Bishop Hill Eastern gas
Aug 29, 2013 Energy: gas Over the last few days there has been a steady stream of good news about Eastern European shale gas. At the start of the week, it was reported that Estonia has become self-sufficient in power, having exploited oil-bearing shales near the Russian border. Meanwhile, on the exploration front, test fracking results in the Ukraine have been very positive and there is also good news from Poland, a country widely cited as demonstrating that a shale gas revolution can't take place in Europe.
While it's fair to say that the eventual success of unconventional oil and gas is not assured across eastern Europe as a whole, it's all looking very encouraging. What is not clear to me is the extent to which a shale revolution that far away would affect us here in the UK. Here's a map of European gas pipelines:
;)
As you can see, even though the distances are large, the network is complete between the UK and all of the Eastern nations where shale exploitation has shown promise. So while there may be capacity constraints, it seems likely that a shale revolution in the east will bring benefits here in the UK.
But expect the government to try to wipe them out by taxing away any benefits to consumers.
Bishop Hill
Tim Worstall notes his recent analysis of Poyry's reports on shale gas, which addresses these questions directly.
...if we all go hell for leather to exploit European shale then the price in the UK will be about 40 p a therm (weird currency and weird units but that’s how we do it here). If we follow a medium sort of path then it will be 65 p, 68 p sort of level. And if only minimal shale exploitation then 75 p to 80 p.
Reader Comments (42)
Most of all this surely will strengthen our resolve to exploit our own shale. Which can only be good, for security as well as prices.
With Putin flexing his muscles over Syria, the sooner independence from Russian gas comes the better.
With Putin flexing his muscles over Syria, the sooner independence from Russian gas comes the better.
Aug 29, 2013 at 12:19 PM | Unregistered CommenterBloke down the pub
Even necessary.
The more other countries start to extract shale gas, the greater the pressure on the UK to get on with it. Hopefully they will make sure the fracking is well controlled and doesn't give any ammunition to those who argue fracking is dangerous.
Well, that's one beauty of the market: first-mover advantage. Central Europe will reap the advantage, and good on them. You could say the UK's lethargy has kept its shale gas in strategic reserve. :-)
Shale is going to be the game-changer we always thought it would be.
Truth is it is the last stand for the anti-capitalists. They are almost certainly going to orchestrate a ban/unprofitability tax on it in this country. But then will have to explain to the British public why energy costs, and CO2 emissions, start dropping in shale-exploiting countries (who aren't experiencing any ill-effects).
It'll be fun watching them squirm. Shame about all the pensioners who'll have to die to prove the point.
The problem is this. The Greens couldn't see shale gas coming - and they are FURIOUS....
RE the update: Tim wrote "if we all go hell for leather".
To put that into perspective, hell for leather in the Ofgem/Poyry report was production of about 75bcm of shale gas a year spread across the shale regions of Europe. European consumption of gas is approaching 500bcm a year I think. Production is about 180bcm. The later Caudrilla/Poyry report had Lancashire alone producing 20bcm a year.
If shale in the UK as a whole is as bountiful as Caudrilla think Lancashire is (big assumption) then it is conceivable that the UK on its own could produce enough gas to satisfy the scenario that keeps gas prices at 40p a therm. Add other regions on top of that and prices *ought* to go only one way - down.
Gixxerboy raises an interesting point - central Europe could benefit from this if they get a move on. This makes shale gas an ideal conduit for European economic development and recovery. Helping poorer European nations get richer would cut down on the 'need' for the EU to redistribute wealth by force.
Stuck-Record: Well said. Completely agree.
sherlock1:
Same with the collapse of communism in the very same countries. Useful lessons.
Remember that the cost of energy is important when deciding where to locate new factories or expand existing facilities. If Eastern Europe exploits shale gas and the UK does not, the jobs will go east.
Strangely, I think the more Eastern Europe exploits shale gas, the more the greens will say that it is unnecessary here. They will point to cheaper gas prices and say "why bother?", while simultaneously denying that shale gas exploration in the UK would reduce has prices.
Speed: " the jobs will go east"
They are already leaving for cheaper energy in the USA.
"“The improved outlook for U.S. natural gas supply from shale brings the prospect of competitively priced ethane and propane feedstocks to Dow – and the promise of new manufacturing jobs to America,” said Jim Fitterling, Dow executive vice president and president of Corporate Development & Hydrocarbons."
http://www.pipelineandgasjournal.com/dow-growing-north-american-businesses-shale-gas-liquids
Rob,
That is the current position of Greenpeace. They are simultaneously saying:
1. Shale gas could lead to a catastrophic increase in emissions because it will be cheap and plentiful. This must be stopped.
2. Shale gas is not plentiful, and it is therefore a waste of time trying to extract it.
@Gixxerboy 1:13 pm
Well, that's one beauty of the market: first-mover advantage.
Not always.
"The second mouse gets the cheese."
Poland, and Europe, can learn from the US companies.
Watch out for over building. Watch out for oversupply,
Hedge gas price through futures as soon as you have a handle on the play.
... and there is nothing wrong with continuing to use scrubbed-coal for base-load electricity.
The conversion factor is 1 Therm (100,000 Btus for our US readers) ~ 29.30832kWh
So 40p/Th = 1.3648 p/kWh
Richard North over at http://www.eureferendum.com/ has an interesting post about the obstacles being placed in the path of shale oil and gas development in Europe by various organisations - well worth a read
Why is Britain over run with the Green disease like no other country.?
"The second mouse gets the cheese."
As if DOW Chemical (and others) will move 30 billion in infrastructure from the US to Europe to save zero on gas costs.
"Chevron Phillips Chemical Co. said its industry may spend $30 billion to build U.S. factories that convert natural gas into plastics because shale gas has made American production the cheapest outside the Middle East.
Output from shale formations will yield enough natural-gas liquids such as ethane to support about five new plants that produce ethylene and related plastics, said Mark Lashier, an executive vice president at Chevron Phillips. Each facility will cost $5 billion to $6 billion and will be built over more than a decade, he said today in an interview in Houston."
> Why is Britain over run with the Green disease like no other country.?
Because in 2004 (I think) the guidelines on political and campaigning activities for charities were changed. As a result WWF, FoE etc are able to use their charitable donations for what is essentially political activity.
Why is Britain over run with the Green disease like no other country.?
Aug 29, 2013 at 6:52 PM | Unregistered CommentereSmiff
Not just you in the UK. France and Germany are completely overrun by socio-communists greenie beenis. The big problem in the UK is the public. They are so easily lead by the likes of the plonker prince and his servant branson & brats.
I have been in Tartu, Estonia and seen the mile-long trains of oil wagons coming from the east (wagons covered in thick black oil) which were headed for a power station near Tallinn, I believe.
It is not surprising that the Estonians have decided to become energy independent if only because it means no more money flowing back down the tracks to Moscow.
I live in Southport near to the Caudrilla shale gas operation. There were earthquakes? I didn't notice. Frankly I hadn't even noticed Caudrila's site until I went looking for it.
Go to the beach here and look out and what do you see? A gas rig on the horizon that has been there for several years.
In Formby you can look for the site of the D'Arcy Oil Exploration Company's rig from the 1930s - 40s and find - nothing, now. My late father knew where it was and would often talk about it. He had been fascinated by it as a child.
My view for what it is worth is, bring it on. Exploit that shale gas and if it means fraccing, well, that is ok by me provided it is done properly.
Unfortunately we have a LibDim MP, Dr Pugh, who is very pro-green. He used to teach RE at my step-son's school. He does not like being challenged about his pro-green views though that seems to be common with the LibDems locally who are very touchy when you question them. I did ask how much power they got from the windmill on top of their HQ - the one that hasn't turned in four, five years. They didn't tell me.
As well as these developments, there are the huge new gas finds in the Eastern Med. In a few years time they will be linked into the above pipeline network, probably via Greece. They could help to save the Cyprus economy through LNG exports.
Another big pipeline project is going to bring gas from Azerbaijan into Europe as well (http://www.naturalgaseurope.com/trans-adriatic-pipeline-european-energy-diversity).
The increasing competition and diversity of supply has already started to break the tradition of long-term gas contracts linked to the price of oil.
Of course this is a nightmare for the policy-makers who based their justifications on ever-rising gas prices.
RoddyB: If you are on holiday in the South, in Dorset, go to the Isle of Purbeck and stand on the beautiful, high viewing point overlooking Poole Harbour and Brownsea Island and see if you can spot the Wytch Farm oilfield. Unless there is a workover rig on site, I doubt you will see it. 190 wells, horizontal drilling, fracking, nature reserver, nothing bad's happened in 30 years.
I haven't been to Wytch Farm but I did go to Bournemouth for a Dr Who convention some years ago.It's a nice part of the world.
I think that a lot of greens simply don't appreciate that things like drilling for oil have gone on for years in this country. That mining used to happen here - around Wrexham there are what look like old spoil tips now greened over.
When I was at University and worked for the local council during the summers, there was an old boy who used to go to Southport beach every day and picked up coal that had been washed out of underwater seams. he said he never had to buy coal.
But these days we have windmills on the Liverpool docks that don't seem to turn much and a neighbour has put a small one in his garden and I've not seen it turning in, what, three months.
Sometimes I despair and think that it is all going to end very, very badly
@RoddyB
There were earthquakes? I didn't notice.
Most earthquakes are somewhat less noticable then an HGV or train going past your front door or back garden.
The only time earthquakes less then a magnitude 5 make other then the local news is when someone is pushing some short of political agenda or someone is looking for research $$$.
There were 27 earthquakes greater then magnitude 2.5 today.
http://earthquake.usgs.gov/earthquakes/map/
"Gixxerboy raises an interesting point - central Europe could benefit from this if they get a move on. This makes shale gas an ideal conduit for European economic development and recovery. Helping poorer European nations get richer would cut down on the 'need' for the EU to redistribute wealth by force."
Excellent point Gareth.
Lets postulate and then speculate a tad, it's not totally beyond the bounds of possibility - the way things are moving in the UK.
Eastern Europe, and if they do exploit all their considerable resources.......
Here in Britain, if we continue to allow a few
kno*headsthe greens and their political allies - to dominate the media, Parliament and thereby crush what industry and manufacturing that still manages to cling on - in these [future] benighted isles. Then, gradually in the next fifty years - British workers will be leaving these islands to seek work in Ukraine and Poland - if they let 'em in.................And Gazprom's Nord Stream gas pipeline under the Baltic will be a 14 billion Euro white elephant.
One investor told me that the largest shale deposits in Europe are in France, but the French would rather destroy their economy and live in poverty than frack.
In France they know that fracked gas would undermine their Nuclear industry ~80% of all electricity generation and CO2 emissions / head now less than China.
That is whey they want to hold it back.
I live there and I am really glad that the likelihood of the lights going out is minimal because they have had a sensible longterm energy policy. Unlike the dithering UK.
Video about oil drilling in Los Angeles and how unobtrusive it is.
http://www.huffingtonpost.com/2009/11/18/secret-oil-rigs-in-los-an_n_362153.html
Martin (6:38 PM):
Thanks for that tip-off. The thread is called Energy: the Geneva – Brussels nexus. Because of my lengthy discussion with Dung about this since the weekend I finally signed up for Richard North's discussion system to say:
We all need to understand what is going on in these obscure, interlocking UN and EU outfits and shine as much light as possible in that direction for others to see too. I always understood that Balcombe was misdirection. This is the real thing. But those that wish to render the UK unable to exploit its shale riches are not home and dry yet.
If the EU tries to prevent us exploiting shale gas (and shale oil, if we have any) then that would be an excellent reason for leaving the EU.
Roy: Quite so. I think the expression is "shit or bust".
Security of supply?
UK gas imports hit record high of 1 trillion cubic feet in first six months of 2013
".....Iron and steel industries increased demand by 8.3pc in the first quarter while other businesses also saw increases, in encouraging signs of economic recovery."
Or just that it takes more energy to melt and heat treat iron and steel when it is cold?
Some dickhead always has to bring up communism on every thread. The biggest critic of communism when at it's totalitarian height was the radical lefty George Orwell. Just like climate scientists, wingnuts find it very easy to use a blinkered ideology to extrapolate limited data way too far and ignore other data that just doesn't confirm their bias. It makes it exceedingly easy for a casual reader to dismiss everything else they say on any issue.
JamesG: To have a pro- and anti-communism debate on this thread would be a diversion of the kind I'm arguing that trolls always seek to produce when there's something important at stake. I called some of our opponents fascistic corporate-staters two days ago. Happily nobody began a lengthy digression on the good points of Franco and Mussolini. Why don't we stick to the knitting.
The reason Britain is so incredibly determined to push ahead with carbon reduction is the multi trillion carbon trading market. Environmentalists really are useful idiots in this game.
Paven Sukhdev, a career banker for Deutsche Bank who now works on the issue for the UN and EU, argues that at least 65% of reductions must be made within developed countries. That means firms such as AEP may still be limited in how much they can invest in projects abroad. Firms in developing countries may not have to buy credits at all. That has led to worries in the City that there won't be enough money to buy all the forest carbon. London's financial centre is the main home to the incipient global carbon market. Prof Heal believes that in a decade, the trade could be worth trillions of dollars.
http://news.bbc.co.uk/1/hi/business/8359397.stm
P.S. The woman who contrived the massive Guardian AGW campaign, $2 million a year chairman Carolyn McCall is now saving the planet as chairman of Easyjet.
Ha, eSmiff with a story from November 2009 about the rainforests. As I was saying :)
I have been arguing for some time that new access to unconventional gas is likely to be a global energy game changer. Those, such as DECC, who project historic gas fundamentals forward into their future pricing models are going to make some very bad strategic energy choices unless they open their eyes.
Access to previously inaccessible gas is being made possible across every corner of the globe. In 2011 the IEA announced that we might be entering a ’Golden Era of Gas’ with new gas supplies coming on stream that will last 250 years. Even since 2011, significantly more new gas has been found to be accessible. Furthermore, within 20 years, according to the US Department of Energy – see here the technology will be available to commercialise methane hydrates which will provide another 1000 years of plentiful gas supplies. Maybe by that time renewables will be commercially competitive without subsidy ;-)
Gas will have profound geo-political outcomes as it will destroy current energy monopolies. Not only in the Russian gas and the European pipeline system (see Bloomberg article yesterday) but also for cartels such as OPEC. The access to vast new supplies of gas will turn gas into a globally priced commodity that will make it uneconomic to use other sources of energy at the levels previously seen. The oil price must collapse as demand will fall and this in turn will promote further anarchy in the middle east as autocrats seek to hang-on to their wealth as their oil economies deteriorate. With the USA predicted to reach energy independence very soon their interest in getting militarily involved in the middle east is likely to wane further.
According to Deloitte , U.S. LNG exports could hasten the transition away from oil price indexation of gas supply contracts very soon. Prices are projected to decrease fairly significantly in regions importing U.S. LNG, but only marginally increase in the U.S.
Just think, if the whole of the world turns to gas and coal is left in the ground as a consequence, the global CO2 emission problem will be fixed at a stroke. We should all get behind this environmental revolution!
The exploitation and taxation of shale gas and the growth it can engender is, it seems to me, the only way that the UK government can begin to get to grips with its ever growing national debt. Somehow the UK has to reverse its lemming like rush over the debt cliff edge from which recovery is not possible.
oldtimer - somehow I think we're past the point of no return as far as rescuing the economy is concerned. We would have to presume large decreases in the cost of energy for any appreciable effects to be felt economically and the political concensus seems to lean towards taxing the benefits of shale gas to death. That, coupled with 'everyone else' (outside the EU) actually GETTING cheaper energy will probably lead to our own products becoming increasingly more expensive.
If anything this plays into the hands of the EU Federalists since if the UK can't benefit from cheap shale gas then nor will any other EU country - thus re-inforcing the 'need' for economic and political unity.
The path has already been decided. Shale gas could be an alternative way - if only the path wasn't 'bent'.
@ Dave_G
You may well be right. Time alone will tell.