to the square of economic reward received, you understand, so the incentive is for the guy who might get paid to be unsympathetic to his neighbours' complaints, always a nice community impact.

Since environmentalism is no longer about the environment but about the socio-political sensitivities of people, you should expect a lot of trouble. Here in Alberta, with a long history of solid economic benefits from the oil and gas industry, we have a lot of NIMBY these days. And if we have troubles, you will have triple them.

Jan 30, 2013 at 5:02 PM | Unregistered CommenterDoug Proctor

'This policy therefore risks security and (increasing) price problems; including greater numbers of fuel poverty. '

were has going for renewable guarantees these

Jan 30, 2013 at 5:29 PM | Unregistered CommenterKnR

Doug,

The only reasons costs will continue to go up is because we continue to p1ss BILLIONS away on windmills and mirrors!

Instead of building forms of energy production that dont work we should instead be working on weening ourselves off Russian gas, thus making us less dependent on an "enemy" state.

As for all of your "concerns", isnt it funny that NONE of these issues are ever raised when it comes to windmill farms? I wonder, why is that? Surely you still have to build access roads...lay new cables to carry what megre power they generate to the people who actually want to use it...windmill noise is shown to have negative effects on humans...Windmills take up much more space than a fracking well head and windmills ARE eyesores...windmills are very effecient at killing native bird life (actually, windmills dont care what kind of birds they kill).

BUT...of course none of this matters because of the greater good of generating profits for rich landowners.

Mailman

Jan 30, 2013 at 5:32 PM | Unregistered Commentermailman

The point about shale gas is that oil companies will invest in it themselves and take the risk. They are not subsidised, they front their own capital and they accept the risks and rewards. This is what oil companies have always done so no-one should be worrying about profitability or not. They will either make money or they won't, but unlike wind farms it will be their own money, not the tax payers, they are using to invest and risk.

As Doug Proctor points out, there will be environmental impacts, but these are generally to do with infrastructure, installations and logistics. The risk of pollution etc is very low and is heavily managed by oil companies working UK onshore. Nothing could be more worrying for an oil company than to fulfil the already negative expectations of them in terms of environmental responsibility, which is why they go to great lengths to get it right and avoid problems. Noise could be a problem, but this is a charge levelled at many industries. Wherever there is economic activity there is negative impact on someone. Who wants to live next to a chicken farm or pigs?

If you want to see how low the environmental footprint of an oil/gas production facility can be, go and stand on the high ground on the Isle of Purbeck, look down over Poole Harbour and see how much of the facilities you can spot for Wytch Farm Oil field, the largest onshore oil field in Europe. Unless a (temporary) workover rig is on site, you won't see much at all. I know shale gas production is not the same (well count and workovers are much higher), but that doesn't mean it can't be done and be environmentally and publically acceptable.

http://en.wikipedia.org/wiki/Wytch_Farm

Jan 30, 2013 at 5:39 PM | Registered Commenterthinkingscientist

Just a quick note to Doug Proctor.

Compressors - with watercooling and intake acoustic labyrinths compressors can have about the same acoustic footprint as one of those containerised super silent electricity generators (as in not much at all) - it's a matter of specification and cost.

http://www.lmf.at/

Jan 30, 2013 at 5:52 PM | Registered Commentertomo

Wind turbines versus shale gas? Which is riskier? The good professor seems to think it is the latter and she has a point. After all, the world will never run out of wind, will it?

What a basis on which to make energy policy!

Jan 30, 2013 at 6:00 PM | Unregistered CommenterRoy

On second thoughts perhaps I was too supportive of Professor Mitchell.

Wind turbine collapses in high wind
http://www.telegraph.co.uk/earth/energy/windpower/9837026/Wind-turbine-collapses-in-high-wind.html

A controversial 80ft wind turbine has collapsed after being hit by heavy winds. Daily Telegraph 30 January 2013.

Jan 30, 2013 at 6:05 PM | Unregistered CommenterRoy

One thing that came to mind while discussing shale gas with a colleague was that it seems to be widespread. Just how far, I have no idea, but the thought then arose: “What about the millions so far invested in pipelines, and ships and marine terminals to transport extraction from the present gas-fields?” That could be a good incentive for dissuading governments from getting too enthusiastic.

It would be delightfully doubly devious if the funding for the anti-fracking zealots (who, often enough, appear to be anti-“Big Oil”) was actually from, erm… Big Oil!

Jan 30, 2013 at 6:21 PM | Unregistered CommenterRadical Rodent

Re the toppled wind turbine. To make mischief now we can say that, with more extreme weather predicted due to catastrophic climate change we expect far more of these windmills to collapse in the future. No windmill installation can ever be safe, so we can never reduce carbon emissions by installing windmills.

Aargh! It's worse than we thought!!! Not even windmills can save us!

Jan 30, 2013 at 6:21 PM | Registered Commenterthinkingscientist

@Joe Public

"What revolution is sustainable when a decade after it begins the companies that created it cannot make a profit from it? There is no single wind farm that I have been able to find that has a self financing field in production."

It is not a typo. Wind farms are not profitable. Solar farms are not profitable. And neither is shale gas. This debate should be about the math and the financial reality, not wishful thinking or ideology. By having the left divert attention from the unfavourable economics of wind and solar, and the right divert attention from the unfavourable economics of shale we are wasting time and resources that should be spent looking for energy solutions that make sense. Shale gas only works in a few core areas of the better formations.

Jan 30, 2013 at 6:27 PM | Unregistered CommenterVangel

@ Roy

Wind turbines versus shale gas? Which is riskier? The good professor seems to think it is the latter and she has a point. After all, the world will never run out of wind, will it?

Given the fact that neither has been able to generate an economic profit I would say that the risk is greatest where the capital investment is highest. I wish that we would be reasonable and stop setting for the least bad option while we concentrate on coming up with a good option instead. Let us stop letting politics and wishful creep into this debate and start to look at the actual math.

Jan 30, 2013 at 6:34 PM | Unregistered CommenterVangel

@Radical Rodent

your double deviousness is already underway - have a look around for links to GAZPROM contributing to WWF and Greenpeace "research" and Matt Damon "Promised Land" and Abu Dhabi...

It would be excellent to get some figures for the amounts involved in the first case - I suspect it'd be rather more than fitted in a rattled collection tin - plain brown sack morelike :-)

Extended deviousness: A considerable number of prominent old school KGB spooks work for Gazprom (and associated service companies)and have maintained their links with the legions of "ex Marxist" activists in the western European Green movement. Said "retired" spooks are looking to do down any threats to their income from Siberian gas piped to Western Europe - no imagination required.

Jan 30, 2013 at 6:39 PM | Registered Commentertomo

Tomo:

You know, I was only trying to be flippant about a bit of apparent lubricating of entrenched opinions by an oleaginous (ooh, look; another pun) opposition. Being right is rare for me, but there are times when I do not want to be right!

That now makes it twice on this blog! If this increases, we should all get frightened. Very, very frightened.

Jan 30, 2013 at 7:07 PM | Unregistered CommenterRadical Rodent

Vangel,
The analysis you provide claiming to support the idea that shale gas is not financially viable in the same way that windmills and solar are not viable is deeply flawed.
Shale has developed so much gas that it has glutted the market with a useful fuel. This has been done without cost to the public treasury. As markets accommodate by using more gas at lower costs and producing low cost gas profitably, the shale gas revolution will continue.
Turn off direct tax payer and imposed rate payer operating subsidies on wind and solar, and they go away completely. The two are completely different.

Jan 30, 2013 at 7:28 PM | Unregistered Commenterlurker, passing through laughing

Vangel,

"Wind farms are not profitable. Solar farms are not profitable. And neither is shale gas."

But isn't it true that the problem with shale gas profitability is that prices plummet because of the increased quantity of available gas?

Jan 30, 2013 at 7:30 PM | Unregistered CommenterJames Evans

Bish wrote: "The environmental costs again are very much a known quantity - fracking is of course a venerable technology and there can be little doubt that it can be done with minimal impact on the environment. Environmental risks seem to be very small."

Although I favor expansion of fracking and abhor the enviros and EPA efforts to kill this new source of cheap fossil fuel, I respectfully disagree with your statement. In many cases, fracking is taking place far too deep in the ground to pose a significant environmental risk, but the casing where wells pass through aquifers used for drinking water is an obvious site of vulnerability. Industrial scale fracking like we are are beginning to see in the Marcellus shale is going to leave one fracking well on every few square miles across about half of Pennsylvania and New York. About 20,000 wells were drilled in the US in 2012, so it isn't hyperbole to suggest that a million wells (or even millions of wells) will be drilled. Do we know how to keep abandoned wells safe indefinitely?

Experience has shown that mining has caused extensive environmental damage. Surface rocks are constantly leached by rain water and living things have adapted to the concentration of chemicals that typically leach into surface water. However, when we dig up valuable ore, crush the rock that contains ore to make it more accessible, and don't properly protect the tailings from exposure to water forever, the water that leaches from the tailings is often dangerous. When we frack, we are crushing the "ore" - oil- and gas-containing rock - deep inside the earth and soaking it in water. It doesn't make any difference how safe "fracking fluids" are, the water remaining in many wells is likely to be hazardous. Well casings are not perfect. How will we decommission wells that are no longer producing? Who will pay? (Hint: If past experience is a guide to the future, don't expect the business entities that profited from selling most of the natural gas to be holding title to wells that have run dry.)

Jan 30, 2013 at 8:04 PM | Unregistered CommenterFrank

[Snip - venting]

Jan 30, 2013 at 8:04 PM | Unregistered CommenterDon Keiller

Frank, a number of the items you list as issues to do with shale gas and fracking are simply standard requirements in any oil well, oil wells which we have been drilling without problems for decades. Casing, drilling fluids, hydraulic stimulation etc. These are all everyday features of modern oil wells. There is no reason to suppose things are worse because its shale gas.

The UK is littered with abandoned oil wells, as is the rest of the world. Do we know how to cap off oil wells? Yes, of course we do. ITs done all the time. Of course, there may be the odd occasion when companies cok up, but when was the last time you heard on the news about a badly capped well causing harm.

All this is normal, everyday, routine oil business activity. There are many arguments about lorries, pipelines, infrasturcture etc that people may object too but the competent drilling, casing and capping of wells is a normal every day activity and there should be no concern about it.

Jan 30, 2013 at 8:19 PM | Unregistered CommenterThinkingScientist

Isn't it amazing how knowledgeable the anti-fraccing brigade are about shale gas production methods and perceived problems but they fail totally to see the obvious problems with windmills.

They know full well that shale gas has the potential to kill the renewable industry stone dead and the quicker it does the better.

Jan 30, 2013 at 8:28 PM | Unregistered CommenterSteve Jones

But isn't it true that the problem with shale gas profitability is that prices plummet because of the increased quantity of available gas?

The problem is that the energy required to drill the wells, drive the frack process, build the distribution infrastructure, run the compressors and other equipment, etc., is higher than the content of the energy that a well produces before it is no longer economic. While there are special opportunities in some of the core areas to make a very nice profit those areas are a very tiny percentage of the total shale formations being drilled. As for those non-core areas there is an opportunity to make a profit if you have certain arbitrage opportunities but those have a way of going away very quickly as prices of output go up or the prices of the inputs rise as a new equilibrium is reached. For the UK to have a lot of shale production it will need a massive number of new drills that will require a large investment. But it will also need drill crews, pumps, compressors, and all kinds of other inputs that will stress the supply chain and drive prices higher. At the same time the new output will drive the price of natural gas lower and in a short period of time the driver of profitability will be the energy return on the energy invested.

The bottom line is that the financial data matters. The depletion curves also matter because they determine the total recovery and ultimately impact the accounting that deals with the earnings statements and will have to force an 'adjustment' that will have to reconcile the balance sheets, cash flow reporting, with the earnings reports. As I said, in the US shale gas has been a huge destroyer of capital. While a few thoughtful analysts spoke out about the problems in the sector they were drowned out by the noise that came from the industry and its paid 'independent' consultants as well as the brokers who were looking to sell debt and equity to gullible investors. The problem is that the huge increases in debt and the impaired 'assets' that sit on the balance sheets cannot be ignored forever. Eventually we will see (and we have already started to see some of it) the producers engage in the type of write-offs that Nortel and Lucent had to engage in as they took 'one-time' hits several times before the game was over. For the record, Nortel did not make a dime of true profit during the entire tech bubble. While it had valuable patents that could have made it money company management was more interested in unprofitable operations that were destroying capital. I suggest that we are seeing exactly the same thing in the US shale gas sector but that the games that are played are being ignored by the financial press once again. By the way, I do not mean to suggest that the accounting is illegal. The SEC allows the companies to play games as they use EURs that cannot be justified by the real production data for quite some time. And they allow acquiring companies to hide their conventional reserve depletion by using a 6:1 boe conversion rate that is based on energy content rather than the more accurate 30:1 rate that appears when we use price. When the bubble pops please do not buy into the fraud claims that will be tossed around. If you look at the actual SEC filings and listen to the conference calls you will find that the companies are very honest about what a terrible business shale gas is. The problem is that too many people prefer the hype and positive narratives to looking at the data.

Jan 30, 2013 at 8:30 PM | Unregistered CommenterVangel

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