Bishop Hill FT on shale gas
Apr 23, 2012 Energy: gas The FT has a good review article on shale gas today. It's pretty balanced overall, but marred by the presence of Josh Fox, the director of Gasland. I wonder if the article's author, Sylvia Pfeifer, was unaware that his movie has been shown to be a fraud.
The article closes with this quote from Lord Browne, the former head of BP.
It is always a good idea to explore for and develop resources within national borders. It increases security, tax take, jobs and it might even reduce power prices,” says Lord Browne. “Nothing is perfect. This is pretty good.
Only might reduce power prices? Shale has caused power prices to crash in the US. It will be a stunning indictment of the political classes in the UK if they manage to engineer things over here in such a way that shale produces no changes in prices at all. I'm sure that is their intention though.
Reader Comments (24)
"It will be a stunning indictment of the political classes in the UK if they manage to engineer things over here in such a way that shale produces no changes in prices at all. I'm sure that is their intention though."
The political classes, of all colours, are so seperated from the general public that they no longer care about our welfare, opinions or even - in a lot of cases - votes.
The whole point of becoming a member of such classes is to get on the gravy train asap. If you can get into the 1st class carriage without ever having done a real job you are seen as a "high flyer" - see the current cabinet or shadow cabinet for large numbers of worked examples.
Us hardened cynics are quite convinced that exploitation of local shale gas will only, if at all, SLOW the increase in our fuel bills.
As these have shown no proper relationship to the wholesale price of gas in the past, why on earth should anyone think that they will do so in the future?
Of course the "State" has no intention of reducing energy costs because to do that would reduce the reliance of the people on the "State". And if the people have less reliance on the "State" then the "State" will find it harder to justify a need for such a large body of pointlessness and inefficiency!
Regards
Mailman
"It will be a stunning indictment of the political classes in the UK if they manage to engineer things over here in such a way that shale produces no changes in prices at all. I'm sure that is their intention though."
The current DECC assumption is that shale will not change gas prices.
Because any shale extracted will all be exported you see?
It's quite mind boggling stupidity. Gas is, after all, fungible.....
"But the price is set by the world price" (ie if we can sell it for more abroad . . ."
When the North Sea Oil bonanza was at its height the price of oil in the UK was still considerably higher that it was in the United States. Part of the reason was the higher cost of extracting the oil but the main reason was tax. As far as the government was concerned North Sea oil was a milch cow.
Where did all the money go?
Another reason why most British politicians won't want to see shale gas causing prices to tumble is that they want us plebs to pay the price of "fighting climate change." Taking such decisions makes politicians look important and helps them to justify their existence.
It is worth considering the price of natural gas in the U.S.
Imagine if U.K. prices were similar to U.S. prices. What effect would that have on the U.K. economy?
This also belies the claim that there is a “world price” for gas.
Shale gas is a game changer because allied with the recent paper by MacKay about the mandatory need for vast pump storage to get wind to save any CO2, the drive for the windmills has stalled.
These were of course always a political statement, control by the EU Marxist state and the use of the UK as a milch cow for carbon offsets, itself a form of neo-colonialism to make the bureaucrats and politicians rich whilst killing billions in the Third World and halving the UK population.
Douglas J. Keenan
I understand "spot price" to be the amount paid by the gas reseller. If so it won't include distribution, admin and taxes, which are paid by the householder. If I'm right, the WSJ is making a rather weak comparison.
Why can't the pump that evil Co2 in to the ground as part of the fracking process instead of using sand ABD all those other chemicals? :)
@ TDK
Good point. With some googling, I found that the U.S. Energy Information Administration publishes prices for natural gas at
http://www.eia.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm
The residential prices listed there are currently about $9.50 per million BTUs. So I agree, the WSJ comparison is misleading.
Mailman,
Gas is compressible. Hence no good for fracking - you need an incompressible fluid.
Liquid CO2 might work but very, very expensive compared to the freely available (at least where I am now) incompressible fluid - water.
Don't assume that US shale gas will always be cheap - it looks like moves are afoot to impose government controls on the industry:
http://www.canadafreepress.com/index.php/article/45984
And remember the greens HATE the thought of cheap, plentiful energy...
Bear in mind the law and the incentives.
In the US, the landowner owns underground resources and has an incentive to extract them (whatever the disruption etc). Drilling licenses seem to oblige the driller to extract gas. The result is that much gas has been extracted and that prices have collapsed. If it goes below the cost of production it is not sustainable.
In the UK, the state owns the resources and so reaps the benefit, not the landowner or local community (which only get the disruption and risk (if you buy that)). If you think that communities that reject windmills are going to accept fracking, you might be disappointed. Ask yourself what you would think if your area was to be the lucky recipient of fracking. My guess is that BH hosts plenty of nimbys.
Mailman, Billy liar
I have pumped liquid CO2 fracs several times. Pumping water at 7000 to10000 psi and 3000 to 4000 gpm is dangerous work. But pumping a supercooled liquid that converts to gas at ambient temperature and pressure is a lot hairier.
DavidCobb: if you release the pressure from liquid CO2, it'll turn into dry ice.
mgdnn
No, if you release the pressure most of it turns to gas (think fire extinguisher, only really big).
With shale gas turning up in just about every country's back yard, a world price for shale may be a redundant concept. Only some sort of global rationing (uh-oh) could contrive one.
Simple,
Lucky the UN is on hand to create that "world government" based on the alarmism and creationism of Mann Made Global Warming (tm)!!!
Regards
Mailman
Just my usual note of caution amid the euphoria - if you go and look at what the North Dakota government think - and I covered it when I wrote about the foolish cornucopian ideas that Citicorp have been pushing the production will still not last that long (declining before the end of the decade) and unless the price of natural gas rises in the US rises a fair bit there won't be a whole lot of folk profiting from the glut (apart from the users that is, who are saving on relative cost).
Remember that the gas producer is selling at around the Henry Hub price which is currently below $2.00, and the income at that price is supposed to pay for a well that may have cost $8 to $10 million. But the hype has always beaten the reality.
Heading Out...if the supplier sells at less than marginal cost....then he should not be in charge...but that would go for many of my former bosses!
diogenes: as I mentioned above, at least some drilling licenses seem to oblige the driller to extract gas, whatever the price. If drilling was planned and committed to when prices were higher, the gas price could now easily be below the marginal cost.
diogenes: bitbucket is right. US regs frequently call on the exploiter of a resource to pump quasi continuously. This has helped drive the shale gas price so low in the states, without helping shale gas producers at all.
In UK, shale gas if abundant will compete with imported LNG and pipeline gas and might well do so mostly on security of supply arguments, without needing to compete much on price, I suspect.
Interesting discussion about the role of CO2 in hydraulic fracturing.The gent who posted about the compressibility is dead right. Compressed CO2 (gas) has been used for donkey's years to "gas lift" crude oil in enhaced recovery operations wherein its compressibity is a virtue, but for fracking shale, no use whatsoever. Let's also remember that CO2 is not cheap to produce on a huge scale. The individual unit processes for absorbing CO2 from a mixed gas stream by an amine solvent followed by regeneration, or release, of the CO2 from the solvent by heat is basic chemical engineering, as is the subsequent compression of the CO2 to inject somewhere, but the reasons why these technologies will probably never be used for "CCS" from power stations are twofold: firstly the volumes of the power station flue gas is times greater than the gas in, say, ammonia production and, secondly, the enemy is the huge volume of nitrogen (from the combustion air) that just passes inertly through the whole process (four times greater than the volume of CO2) making equipment sizes far greater and energy consumption unsustainable.