I'm somewhat intrigued by Damian Kahya's article on shale gas - the one I mentioned briefly yesterday. According to a tweet from Kahya it's unclear if Poyry were discussing the effect of Lancashire shale or European shale on prices. I don't know about you, but I found the text fairly clear - they were discussing the effects of Lancashire shale. Don't get me wrong, I don't think shale exploitation will cause a price collapse as it did in the USA, but an increase in supply will presumably have some effect.
On the same subject, here are some other things that Kahya had to say about shale prices.
UK shale gas is unlikely to be cheap
It’s hard to say for sure – because we are so far from the production stage – but most experts including Bloomberg, the IEA, the EIA and Ernst and Young, appear to think that shale gas production in the UK is unlikely to be anywhere near as cheap as it was in the US. In fact, according to their analysis, the cost of extraction alone may be higher than the current wholesale cost of gas.
That’s partly because UK shales are deeper and geologically more complex than those in the US and because UK shale gas is more tightly regulated – as the Prime Minister himself observed. We also lack the kind of onshore oil and gas infrastructure which made shale gas in the US economically viable.
Now this is a whole different kettle of fish - here we are being led to believe that all these firms like Cuadrilla and iGas are soon going to be running for the hills because the cost of extraction is going to exceed current wholesale prices.
On the face of it, this the case is surely not so clearcut. Why would anyone invest in UK shale if it was likely to be uneconomic? Centrica must have had access to Cuadrilla's test drilling results in Lancashire before they bought into the company. Kahya's take on the issue doesn't pass the sniff test.
Now I've had a glance through some of the documents linked by Kahya and can find little that supports his case. Drilling down, there seems to be a case that UK shale will be more expensive than the USA, but the report involved - from Wood MacKenzie - seems to be paywalled. The press release is here. Does anyone have access to it?
In the meantime, see what you reckon to the documents that Kahya links to, which he says support the case for shale gas being uneconomic in the UK.