Shale gas is natural gas found in impermeable rock that can now be produced by applying new technologies such as hydraulic fracturing and horizontal drilling. It’s not only opening up massive new gas reserves, but is beginning to lead to some rethinking about national energy policies.
BP has said that proven global gas reserves are now 1.2trillion barrels of oil equivalent, and still rising. That’s roughly enough for 60 years’ supply.
Stephen Holditch, head of petroleum geology at Texas A&M University, believes global gas reserves could be nine times larger than previously thought.
He estimates total world shale reserves at more than 16,000trillion cu ft. The distribution included 509 in Western Europe, 627 in the FSU, 2,547 in the Middle East and 3,526 in China. Total OECD annual gas use is 50TCF, of which the UK has 2.5TCF.
That’s one heck of a lot of gas and, according to Tony Hayward – the chap who now runs BP – “There has been a revolution in the gas fields of North America. Reserve estimates are rising sharply as technology unlocks unconventional resources”.
Needless to say, then, it’s in the US that some people are beginning to look at the impact this could have on energy policy.
However, the reserves found in the US are not unique. In fact, it seems shale gas could be quite widespread. Gas-field operators in The Netherlands are suggesting they could have a life of 50 years or more, and there are developments going on as far apart as Australia and Patagonia.
Reports suggest there is also shale gas in Hungary and Poland, and closer to home, there are suggestions that shale gas could well exist both onshore and offshore in the southern UK and perhaps even in Scotland’s Central Belt, which was the birthplace of shale-oil extraction in the 1800s. Remember James “Paraffin” Young?
Nick Grealy, who writes for NoHotAir.com, says “shale is the most common of sedimentary rocks, which themselves form +/-70% of the Earth’s surface”. The implication – presumably – is that we may soon be witnessing even more shale-gas developments.
Grealy says, though, that the big prizes could be in China, and that’s important for a number of reasons.
Firstly, it would remove some of the pressure on non-Chinese suppliers, but it could also have a large impact on China’s carbon emissions.
In terms of the impact of greatly improved gas availability on this country, it would cause somewhat of an upset in terms of the UK Government’s energy policies. Some suggest it could lead to more power being generated using gas and cutting down dramatically on both coal and nuclear.
Personally, I’m not convinced this would be the best of moves. As bizarre as it may sound, we may need the additional carbon dioxide that comes from coal. I’m very impressed by the developments in the use of CO-munching algae and recently attended the switching on of Scottish BioEnergy’s system at the Glenturret distillery. It looks to me as if this will become one useful source of future liquid fuels.
However, all this good news on potential gas supplies could well be snookered by the attitude of the UK Government.
I’m not going to repeat the well worn mantra about what benefits North Sea oil&gas brings to the north-east of Scotland, as well as other parts of the country, or how much revenue the industry has poured into the Treasury.
Everyone in the industry, and other interested parties, recognises that even when the oil price is relatively low, the economy still benefits.
Sadly, though – or perhaps not unexpectedly – the UK Government would appear to have developed an approach which puts carbon reduction, climate change and global warming at the top of its priority list to the virtual exclusion of much else.
If you haven’t read the recent report by the UK parliament’s committee on climate change, I strongly encourage you to do so.
It’s frightening. It contains such policy suggestions as wanting 3.9million drivers trained and practising “eco-driving” by 2020; more support for electric cars; methods of encouraging investment in clean-coal technology, and faster planning procedures for windfarms and nuclear reactors.
But this report is relatively harmless compared with the recent call by a group of MPs for a whole range of new measures, including a reduction in the speed limit to 50mph, increases in fuel taxes, and so on and so forth.
Gordon Brown has said that negotiators at the Copenhagen summit had 50 days to save the world from global warming and warned that the UK faces a “catastrophe” of floods, droughts and killer heat waves if world leaders fail to agree a deal on climate change.
Scary stuff and, just to back up the Government’s message, it has come up with a TV advert for children that is pure propaganda. It features a father telling his daughter a bedtime story about “a very, very strange” world with “horrible consequences” for children and shows streets and houses underwater, with cartoon animals and people drowning and a jagged-toothed monster in the sky representing global warming.
It also claims, “The grown-ups discovered that over 40% of the CO comes from everyday things like keeping houses warm and driving cars”.
The point, though, is that, given that the attitude of the Government would appear to be that hydrocarbons are bad news, then it is highly unlikely it is going to do anything that would dilute this message. Hence, the calls for Government to reduce the tax burden on the oil&gas industry are unlikely to achieve very much.
Taking off the supplementary charge on corporation tax, as proposed by the industry, would be seen by the environmental wing of the Labour Party and environmental lobbying organisations as nothing short of a climate-change betrayal.
According to the Press and Journal, “Treasury chiefs claimed production would continue, that the price of oil was more important than tax incentives and that cutting tax would not boost production enough to offset revenue losses”.
To an extent, I agree that an increase in the oil price would have a positive impact on the confidence of the industry, but although there has been a recent rise, there is no guarantee that rise is going to stick. Conditions in the global economy are still far too volatile, and will remain so for some time to come.
As far as the UK is concerned, there is also the not insignificant matter of the Government’s bailout of the banks to pay for.
The consequence of this is that the Treasury needs every penny it can get its grubby fingers on. Given this, it is highly unlikely that the Treasury is going to forgo any percentage of the tax take from the North Sea.
But do you really think anyone is going to get serious about a shale-gas hunt in the UK with such attitudes prevailing in the Treasury and at DECC? Methinks not.
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