Bishop Hill Labour minister talks tosh
Jan 20, 2014 Energy: gas The opposition energy minister Tom Greatrex has an article in the Telegraph (of all places!) in which he talks a lot of waffle on shale gas developments:
Differences in geology, extraction rights and the market realities (including the fact that the UK is plugged into a European market many times larger than itself, whereas the US is currently unable to export shale) mean experts have repeatedly warned that this is unlikely to be the case.
He would do well to take a look at Chris Wright's evidence to the Lords' Economic Affairs Committee last week. Wright told their lordships that the geology of the Bowland meant that it was likely to be at least as good as major shale formations in the US, that the different land ownership rights could easily be overcome by operators making payments to landowners anyway, and finally noted that the US is connected to Canada and Mexico by pipelines too. (It's interesting to note that natural gas prices in Texas, from where gas is piped to Mexico, seem not much different from the benchmark Henry Hub price)
There will be differences for sure, but to say it is "unlikely" that prices will fall is starting to look a bit of a stretch.
Reader Comments (35)
"Labour minister talks tosh"
This is revelatory?
He's only a shadow minister, your Grace, unless he's one of the other kind of minister like the Rev Flowers.
Why is it that shale gas always has to be a "silver bullets for all our energy problems" (or similar), and that if it fails to meet that (impossible) standard, it should not be pursued?
Being Co-Op sponsored he likely is obliged to trumpet this stuff - no excuse though. Just another party hack shinning up the greasy pole.
It'd really be more interesting to know who's working the mouth parts of this empty vessel.
He isn't another Crystal Methodist.
Surely!
The Shawdow Energy Minister studied Economics, Government and Law at the London School of Economics, graduating in 1996. What a surprise - no understanding of any science whatsoever.
Just like Ed Mililband when he was energy minister in the previous government. We can expect a lot more drivel from him in future.
"..... but to say it is "unlikely" that prices will fall is starting to look a bit of a stretch."
Not at all. Prices will not be allowed to fall by any worthwhile amount that might further expose the obscene cost of renewables, we have been told this over and over again. One way or another, by taxation or another charge, the cost to the consumer will be forced up to ensure renewables won't be disadvantaged.
Henry Hub (near Erath, Louisiana) is less than 700 miles from the Mexican industrial city of Monterrey - or rather less than the distance from the Brent oil and gas field to London. Gas from there tends to be piped to the US Eastern Seaboard. Gas from the offshore Gulf of Mexico and Texas may head East to there (and onward), or South West to Mexico - significant quantities are landed near Corpus Christi - so it's easy to see that Monterrey may get cheap gas.
http://www.eia.gov/state/maps.cfm?v=Energy%20Infrastructure
(set just the Natural Gas layer to see how intensive the network of gas lines is)
It was the case that the UK had rather lower gas prices than the Continent when we had a surplus of gas production (including imports via dedicated pipelines from Norway) before production declined in the North Sea. There are limits on the capacity of pipelines to the Continent, and once they are full, any surplus gas has to be dumped or shut in. Besides, the first tranches of shale gas will replace expensive LNG imports, so lowering costs.
Labour's shale policy is to say nothing in particular. They are not being called out on it, and are doing it rather well.
Of course this isn't good for the country, but it saves them alienating voters by taking a position.
What will happen if (as seems likely) they are elected? Ed (a former Environment Secretary, remember) will probably have a delaying review of the environmental rules that will save Labour taking any decisions for a few more years and let us drift further into the mire.
Whether prices fall or not is a question of supply and demand. If there is enough natural gas from Persian Gulf suppliers to induce Russia to compete on price, it will happen. When you add UK shale into the mix, it becomes more likely to see price competition, especially if US shale displaces Persian Gulf shale in places like Japan, and that Persian Gulf shale starts looking for another market. Natural gas doesn't have to be a worldwide market, and at present it isn't, but look out a decade.
The other issue: suppose that UK shale doesn't impact price very much for a while, or maybe not much ever. Would we rather have the jobs in the UK, have the money support local economies? We have to start thinking this way, it isn't like we are an industrial power any more.
Bowland Shale up to 6000ft thick. Therefore much thicker than many shale units in the USA. Bowland, looks very promising.
Correction on my post of 12:35 AM: typed too fast, no Persian Gulf shale, or at least that isn't the geology of the prolific supplies in the Gulf at present. Scuse me!
This just in:
DOG BITES MAN!
Film at eleven.
From the Ecclesiastical Uncle, an old retired bureaucrat in a field only remotely related to climate with minimal qualifications and only half a mind.
I read the article before opening up Bishop Hill and so did not know it was written by a Labour politician. At the time it seemed fair enough mostly being reports of what the energy companies had said, presumably to him. However, now, in the light of my new knowledge, it has to lose some credibility. (What a sad commentary on the state of politics this is!)
The piece reported that the energy companies had low expectations that there would be progress because of difficulties caused by UK planning processes. This is fully in line with the recent American fracking expert's testimony to the Commons Committee that he would not get involved in fracking in the UK because of hindrances due to these processes.
So the light at the end of the tunnel is that the article reported that the DECC was working to establish a regulatory regime that would facilitate progress. But clearly this is going to be difficult because the American made it clear that great flexibility would be required and this will be contrary to the ethos of planning officers and their lawyers who have always sought to tie everything up tightly in attempts to prevent the undoubted scoundrels who do exist out there from getting away with anti-social developments. Moreover, as planning matters are the responsibility of the so-called Ministry of Communities and Local Government, the DECC will probably find themselves mere advisers and any flexibility they propose may well be opposed by the MinComLoGov who no doubt sincerely believe in the necessity of protracted planning processes and who will be unimpressed by pleas that this needs to be different.
My view was that the writer seemed to have a greater grip of reality than do Cameron and the Tory shires. However, I guess that the will to do something worthwhile may be greater in Toryland once they realise that the problems exist - after all they will get the blame when the lights go out..
In a competitive market, supply and demand dictates that prices will fall if supply is sharply increased and demand remains the same. Naturally if the shadow government plans to rig competition in the market then this will not hold true. Not being dependent upon Russia for gas supplies is just a bonus and I genuinely don't understand why the left wants this DANGEROUS situation to continue.
I give you a guarantee that if current policies continue then gas prices in the UK will fall to unsustainable levels just like the US experienced.
Reasons:
Currently popular statements about how much gas we have got are wrong; rather than 50 years supply we actually have several hundred years supply.
The difficulty of extraction in the UK has been massively hyped, as Charlie touched on above; at least in the Bowland shale deposit conditions could not be better and the thickness of the shale is not "up to" 6000 feet it is "in excess of" 6000 feet. Cuadrilla stopped drilling at 6000 feet but the shale went deeper so even they do not know how thick it is.
This thickness of shale means that one well drilled in Bowland will deliver more than 10 times the amount of gas that the best US well can deliver (Their thickest shale so far is 600 feet thick).
Cameron's policy at the moment is to drill everywhere that shale might potentially provide gas/oil so whatever Labour's policy might be when/if they come to power there will be a large number of companies producing or ready to produce gas/oil.
For as long as we continue to give priority to renewables in power generation it will not be economic sense to build new gas fired power plants or to take old plants out of mothballs.
When all the new gas comes on stream therefore, it will not instantly have a large market in the UK. Pipeline capacity is limited and also it does not connect us to the most lucrative markets for gas; China, India etc.
To reach China and India we need LNG export facility and just like the USA we do not have any LNG export terminals and the time to build is 5 years.
We will have a glut and prices will drop through the floor; to the benefit of consumers but leading to bankruptcy among gas producers.
Thanks Camergoon!
Aust to be next shale winner
Never mind, we've got plenty of it, have gas port terminals and are building more. And a government that doesn't give a toss about greeny whinging and bleating.
BTW a young electrician I know packed up his traps and went bush in outback Queensland where they are drilling a huge area at a furious rate. Clears A$2, 500 a week AFTER tax and top class on-site food and accommodation. Despite what a couple of gas deniers who comment here say, the gas companies that employ him must think there's a long term buck in it.
Or they wouldn't be doing it, would they?
Being from Canada where we're a little more used to exporting fuel I like the fresh perspective of seeing high prices as necessarily a bad thing. "We needn't bother mining that since the price will remain high with our market situation" said no one here ever.
Local government planning is the only real obstacle and it will all go exactly as per the Airth gas extraction debacle unless a) local journalists stop scaremongering, b) it is no longer politically correct to be anti-fossil-fuel & c) locals start to associate increased gas supply with lower fuel bills. I can't see a) or b) happening any time soon and c) is subject to an an ongoing disinformation campaign by an unholy alliance. The business rates bribe might work of course but if the disinformation campaign worked in the Falkirk area, which has traditionally relied upon and accepted widespread coal-mining, the massive Grangemouth petrochem complex and even previous shale oil extraction as utterly necessary for local jobs and prosperity, then the fracking PR teams have a task ahead akin to the nuclear lobbyists of the past.
'Labour minister talks tosh'
Tautology
Speaking of frakking tosh
http://www.theguardian.com/environment/2013/dec/14/fracking-hell-live-next-shale-gas-well-texas-us
When the railways were introduced, some those people keen on a proper regulatory framework wanted a man (yes, they were sexist in Victorian times) with a red flag to walk in front of each locomotive.
That is exactly the spirit of today's politicians who are keen on setting up a proper (i.e. Greenpeace / Friends of the Earth inspired) regulatory system for exploration for, and production of, shale gas.
Fortunately for us our politicians in Victorian times had some common sense. Cameron, Miliband and Clegg have got ... what exactly?
Mr FrakkingTosh - that well-known Scottish greenist.
Dung speculated that if we really start to develop British shale gas reserves properly we would have excess capacity and could not export our surplus gas.
To reach China and India we need LNG export facility and just like the USA we do not have any LNG export terminals and the time to build is 5 years.
However there are two new LNG terminals at Milford Haven in southwest Wales. They were built to take imports from Qatar. I am not an engineer but surely a terminal used for importing liquified natural gas could be converted fairly quickly to export it?
When the railways were introduced, some those people keen on a proper regulatory framework wanted a man (yes, they were sexist in Victorian times) with a red flag to walk in front of each locomotive.
(...)
Jan 21, 2014 at 9:46 AM Roy
Roy, are you sure about that? Do you have a reference? I have never heard of that.
My understanding is that railways were *always* fenced in Britain and from the very start ran at relatively high speeds (20mph+) for passenger trains.
The Red Flag Act decreed a red flag to be carried in front of powered road vehicles - but trains?
Labour, the Limp Dims and every green NGO across the land are terrified of the incredible potential from shale gas. Why else would they constantly shout down every element of shale gas at every opportunity, via a relentless wave of negativity?
We could have half a century's worth of clean energy right under our feet - yet they ALL stick the boot in. Accessibility, water pollution, noise, visual impacts, 'no impact on gas prices' and - wonder of all coming from socialists, that it may even impact on house prices!
There is never even the slightest optimistic comment or encouragement offered. It's all one-way doom and gloom.
The reason is obvious: they're terrified shale gas will expose the ruinous, uncompetitive truth of wind and solar, and thus kill those 'industries' stone dead. (That's why nuclear-dependent France killed fracking - to protect their existing nuclear industry, nothing more or less)
Get on with it Cameron. It can't come soon enough.
The UK's largest lender to windfarm projects The COOP have their own MPS
Tom Greatrex is a COOP MP - strangely he says he's "skeptical about shale" (wind's competitor)
The register of Members interests shows green freebies
- Government of the United Arab Emirates : expenses of £3,500 : Masdar city and promote low carbon trade and investment ties March 2013
- Ice Energy Technologies : expenses of £781.15 : Sweden visit to see heat pumps : Nov 2013
- nothing shown for previous years just £4,500 total from GMB over 2 years
Roy
The first US LNG export terminal due to come on stream in 2015 was an LNG import terminal, it will have taken 5 years. Gassification and liquification are totally different processes.
The US has long had an LNG export terminal at Cook Inlet, Alaska - it started exporting to Japan in the 1970s. It was mothballed when production fell recently, but will now be restarted as Alaskan shale is developed (along with another LNG export project from the State of Alaska and Exxon).
If the UK were to develop sufficient shale production to become an LNG exporter, domestic prices would have to fall a long way to provide a margin on LNG exports to cover the costs of liquefaction and regasification and freight to market. The deal for BG to buy LNG from Sabine Pass, La. was Henry Hub price plus 15% (to cover energy used in liquefaction), plus $2.25/MMBtu (to cover the plant capital costs), FOB. Add in freight and regasification, and you are looking at $4/MMBtu or more - over 25p/therm compared with current UK prices of a little over 60p/therm.
Dung; we might see a gas glut here if we were to enjoy a massive and very rapid programme of shale exploitation. That, unfortunately, seems highly unlikely.
A more realistic scenario (politics allowing) would see a steady growth in output which would take a long time to become a glut, if it ever got there. Before LNG exports could become an option, domestic shale would first have to:
> displace LNG imports
> replace declining N. Sea output
> meet increasing demand for power generation as nukes and coal plants are retired
> produce a surplus in excess of the gas interconnectors' capacity
If we ever get to that happy position, there are other gas uses which could soak up more output such as Gas-to-Liquids for motor and/or jet fuel which would reduce our oil demand. Transport could also adopt LNG and/or CNG, as is happening in the US. New plants for methanol or fertiliser could add demand.
Lastly, it would probably be more attractive to run additional pipes across to the continent rather than competing in the LNG market.
All that is very well and good mikeh BUT what we must absolutely do is to allow fracking companies to get the damned stuff out of the ground to start with! The only way we will ever prove whether shale is going to be the saviour of the country and do absolutely nothing to the price IS to allow companies to extract it in the first place.
Mailman
Mailman; we're on the same page. I was just pointing out that there is a very long way to go before we would face a US-style glut.
I have suggested a few times that the government could be more pro-active by encouraging exploration on land under its control. Given the ubiquity of shale, there must be some army grounds, air bases, depots, ranges, etc which sit above potential sites. Many of the current problems would not apply: no local residents; good access; established security.
They could even hypothecate part of any revenues direct to the MOD...
John; your accidental reference to "Persian Gulf Shale" does have some basis in fact.
The Saudis are planning to build a 1000MW CCGT power plant fed by shale gas with more of the same to follow.
The aim is to reduce the use of oil for power generation to free up more for export.
This is interesting for several reasons.
Firstly the commitment of significant long-term capital suggests they are not worried about the much-touted issue of diminishing output.
Secondly they have opted for shale despite the availability of ultra-cheap gas in the region, suggesting that shale production costs are pretty competitive.
Lastly, this is happening despite the obvious issues with water.
This is not a one-off. Oman expects to start shale gas production by 2017.