Bishop Hill Public relations, not research
Nov 12, 2014 Energy: gas Greens The UK Energy Research Centre - a proud member of the green blob, and a taxpayer funded one to boot - has launched a pair of reports into shale gas today, with a big bash to be held at the Royal Institution. As far as I can see the reports themselves have not been made public, and everybody is reporting the press release. This is usually a sure sign that something dicky is going on.
The headline is that shale gas development in the UK will not make a difference to prices. I assume this meanst that they are just channelling previous reports on the subject, but without the reports it's hard to say. I very much get the impression this is PR rather than research.
Bishop Hill
I have now located the report. This bit (p.36) is interesting:
This project has not been about shale gas in the UK ... The bottom line is that the industry in the UK is still in its infancy and a 2-3 year exploration programme is required before we can even begin to answer key questions about flow rates and prospects for commercial development at scale.
There is a passing reference to the scale of likely shale gas development being insufficient to significantly reduce prices, but that is it. So unless I am mistaken, the headlines this morning are indeed nothing to do with research and everything to do with PR.
Reader Comments (68)
Prof Jim Watson was bashing fracking posing as an unbiased expert on the Today program. Shoddy and shameful by both him and the BBC.
See also the Harrabin take at the BBC as pointed out on unthreaded.
Paper is here:
www.ukerc.ac.uk/support/tiki-download_file.php?fileId=3717
They note that despite not one molecule of US shale having been exported it has affected gas prices worldwide (rerouting of LNG and coal etc). Then they say that because we'll not export much shale gas from the UK it won't affect prices.
Words fail.
In case anyone doubted His Grace's reference to the Green Blob, here are their advisory board members:
Graeme Sweeney - Shell (Special Advisor)
Keith Allott - European Climate Foundation
Chris Anastasi - International Power plc
Kersti Berge - Ofgem
Duncan Botting - Global Smart Transformations
Tom Delay - The Carbon Trust
Jane Dennett-Thorpe - DECC
Tony Grayling - Environment Agency
Arnulf Grubler - International Institute for Applied Systems
Nick Hartley - Oxera
Linda Pooley - The Scottish Government
John Scott - Chiltern Power Limited
Philip Selwood - Energy Savings Trust
Sabine Semke - Juelich Research Centre
Diana Urge-Vorsatz - Central European University (CEU), Budapest
Even the International Power rep who might appear to be in favour of optimal energy production turns out to report to GDF Suez which has massive investments in renewables and a clear vested interest in undermining shale gas production. Most of the others are climate activitists rather than unbiased energy experts as they have conned the gullible media into believing.
When will these organisations realise that this has little to do with price and much to do with energy security. Probably the researchers are eager young things, who believe that the world of plenty that we have to day has always been the case. In fact the last twenty years or so is very much an economic blip and the majority of us who remember the Cold War realise that something worrying is happening in Russia. Gorbachev made a speech last week to that effect, among others. The "naughties" more and more remind one of the thirties - economic deflation, the rise of the militant right, demagogues in power and coalition government. I hope that I am completely wrong.
Are they perchance funded by BigGreenHedgefunds ?
@David S has answered my question ..thanks
Fracking is a serious threat to unicorns habitat.
I wonder if this hastily released bit of Propaganda has anything to do with THIS..
http://www.dailymail.co.uk/news/article-2830819/Fracking-transform-North-Minister-reveals-Government-plans-sovereign-wealth-fund-hold-revenues-shale-gas-certain-parts-country.html
It is pretty clear, as others have pointed out, that it is the potentially threatened renewables lobby that is campaigning against fracking. This is just another attack by the green blob, on the chance for this country to attain energy security. This needs to be publicised - because it borders on economic sabotage, by vested interests.
This is the lead item on BBC radio news, alongside China and USA saving the planet, ahead of the fall in unemployment and wage rises beating inflation.
Nobody seems to mention the main benefit of shale gas to the UK - primary economic activity, on which all public expenditure relies.
Generally, although somewhat simplistically, prices are driven by two factors, first the balance of supply and demand, second, the cost of production (including the cost of extraction and delivery to market) which will set a base price below which it will be uneconomic to produce the commodity.
Obviously, if there is a glut of a product and one which is near to its market, there will inevitably be a price fall in the market value of that commodity. In the States gas prices have fallen substantially and whilst there are some differences between the States and the UK, there is no reason to doubt that the extraction of shale will impact on UK/European gas prices.
Indeed, the present oil price war that is ongoing (fuelled by a deesire in the West to put pressure on Putin and the Russian economy, and with which desire the Middle East is, for the time being, content to go along with since it puts pressure on fracking in the US which may be uneconomic if oil were to drop to US$60pbbl) demonstrates how the availability of shale has a big impact on prices.
If the US did not have shale, the pbbl price of oil would not have fallen to about $80pbbl. Indeed, since the shale boom, one can see a change in US foreign policy which is no longer so beholden to the MIddle East.
UK extraction of shale will likely be a game changer. It is probable that it will impact on gas prices, and will liberate UK foreign policy. One must not forget that shale is not limited to UK but there appears to be large reserves in Europe and in China/Indonesia. It only needs a few players to tap into their reserves to cause a domino effect.
If the UK is to compete with the developing world, energy prices need to fall substantially (the US has seen substantial industrial growth and has also seen high energy users relocating to the States because of low energy costs) and the extraction of shale is a necessity for the UK economy and consumer a like.
I love the way we are supposed to accept without question the output of climate models, yet reject the fundamental laws of supply and demand.
I to heard that biassed report on Today this morning. The so called expert ignored the paper released yesterday from two respected engineering professors who ststed tghat the regulation process in the UK was far too costly and complicated at the moment and the limit of 0.5R as a maximum seismic event before fracking had to stop was far too low and should be set at 2.9-3.5R. Property damage is easily covered by existing mining and quarrying regulations.
In fact the 0.5R limit is lost within the countries seismic background noise so how can any one well be held to blame for an event only the most sensitive instruments can measure?
Its about a year ago since I showed up here and made the rather unpopular point that shale gas is not cheap. The post that arose from that "What is the Real Cost of Shale Gas" has been the highest selling on Energy Matters with over 10,000 views spread over the year - still gets about 50 / day. Thanks to all who provided the inspiration.
The thing that gets me most is that in the intervening year hardly anything has happened on the shale front. In the US they would already have drilled and fracked 1000 wells. Shale needs huge numbers of rigs mobilised drilling round the clock. I think the powers at be are not really that enthusiastic.
Todays offering:
Ed Davey in Wonderland
He did mention shale once in his speech.
I think the report is reasonable. It is focused on security of supply and it is not anti-fracking. It mainly criticises the private sector (presumably national grid) for not worrying about gas storage and DECC for not considering their projections might be wrong and hence giving out the wrong messages to investors - as here.
"Increasingly it seems that natural gas (methane) is treated more as part of the problem; rather than an essential part of the solution".
What they mainly said about shale is that at this rate of progress we clearly can't rely on it but the report is not against it. In fact they support it:
"There is a need to assess the prospects for the development of unconventional (shale) gas in the UK and in Europe more generally".
The Guardian green flake seems to have just combed the report looking for an anti-fracking message and thought she found it in this rather innocuous remark:
"However, given the current status of shale gas exploration, it is unlikely that domestic shale gas production will be a factor until the early 2020s and it is also unlikely to be of sufficient scale to significantly reduce the UK’s import dependence or to have a significant impact on UK gas prices."
This is mainly just a somewhat realistic reflection of just how slow we are in the UK to get anything off the ground when compared to the US. As in the North sea we will likely just rely on US companies to do the heavy lifting for us and they will need a much looser regulatory approach before they contemplate it.
On gas prices, the following are mean prices for 2013, $US / million BTU:
USA 3.7
Europe 10.7
Japan 16.2
There is absolutely no doubt that shale gas over production in the USA has dumped gas prices. In the USA about $5 is required to make a profit, hence most shale gas is still being produced at a loss. Lets imagine shale gas can be produced for $8 in the UK - that may displace LNG that currently costs about $16. Gas prices will come down IF significant volumes can be produced.
When one considers that the climate obsessed and green extremists almost all believe Paul Ehrlich and Malthus, I guess it is not surprising that they would embrace a phonied bit of ignorance making idiotic economic claims.
I didn't hear this but the opposing case was put by Jim Radcliffe who made several interesting points.
From memory-
- we know there's a lot of shale but we don't know how productive if will be because we haven't drilled for it.
- we shouldn't think the regulation in the US is poor because it isn't and they've drilled millions of well without major incidents
- the idea of a Sovereign Wealth fund is laughable at this stage, far too premature
- we need cheap energy because if industry, I thiink he said 'has collapsed in the last few years; - and he would know a lot about that
I also found the comments of Dieter Helm interesting when giving evidence to a Parliamentary committee a few weeks ago, one of the comments he made was that despite the chatter about US shale gas people haven't yet got their heads around the impact of it. He cited an export plant that had been built in Qatar to supply gas to the US just when the US found it no longer needed to import.
He said that the world was 'awash' with gas at present.
Both Jim Radcliffe and the earlier Dieter Helm (BH linked to it at the time) are well worth a listen.
Euan Mearns wrote:
"Its about a year ago since I showed up here and made the rather unpopular point that shale gas is not cheap."
Euan, that might be the case, but if companies are prepared to risk their own money exploring then whatever is produced reduces the UKs balance of payments by that amount.
Is this not enough reason to encourage it (with reasonable regulation)?
@ Nial, I've been arguing that UK needs to maximise its indigenous primary energy production for about 8 years now for that very reason. I was probably the first to produce a chart showing the impact of energy imports on UK trade balance, actually produced a response at DECC and MacKay.
@Euan Mearns "shale is not cheap"
Until we get on with it, we don't know, do we? One thing we do know for a fact is that solar, wind and biomass ARE expensive.
Finally, there is a tendency to ignore the
consequences of the low carbon energy transition
for the incumbent fossil fuel sectors and this
seems true of the gas sector in the UK. While it is
recognised by politicians that gas has an important
role to play in the UK’s future energy mix, too
often it is relegated to a default position and there
is a degree of complacency and an assumption
that secure and affordable supplies will always be
available should they be needed.
We would advocate a ‘gas by design’ policy that
plans now for the changing role of gas in the UK
energy mix, thus ensuring future UK gas security.
A blind belief that a future UK shale gas revolution
will solve all our problems does not fit with this
remit. It seems highly likely that the UK will end
up needing more gas for longer than current
policy predicts and a failure now to pay sufficient
attention to the issues that influence UK gas
security will mean that consumers may end up
paying more to secure that gas.
@ brik, Qatar had no problem finding alternative markets for its LNG. But the US does have LNG import facilities that were never used. N America is awash with gas. The rest of the world not - just look at the prices I posted. Global LNG production has fallen the last 2 years. Dieter Helm should perhaps not have unsubscribed from my mail list.
As I've posted here a few times, if the volume of supply of a good increases, then its price is less than it would have been if that supply had not been produced. Isn't that all we need to know about the impact of increasing UK gas production on future gas prices?
Do DramaGreens & politicians really care about the environment ?? There are 1100 illegal waste sites polluting the land & water etc And there is a big recycling/waste centre fire every day. They exist cos the £80/tonne landfill TAX gives criminals the incentive to make big easy money.
- If the antifrackers care about the planet why haven't they been protesting against actual pollution of today ? ..No rather they seem like a rentamob for the renewables SUBSIDY mafia.
- At the same time the politicians are handing out £hundreds of millions in subsidies & grants to their BigGreenHedgefund & renewables mates, they give the EA only £17m/yr to monitor existing waste site polluters. Yet 600 large waste site fires in 2013 cost local authorities £32m.
- See last night's Radio 4 documentary about sharp tricks in the recycling/waste industry : like deliberately setting fire to waste stockpiles after being paid to collect it and dispose of it greenly & then sign the form saying we have met the EU targets.
...See how the green laws with their subsidies & taxes are not only screwing up the market, they are screwing up the environment as well. So yes as Bish says there is a lot more PR hype than proper research around.
us has invested a trillion into shale (thats one trillion dollar that is)
thats expensive you can say
UNTIL you realise they MADE a trillion on it. This trillion was earned and paid for, nobody took a loan for it or printed ponzi dollars.or manipulated figures parked buddies had minions spread obfuscations etc etc(the libtard way of double standards)
Euan Mearns
Discounting political barriers (until after their elections at the earliest) how easy would it be for the LNG terminals in the USA to be converted to export? At the prices you give Japan would be a highly profitable market for the US producers; even Europe would give them a decent living.
SandyS
Converting LNG import to export terminals would be about as easy as converting a refrigerator into a food blender. But the US are building LNG trains. The first to come on, Sabine Pass, within a year or two. What US consumers don't realise is that this will begin a process of price normalisation, US prices going up significantly, Japan prices coming down. Its gonna cause a riot. But the producers need higher prices to stay solvent.
stewgreen
This sort of thing, you mean? -(report from June 2014)
http://www.dailymail.co.uk/news/article-2668507/18-000-ton-waste-mountain-thats-caused-stink-cul-sac-three-years-Environment-Agency-legal-battle-site-owners-rubbish-removed.html
Anyone know if it is still there?
Billions of dollars are also being invested by chemical companies on the Gulf Coast to use the shale gas excess for plastics manufacture. There is a huge amount of economic activity being generated by shale gas apart from just its extraction.
Euan, the breakeven on US shale gas depends on which shale where, and ranges from about $4 to about $6. Is not just the well, it is the local processing and transport infrastructure. Exists for the Barnett, not yet for the Marcellus. The low price resulted from glut caused by the land lease agreements, many of which during the original 'land rush' contained 'use it or lose it provisions'. Over drilling in order not to lose the drilling rights. Many Rigs have switched to oil shales which are usuallymatill profitable even with oil temporarily at $80 rather than $100+. Fracked shale well Decline curves mean the glut from overdrilling goes away by 2016. Utilities building CCGT are thinking $6-7 gas for the long haul. Still the cheapest gas outside Russia and Quatar for the next few decades.
Utterly amazing that the UK has been so slow to get on board.
Euan: "Shale needs huge numbers of rigs mobilised drilling round the clock."
All of Canada has 363 rigs actually drilling as of Nov 10th. And that is oil and gas combined.
http://www.caodc.ca/rig-counts-drilling-dr-week
Euan says:
Chance would be a fine thing. You would think the Cuadrillas of this world are asking for Davy to sell his family into slavery to fund the business, when all they want to do is get on with it.What I would like an opinion on is, do you think OPEC are deliberately forcing down the price of oil in order to make shale seem less economical?
I guess the answer to one of those points will be when the public start getting power cuts when they know that there is gas to be had under their feet.
@ Rud Istvan - agreed. Here's my post from last year:
http://euanmearns.com/what-is-the-real-cost-of-shale-gas/
@ Harry
Yes, I think that Saudi Arabia is better placed to withstand prolonged lower oil price than heavily indebted US shale oil producers. The objective is to hobble US shale industry and to maintain market share - but I could be wrong.
Lower oil price is of course good for economy and demand.
But this has little effect on gas prices - apart from LNG sells in Japan at the same price as oil on a thermal content basis.
Converting LNG terminals to both export and import, according to what an engineer familiar with the topic told me yesterday at lunch, is feasible but not cheap.
@ Bruce - yes, and the UK maybe has 2. I checked the Baker Hughes rig stats the other week and N America is in full swing, i.e full utilisation. And so it may take months for drilling to slow down and over-supply to be cut. I think we may see $50 - North Sea up shit creek at that level.
@hunter. The terminal doesn't care much in or out. . But importing is just pipes and storage. Exporting means putting in the liquifaction 'trains' ( really a massive series of compressors and cooling systems to chill the gas until it liquifies. Giant cryogenic refrigerators). Each train costs several billions and takes several years to construct.
Euan: "the UK maybe has 2"
Build more. It's pretty easy. A rig can drill about one well per month.
ptw
wait till vangel reads that. He has been telling us for 3 years at least that shale drillers are about to go bust.
'Churnalism'
The crux of this whole argument would be, what is the likely minimum market price of UK shale gas?
Anyone got figures? The companies involved presumably have some idea, but has anything been published?
Stop derailing ,It's immaterial to us what the price is.
It's a private business they take the risks, they pay to fix something if they break it.
It's up to the gov to set the health & safety laws, police them and give planning permission to all corps that will operate within those laws end ..end of
.. We don't go over to warmist blogs and say "whole argument would be, what is the likely minimum market price of UK wind/solar ?"
Bruce,
> All of Canada has 363 rigs actually drilling as of Nov 10th. And that is oil and gas combined.
Euan,
> @ Bruce - yes, and the UK maybe has 2
Where do you get that figure? Here is a list of every onshore well from 1902 to Oct 2014 (over 2100 of them): https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/362870/Landwells7Oct2014.xlsx
"The crux of this whole argument would be, what is the likely minimum market price "
How about, what is the likely commercially viable market price for renewable energy, if it wasn't being subsidised by ridiculously punitive taxation?
EM...as a matter of interest do you have any investments in renewable energy? If you do, do you constantly hector the companies to tell you about their pricing plans? And, if so, do they tell you?
"They note that despite not one molecule of US shale having been exported..."
Well not shale, but quite a lot of shale derived gas is being exported to Canadfa and Mexico. On the Canadian border gas goes in both directions depending on availability and pipelines, but there the US is still a net importer. On the other hand on the Mexican border the gas goes all one way - south. Who would have believed that ten (or even five) years ago?
Euan: "Shale needs huge numbers of rigs mobilised drilling round the clock."
The current (Sep. 2014) number of gas drill rigs (shale or not) in the US is 336:
http://www.eia.gov/dnav/pet/pet_crd_drill_s1_m.htm
This is actually the lowest number since 1991:
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=E_ERTRRG_XR0_NUS_C&f=M
Interestingly the total number of drill rigs (oil+gas) in the US has not increased in recent years despite the shift to tight (not "shale" please) oil and gas and the huge increase in production:
http://www.eia.gov/dnav/pet/hist/LeafHandler.ashx?n=PET&s=E_ERTS0_XRS_NUS_C&f=M
This means rigs drilling for tight oil and gas in 2014 are actually more productive than were drill rigs drilling for "conventional" oil or gas 10 or 20 years ago.
@ Terry S
I really don't have time to answer all these questions. I consult the Baker Hughes international rig count. It shows in Sep 2014 zero operational land rigs in the UK. 2 in August, 1 in July. What may I ask is the point of your question?
From memory I've not seen more than 2 land rigs operating in the UK for many years, I think that's all we got. The USA has about 2000.
If you really want to learn, then a good starting point is to read, this is a good starting point for USA drilling stats:
http://euanmearns.com/usa-gas-independence-looking-for-export-markets/
Nov 12, 2014 at 6:26 PM | stewgreen
Well said. Just let the companies get on with fracking. The greens are desperate to strangle shale gas at birth because as soon as it starts to flow in any quantity it will blow away those stupid, expensive and inefficient windmills.
Even rubbing their noses in the US experience won't persuade them; Gasland contains all the facts they need. This is further proof, were it needed, that the greens have no idea about the real world.
Euan: "The USA has about 2000."
Only 356 for gas.
"The U.S. rig count decreased by four to 1,925 rigs running by the end of last week. A total of 356 rigs were targeting natural gas (ten more than the previous week) and 1,568 were targeting oil in the U.S."
http://eaglefordshale.com/drilling-rig-count/