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Friday
May232014

Newsnight on shale

Ahead of today's announcement on shale oil prospects in southern England's Weald basin, Newsnight took a look at the differences between the shale industry in the US and the sclerotic developments here. Featuring Iain Stewart, it was a pretty balanced piece. The one thing I felt it missed was a view of a production well head.

See it here from 10 mins.

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Reader Comments (76)

"it missed .. a view of a production well head"

Interesting to ponder whether that was deliberate or whether the producer failed to see one, having been conditioned to look for a derrick...

May 23, 2014 at 9:34 AM | Registered Commenterjamesp

I suspect the word has come down that we need fracking and the BBC better slide over to be onside and on message.

May 23, 2014 at 9:58 AM | Unregistered Commenterrhoda

Rhoda "I suspect the word has come down that we need fracking and the BBC better slide over to be onside and on message." Yes, I got the feeling that there has been a wakeup call at the BBC. Might just be a phase.

May 23, 2014 at 10:28 AM | Unregistered CommenterTinyCO2

Might this article, dated 21 May, on the Monterey shale formation in California, be relevant here ?

www.peakprosperity.com/blog/85555/us-shale-oil-miracle-disappears

(Apologies if already posted).

May 23, 2014 at 10:29 AM | Unregistered CommenterCassio

As I posted on unthreaded, I see no sign of the BBC changing its stance on "controversial" fracking.
BBC

May 23, 2014 at 10:32 AM | Registered CommenterPhillip Bratby

And now we have the High Court shutting down a £19 Million Carbon Credit Investment Scheme!

http://www.fundweb.co.uk/news-and-analysis/regulation/high-court-closes-19m-carbon-investment-scheme/2010552.article

OK - so those that bought at such obviously inflated prices could be said to have been stupid.

But the last para is telling:-

"Last year, a survey of 125 carbon investors by the Financial Conduct Authority showed not one has made any profits through investing in the credits."

Now there is a surprise.............................

May 23, 2014 at 10:42 AM | Unregistered CommenterDoug UK

Rhoda: "...and the BBC better slide over to be onside and on message."

Maybe Theresa May can be persuaded to take 'em on, now that she has given the Police Fed a going over. Now that, I'd pay to see.

May 23, 2014 at 11:03 AM | Registered CommenterHarry Passfield

A 'wake-up call', Tiny? R4's TODAY this morning were still referring to the 'controversial' process of fracking. They have no idea of balance and scale. After the horrible death toll in the Turkish coal-mining disaster I would have thought that mining for coal could (with understatement) be called 'controversial'.

May 23, 2014 at 11:08 AM | Registered CommenterHarry Passfield

Harry Passfield, a wake up call doesn't mean that they're fully awake. The changes at the BBC may just be a realisation that gas isn't as bad as coal on their scale and are making the best of a bad lot. As for controversial, any kind of industry in the Weald would be considered controversial. Industry, if we have to have it at all should be done somehwere else /sarc.

May 23, 2014 at 11:37 AM | Unregistered CommenterTinyCO2

Maybe Theresa May can be persuaded to take 'em on, now that she has given the Police Fed a going over. Now that, I'd pay to see.
May 23, 2014 at 11:03 AM | Registered CommenterHarry Passfield

But would you pay £145.50?

As others have noted, the BBC is today still using the "controversial" word to describe fracking. This is the organisation of self appointed technical experts who wasted £100m on their Digital Media Initiative, something they should be good at.

May 23, 2014 at 11:48 AM | Unregistered Commentermichael hart

If it was a balanced piece then heads will probably roll. Maybe all the usual suspects will complain.

I always think that people who depend on the BBC for all of their news are uninformed about half of what is going on and misinformed about the other half.

May 23, 2014 at 12:07 PM | Unregistered CommenterSchrodinger's Cat

Not sure the article is quite as balanced as you think, BH; note the screen filled with machinery (that’s how it’s going to be, folks!); the rather ill-informed home group (four lorries an hour! Gasp!); the one – note the emphasis on the one – couple who are for the idea. Also, note the absence of any mention of those sites in the UK where fracking has been on-going for several decades – Wytch Farm being probably the most well-known, and that is fracking under some of the most expensive real-estate in the country. I suppose it is about as balanced as the BBC will ever achieve.

May 23, 2014 at 12:42 PM | Registered CommenterRadical Rodent

Not really balanced at all. Scenes of idyllic countryside, cricket fields etc. with the unspoken implication that this was all going to be wrecked. As evidenced by the American scenes of machinery and American landscapes. As noted the ill informed group (no questions such as would you rather have loads of wind turbines? or putting them right about the difference between initial drilling and extraction.) The underlying suggestion that it was all about money and whether people could be bought off - i.e. subdue their principles for filthy lucre. Etc. etc. Frankly I find watching almost anything on the BBC with its profoundly ignorant presenters speaking with lofty condescension to us peasants not something I voluntarily undergo. (And what a wimp from IGas, agreeing with the looney Lucas.)

May 23, 2014 at 1:10 PM | Unregistered Commentermike fowle

I only saw a bit of the Newsnight piece last night. What struck me was the way that all the subliminal lies that have been put out about fracking have built opinion. There was the couple who have been ostracised for allowing a well on their land and then there was the group filmed in someones living room that were just against it, they didn't seem to explain why they were against it, maybe I missed that bit.

May 23, 2014 at 1:17 PM | Unregistered Commenterjohn Lyon

Yep - Philip/Harry - BBC Breakfast autocue obviously contained the obligatory word 'controversial'...
They just can't mention 'fracking' without it...

May 23, 2014 at 1:41 PM | Unregistered Commentersherlock1

On today's BBC TV News at 1:00pm, Harrabin's report on fracking showed the discredited 'Flaming Tap' clip.

May 23, 2014 at 1:49 PM | Unregistered CommenterJoe Public

Joe Public: It also showed a massive drilling rig, not a well-head. Even worse, it gave the last word to that Green Party woman, Caroline Lucas, telling us we need clean renewables (or some other green crap).

May 23, 2014 at 2:13 PM | Registered CommenterPhillip Bratby

The problem with the media coverage is still a bias against the 'dangers' of fracking even as the lousy economics outside of small core ares is being ignored. The US has a great deal more experience in shale production and is still looking at capital destruction as most production is not economic. Not only that but the government agencies that were leading the shale cheers are now quietly reducing their estimates of how much oil and gas can safely be extracted economically. As predicted the IEA downgraded its California estimates by 96%. The problem was not the amount of oil and gas in the formation because we are quite certain that the formation is rich with hydrocarbons. The problem is economic extraction. Shale formations in California do not look like formations elsewhere as pressures have created folds that cannot be exploited in the typical manner. While that was something that the IEA should have realized early in the game the pressure to hype up energy independence proved too great for the geologists.

Sadly, the Bakken data is showing an even scarier story. We know that the Bakken has some great wells in its sweet spots and that those wells are very profitable. The trouble is that the profitability of the formation as a whole has been in doubt given the fact that primary shale producers were unable to generate positive cash flows or drill wells with production profiles that matched the theoretical estimates. The latest data (https://www.dmr.nd.gov/oilgas/stats/historicalbakkenoilstats.pdf) tells the tale for anyone willing to pay attention. We see that the last month for which data is available, March 2014, had 7240 active wells that produced an average of 126 bpd. That stat does not tell us what we really need to know because we do not know what the decline curve looks like and what the depreciation schedule for each well should look like. But a bit of logic points out the problem for the shale promoters. A well costs a few million to drill without accounting for the land acquisition and other costs. And each well produces the highest rate in the first few days of operation and as it ages production declines. So why is the data showing a problem? Well, if we go back two years to March 2012, we see that the production rate was 120 bpd ant that came from only 3688 active wells. This means that even though the number of new high production rate wells doubled the average rate went down. The math does not support the argument that shale wells will produce for decades and over their lives they will generate enough revenue to make the production economic. You would think that people who could go through the temperature data and figure out where the 'experts' went wrong could do the simple math necessary to see what the shale data is telling us.

Let me note again. Some shale formations make sense. They can have wells that are fabulous and will provide a great return to investors. The problem is that shale in the aggregate makes no sense and cannot be a solution to our energy problems.

May 23, 2014 at 2:19 PM | Unregistered CommenterVangel

I thought there was still a subtle (and sinister) bias against fracking, tipping people off about how to oppose it, via the law and via intimidation. Was hoping that one of the locals interviewed would say "We locals will decide, everyone else can frack off".

May 23, 2014 at 2:36 PM | Unregistered CommenterMikky

I have had a quick skim of the BGS report. It actually seems quite pessimistic about possible large scale production.
Have a look at table 3 on Pages 6 and 7, (16 and 17 of the pdf counter) several of the measured parameters are outside the range considered viable in North America. In particular Oil yields and oil saturation indices seem low.
Obviously free oil has been formed as it is being produced from conventional wells in the area, and they do mention the possibility of "sweet spots"

This is from Page 1 (page 11 on the pdf counter)

None of the Jurassic shales analysed by Rock-Eval methodology in the Weald Basin has an ‘oil
saturation index’ (S1*100/TOC) of greater than 50, i.e. much of the ‘oil’ may be physically associated
with kerogen, rather than present in pore space. This is low in comparison to shale oil producing
areas in North America, so it may be that only limited amounts of shale within the Jurassic of the
Weald Basin have any potential to produce oil in commercial quantities. However, after correcting
for the evaporation of light hydrocarbons since the sample was taken, it may be that some horizons
within the Mid and Upper Lias, lower Oxford Clay and Kimmeridge Clay exceed the 100 required for
the oil to be ‘producible.’

On this basis I wouldn't want to invest in a well just yet.

May 23, 2014 at 3:02 PM | Unregistered CommenterSteve Brown

Seems old Harold Macmillan had it right all along: "Events, dear boy, events".

This oil find is simply too big to ignore.

A marginal find that could in theory provide a few years supply could more readily be waived away. A potentially nation-changing quantity that ticks box after box - local jobs, energy self-sufficiency and security, balance of trade payments, exports, expansion, growth and so on, well that is another thing entirely.

Whichever political party leaves it in the ground will be leaving a £multi-billion, wealth and job-creating open goal for their rivals to exploit. Not gonna happen.

Only a matter of time before this gets going, hence the BBC (through gritted teeth) is now re-aligning itself. Splendid.

May 23, 2014 at 3:07 PM | Unregistered CommenterCheshirered

Vangel
History tells us the amount of shale gas produceable was grossly underestimated in the USA. The reason producers are not making enough money is because they are producing too much. That may be temprarily bad for them but it is still good for the consumer and for industry. As LNG exports increase so will profits. In other words it is far too early to be so pessimistic about shale.

Of course you may just have visited the Guardian echo chamber where pessimism is a rite of passage. Good grief some of them don't even seem to know that the electricity they use to write their gobbledegook is 80% from fossil fuels - plus 100% of transport and heating fuels. We better hope that there is enough gas down there because the alternative is so far not here and not even on the horizon.

May 23, 2014 at 3:56 PM | Unregistered CommenterJamesG

Cassio - please note the reference in that article to 'current production technology' - not much of anything that's been done in any shale deposit in the past couple of years would have been possible with the 'current production technology' of a decade ago.

As the low-hanging fruit dwindles the drillers will have to be more clever, this has pretty much always been a given, the question is how fast the hardware and techniques can get there.

May 23, 2014 at 4:04 PM | Unregistered CommenterJEM

The Guardian claims that the BGS conclusion is that "there is unlikely to be any shale gas potential":
http://www.theguardian.com/environment/2014/may/23/no-shale-gas-potential-weald-british-geological-survey-oil

The quote is apparently from the BGS report, but I can't find that phrase in the report. What the report's conclusion does state is that "there is no significant Jurassic shale gas potential in the Weald Basin". There is, however, some oil.

May 23, 2014 at 5:12 PM | Unregistered CommenterSara Chan

Vangel said:

Well, if we go back two years to March 2012, we see that the production rate was 120 bpd ant that came from only 3688 active wells. This means that even though the number of new high production rate wells doubled the average rate went down.

You mean 140 bpd but I understand the point you are making. The average per well does drop but the number of wells goes up loads. There may be a regulatory reason for the falling average - In some areas, in a bid to reduce gas flaring, wells that are not connected to gas capturing system are required to have their output restricted. See this page for details.

Vangel said:

Let me note again. Some shale formations make sense. They can have wells that are fabulous and will provide a great return to investors. The problem is that shale in the aggregate makes no sense and cannot be a solution to our energy problems.

The above applies in spades to wind and solar energy yet the subsidy programmes continue.

That isn't reason enough to ignore the deposits and explore how to extract the gas and oil. We won't know how economical it is to do *in the UK* until someone tries it. If investors want to risk losing their shirts then we should be relaxed about letting them. If they find nothing they have spent their money. If they find some at uneconomical costs it can sit there waiting until the costs come down or prices rise enough to make it profitable. If they find some at profitable costs the increased supply will help to reduce prices.

May 23, 2014 at 6:26 PM | Unregistered CommenterGareth

Vangel:

The oil business, government and stockmarket, exaggerates. Your caution is justified. As to the North Dakota Bakken, I've been monitoring this closely, using government data (North Dakota Production). Calculate the monthly change in producing well numbers and monthly change in production rate, and you sill find that there is a declining percentage prod well count as the field grows (currently about 32% per year) of about 12%. This means that 20% of the new wells go to replace an equivalent of 20% of the previous years producing wells, i.e. the annual decline rate is 20% (at a >7000 well maturity).

Production increases only happen in the North Dakota Bakken play because the drilling rate exceeds the production decline rate, but not by much. The drill rate is about maxed out by 145 wells/month, or 1740 per year. When 1740 wells per year equals 20% of the field numbers, production won't climb. That number is 8700 wells. Allowing for some better "pods", then that number is around 9500 - 10000 wells. Initial wells decline >30%/annun.

The North Dakota Bakken is SO different from the English/EU situation it does not bear good comparison. Sill, if we think of 4.4 billion bbls IN PLACE, with a 15% Recovery Factor (tough stuff, this shale oil), we get 660 million barrels recoverable ... over 40 (+) years. In the beginning, fully developed, 100,000 bbl/day.

How much oil does Britain consume each day?

May 23, 2014 at 6:32 PM | Unregistered CommenterDoug Proctor

Why are some people so keen to play down the potential of shale gas/oil and then use that as the excuse for not bothering to try and exploit it? They seem very sure of their predictive capabilities.

May 23, 2014 at 6:51 PM | Unregistered CommenterSteve Jones

Doug Proctor:

The North Dakota Bakken is SO different from the English/EU situation it does not bear good comparison. Sill, if we think of 4.4 billion bbls IN PLACE, with a 15% Recovery Factor (tough stuff, this shale oil), we get 660 million barrels recoverable ... over 40 (+) years. In the beginning, fully developed, 100,000 bbl/day.

How much oil does Britain consume each day?

WP says about 1.6 million barrels. Also, for comparison, the North Sea produced about 800,000 barrels a day in 2013 and its output may decline by c. 70,000 for this year. Still, 100,000 barrels a day is certainly well worth having, and it would be a nice surprise given that Bowland wasn't supposed to have any oil. And of course the recovery rate might be somewhat higher, especially in the long run and because of the economics of oil as opposed to gas.

May 23, 2014 at 8:17 PM | Unregistered Commenteranonym

JamesG writes:

History tells us the amount of shale gas produceable was grossly underestimated in the USA. The reason producers are not making enough money is because they are producing too much. That may be temprarily bad for them but it is still good for the consumer and for industry. As LNG exports increase so will profits. In other words it is far too early to be so pessimistic about shale.

this is not true. Conventional gas can be quite profitable at $5 but shale gas needs closer to $10 once all the costs are accounted for. The simple fact is that the economics depend on the energy content in the gas produced and the energy content involved in the entire production process. At this time that is negative outside of the core areas. And I have no clue how it is that we can say that it is too early when we are looking a nearly a decade of production and depletion rates that already recovered most of the gas that will ever be produced from the wells that have been drilled without producing a positive return. LNG will not really help because by the time that the LNG terminals will be in operation most of the shale formations will be dry. When the EIA, which is typically very optimistic, writes off 96% of the oil in the supposedly 'richest' formation you know that there is trouble. And when the producers are selling off pieces of themselves to close the funding gaps you know that the game has just about run its course.

Of course you may just have visited the Guardian echo chamber where pessimism is a rite of passage.

I believe in realism, not optimism or pessimism. From what I see the 'shale as saviour' argument is based on faith, not sound accounting. Yes, wells in core areas are great. But they are rare and the typical well in a shale formation is a destroyer of capital.

May 23, 2014 at 9:52 PM | Unregistered CommenterVangel

Gareth wrote:

You mean 140 bpd but I understand the point you are making. The average per well does drop but the number of wells goes up loads. There may be a regulatory reason for the falling average - In some areas, in a bid to reduce gas flaring, wells that are not connected to gas capturing system are required to have their output restricted. See this page (http://northdakotapipelines.com/natgasfacts/) for details.

Yes, the decline was from 140 bpd to 120 bpd even though high IP wells were drilled and the count of operating wells doubled. The reason for the drop is not regulatory but geological. Shale wells have a large depletion rate; more than half the oil that will ever be produced is produced in the first two and a half to three years. The problem is that the accountants use an estimated recovery rate that is higher than what the production data suggests and during the period that half the oil is produced they are only depreciating a quarter to a third of the cost. What this means is that we will see a massive wave of write-offs once the divergence is no longer possible to ignore. I think that we get that when the Bakken production turns down some time in the next year.

"That isn't reason enough to ignore the deposits and explore how to extract the gas and oil. We won't know how economical it is to do *in the UK* until someone tries it. If investors want to risk losing their shirts then we should be relaxed about letting them. If they find nothing they have spent their money. If they find some at uneconomical costs it can sit there waiting until the costs come down or prices rise enough to make it profitable. If they find some at profitable costs the increased supply will help to reduce prices."

The economics depend on a number of factors but unless there are very large sweet spots in the UK formations it is very likely that no money will be made by investors from the fundamental, production based side of shale. Of course, if people want to gamble and play the speculative angle there could be a nice profit for those that get out before the party ends.

May 23, 2014 at 10:01 PM | Unregistered CommenterVangel

May 23, 2014 at 10:01 PM | Unregistered CommenterVangel

Vangel, at what price would shale gas (or shale oil) be profitable to extract?? The economics of cost of extraction to price you can sell it at seems pretty simple and well defined. A ballpark figure would be good.

May 23, 2014 at 10:14 PM | Unregistered CommenterRob Burton

Doug Proctor writes:

"The North Dakota Bakken is SO different from the English/EU situation it does not bear good comparison. Sill, if we think of 4.4 billion bbls IN PLACE, with a 15% Recovery Factor (tough stuff, this shale oil), we get 660 million barrels recoverable ... over 40 (+) years. In the beginning, fully developed, 100,000 bbl/day."

The problem comes down to the economics. If we need to invest more energy to get the stuff out than the energy content in the stuff that we produce all we are doing is destroying capital. That has been the reality of shale production.

It is interesting to me how the EU tends to follow the US over a cliff. After all it was the EU's obsession with American collateralized debt obligations that brought down the European banks. Instead of going its own way on foreign policy the EU has followed the American interventionist model. NATO should have been dissolved once the USSR fell apart. Instead its mandate has been changed and expanded to a point where it acts as al Qaeda's airforce in Libya, and banker in Syria. Instead of telling the US to mind its own business the EU stood aside as the Americans spent billions trying to destabilize Ukraine. And when Putin responded as expected the EU sanctions simply pushed the Russians to the East where they can form alliances with India and China and to the Middle East where they have agreed to build several reactors for Iran's power generation utilities. How does it help the UK to have Russia reduce its gas exports and to help prop up a failed Ukrainian regime that will need billions of handouts just to pay its bills? The shale story is something else that will lead the EU down the wrong path. As European nations shut down industries because of soaring prices of energy they risk severe shortages because they wasted all this time, money, and energy fighting about fracking. Let the energy companies see if they can produce shale gas at a profit. If they can't look elsewhere before it is too late to come up with substitutes that will allow the standard of living to be maintained at a reasonable level. Sadly, I just don't see this working out. The few great wells will not make a dent in the shortfalls and the UK and EU governments will be scrambling for solutions. (If things play out to schedule uranium or coal should do quite well some time in the next few years.)

May 23, 2014 at 10:26 PM | Unregistered CommenterVangel

It amuses me, this talk about the economics of fracking, and how it doesn't make sense, no-one will make money at it etc. Remind me again whose money is currently subsidising the windmills, solar panels and bio-digesters that are springing up all over the country? And whose money will be at risk in drilling all these oil and gas wells for fracking? Would that be my money paying for the renewables, and voluntary investments paying for the wells?

Only the Left could manage to simultaneously complain about private companies making too much money (Banks, utility companies, supermarkets etc etc) and then rubbish something on the grounds its not profitable. Of course if it turns out to be uber-profitable, they'll complain about that too.

May 23, 2014 at 10:27 PM | Unregistered CommenterJim

Yes, Jim, the same arguments appear every time shale oil or gas makes some headlines in the UK. There may be something valuable there, or there may not. But I don't see why private capital should be prevented from finding out, within a sensible regulatory framework.

At the moment it doesn't seem to me that we would get a sensible regulatory framework from Clegg or Milliband's parties. Cameron may be making some occasionally encouraging noises but I don't yet trust him to do more than make noises. There is a general election due next year.

May 24, 2014 at 12:09 AM | Unregistered Commentermichael hart

Chandra, have you changed your name again Vangel?

Iain Stewart, 'balanced' on that sort of rating by comparison, it must make Nick Clegg a Eurosceptic.

You have to read the subtext with such as these, and as with anything which is slightly on topic pertaining to hydraulic fracturing the implication - is bad, to very bad and 'we' Britain, EUrope, the WORLD - shouldn't be dirtying our precious hands with it.

Here endeth the fracking lesson - according to the BBC.

May 24, 2014 at 12:21 AM | Unregistered CommenterAthelstan.

May 24, 2014 at 12:09 AM | Unregistered Commentermichael hart

Yes Jim and Michael, I have my doubts about the economics of shale gas - but surly the economic numbers themselves should be straightforward and pretty good estimates out there somewhere for people to discuss. I just never actually see the numbers themselves with the 2 'sides' nowhere near meeting with each other on their claims.

May 24, 2014 at 9:49 AM | Unregistered CommenterRob Burton

Athelstan: unlikely. Vangel does display a certain amount of rational understanding of the real world, not the politico-tinted ideas of Chandra. The shale gas “revolution” in the USA does have the feel of a gold rush about it, and so there will be many casualties, who will lose large amounts of their own money but very little of the tax-payers’. The stricter regulations in the UK should minimise that problem, though may not eradicate it; fingers will get burned, and the tax-payer will be hit. Vangel fails by dropping out of the accountancy course too early; she/he stayed for the “spend nothing and rake in all the profits” lecture, then bunked off. Following Vangel’s logic, the Alaskan fields would still be untouched, as would the North Sea, and probably even Wytch Farm; indeed, unless one day you’re hunting for some food when up from the ground comes a-bubbling crude, then it’s a waste of money.

May 24, 2014 at 11:33 AM | Registered CommenterRadical Rodent

In Texas, we are about ten years into the current oil boom, based on shale.
Consumer prices are down for gas, employment with good paying jobs are up.
Oil companies and their vendors are rowing hiring.
Tax revenues are way up.
Roads in rural shale areas are getting worn out faster by use, so civil engineering companies are busy fixing them and building new ones.
Out of what is now many thousands of wells no ground water contamination has taken place.
Over a 50 plus year period of time for modern fracking, no ground water contamination has happened.
Many people in Texas thought fracking and horizontal field development was foolish and would not last long.
They are now quiet here, but perhaps have moved over to Europe.
As has been pointed out, if there is a great failure at the end, it is private money, not tax payers, who suffer the losses.
Wind and solar, by contrast, were hyped as great wonders but produce almost no jobs and have been documented to cost jobs. Wind and solar depend explicitly on forced premium pricing for sales to utilities and tax payer subsidies for development. Wind and solar occupy and disturb huge amounts of land. Fracking does not destroy large swaths of land.
The opposition to fracking is so lacking in supporting facts as to raise questions about the opponents.

May 24, 2014 at 11:48 AM | Unregistered Commenterhunter

"the EU tends to follow the US over a cliff."

Vangel, there's a job waiting for you as a part of Putin's inner circle. With opinions like yours, you'll make a great fit.

Naturally you will look all wide-eyed and protest "but I'm only being realistic". I'd rather call it a deliberate attempt to undermine. You, my disingenuous friend, overplayed your hand with that last comment. You are truly dangerous.

And now, back to your day job ... on RT perhaps?

May 24, 2014 at 12:38 PM | Unregistered CommenterJerryM

"Vangel, there's a job waiting for you as a part of Putin's inner circle. With opinions like yours, you'll make a great fit."

How ironic. I used to get the same type of, 'why do you hate America,' comments when I pointed out that the Fed was blowing up a real estate bubble. I get the same line again by people who don't understand that the shale scam is also dependent on the Fed's liquidity injections. Instead of making accusations that they cannot support I suggest that you find any primary shale producer that has managed to generate positive cash flows from operations. I think that Encana, Exxon, and BHP shareholders would have been pleased if their management groups had not purchased assets that had to be written off because they were destroying capital.

May 24, 2014 at 2:06 PM | Unregistered CommenterVangel

Vangel,
It is a bit of a mystery to me why your views should be resisted here. Debated, OK, but resisted as cant? The housing invented security bubble we had here in the states was obvious to anyone paying attention as early as 2000. I didn't know about the collateralized mortgage-based securities, but we did see people getting mortgages for units in our condominium who clearly weren't up to the financial burden - and it was obvious from their reluctance to pay the monthly fees.

Prices were rising very fast. We sold out in 2003 - missed the peak but are happy we missed the bottom. The other owners in the building had to cover the fees of the 30% who defaulted.

But that was housing and we were all investors - could see, if we wanted to, what was going on.

The Oil Patch is a bit different because I suspect that the actual experience of the smaller drillers and their investors is not visible. Back in the late '70s, you could buy an eighth of a well, pay for drilling, then pay your share of the development costs and then some more development costs and still end up not recovering your money - and with everyone honest. It was private, and people who lose money in their investments tend to keep quiet about it, or if they have the wherewithal keep rolling the dice.

I would think that the action of the large developers, the BPs, Shells, and Exxons would be instructive as to how sure a thing oil sites which required frakking actually are.

Thanks for continuing to comment here. After all, this is a skeptic blog, isn't it?

May 24, 2014 at 2:24 PM | Registered Commenterjferguson

Someone wrote:

"Vangel, at what price would shale gas (or shale oil) be profitable to extract?? The economics of cost of extraction to price you can sell it at seems pretty simple and well defined. A ballpark figure would be good."

If you add up everything, which means land acquisition, overheads, drilling etc., you are looking at around $7.50-$11 for gas and over $100 for oil as long as the costs remain the same. We knew this many years ago when the CEOs were telling us the actual costs because they were expecting $15 gas. The UK costs would be quite different because a lot depends on acquisition costs and royalties and the efficiency of the services sector. It is easy for the US companies to move from conventional drilling to fracking because everything was in place and the supply chain could handle it. Rigs, compressors, manpower, etc., were all available. The UK needs to let the people who want to use fracking technology to unlock shale deposits try it and those that stick to the core areas of good formations should do fine. But I doubt that the average well in the typical shale formation will ever be profitable.

May 24, 2014 at 2:53 PM | Unregistered CommenterVangel

Gareth, Jim:

It should be evident that it's perfectly possible that maybe solar and wind are a bad idea, and a large proportion of shale development is also a bad idea.

jferguson:

It shouldn't be any mystery. It's human nature to want to believe that the partisans on my side are calm, rational and honest where the partisans on the other guy's side are not; however, human nature alongside the law of averages dictates that on the whole they probably aren't.

May 24, 2014 at 5:43 PM | Unregistered Commenteranonym

anonym,

I think the problem here is that we don't know whether Vengel is a partisan. Maybe he isn't. Likely the inverse of what you suggest also applies.

May 24, 2014 at 7:42 PM | Registered Commenterjferguson

"we don't know whether Vengel is a partisan"

Right now I'm knee deep in despair over the effect that some very sophisticated state propaganda is having on usually intelligent friends and family in Russia. It's immensely clever and calculated, not least because it's oh-so-superficially reasonable.

Vangel not partisan? Nah. The profile fits far too well.

May 24, 2014 at 8:49 PM | Unregistered CommenterJerryM

Vangel is a party of one, conflating the Central banks to a master plot that helps fracking interests. If we scratch under the surface will we be surprised to see that he thinks it is a Jewish/ Bilderburg plot?
There was someone else who used to post here not so long ago with the same static, stale and inaccurate assertions about how fracking can't work, too expensive, blah blah blah.
All it takes to buy into that sort of fantasy is to ignore reality and history.
As to the real estate bubble, a *lot* of people saw that one coming, so no extra points. I was out or short by August 2007 seeing the tsunami on the wall.
Again: If fracking is tried and does not work for the UK, its failure will cost the people there less than the success of wind and solar.
But unless physics and engineering work differently in the UK than everywhere else fracking has been used over the last >50 years (including ironically parts of the UK), then it will turn out OK.
The faux reasoning behind opposition to even attempting fracking in the UK would be worth a study or two. Perhaps a history of how a progressive assertive people who opened frontiers around the world were forced by a vocal manipulative minority into being afraid to even try.

May 24, 2014 at 9:11 PM | Unregistered Commenterhunter

It has to be re-stated over and over again - UK shale exploitation is being deliberately sabotaged by vested interests - both economic and ideological. At least half a dozen fields should now have been evaluated - and there's diddly squat happening. The volume of disinformation about shale gas on every level is enormous - the BBC still feeling safe wheeling out flaming taps indicates the confidence of the antis.

This isn't paranoid conspiracy it's in plain sight, enabled by corrupt, innumerate and profoundly ignorant "public servants" supported by most of the UK MSM.

Something has got to give....

May 24, 2014 at 9:44 PM | Registered Commentertomo

hunter wrote:

"Vangel is a party of one, conflating the Central banks to a master plot that helps fracking interests."There was someone else who used to post here not so long ago with the same static, stale and inaccurate assertions about how fracking can't work, too expensive, blah blah blah

Proving the skeptics wrong is easy. All you have to do is to point to primary shale producers who can generate positive cash flows from operations. I have been looking for the better part of a decade and have yet to find such producers. Where are they?

All it takes to buy into that sort of fantasy is to ignore reality and history.

History tells us that established companies that cannot generate positive cash flows from operations and need to keep borrowing to maintain their production levels are unlikely to work out for investors. Note that I am not talking about new players expanding very rapidly but about companies that have been around for years and are the established leaders in their industry. Why do you think that conventional players keep having to write off much of the value of their shale purchases? Don't those write-offs show a problem that is not being acknowledged?

May 25, 2014 at 2:09 PM | Unregistered CommenterVangel

JerryM writes:

Right now I'm knee deep in despair over the effect that some very sophisticated state propaganda is having on usually intelligent friends and family in Russia. It's immensely clever and calculated, not least because it's oh-so-superficially reasonable.

OK, I'll play. What propaganda are you thinking of and which state produced it?

May 25, 2014 at 2:11 PM | Unregistered CommenterVangel

Well Vangel I'm always prepared to be educated. Pray tell us what are these 'alternatives' you are thinking we should be investing in because I've been involved in power engineering for 30 years and I must have missed it. I used to argue for windmills, wave energy and solar panels when everyone else poo poohed the idea and when the current faux-greens were buying Chelsea tractors. I've since seen the economic realities of those. Sure solar power is now ok if you live in Spain - or it was until they started to tax it. I used to be optimistic about fast breeder reactors until the jig was eventually up with Superphenix, PWR's might be ok if do like France but we sold off our capability. And anyway Uranium is likely scarcer than coal. Offshore wind has more uptime than onshore but is hugely more expensive. Nuclear fusion will arrive maybe in 2070. What else is there and how much will it cost? As it stands gas extraction costs the taxpayer nothing: Tax breaks being just a reduction in money in rather than increased money out. So what does your economic sense tell you? Negawatts perhaps? Biogas? Geothermal from Iceland? What have we missed?

May 25, 2014 at 4:21 PM | Unregistered CommenterJamesG

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