How big an impact could shale have on Europe?
- Written by Nick Grealy
- Published: 14 March 2011
Strange as it may seem today, but this time last year one of the objections raised by shale detractors was that shale gas was in fact too good to be true and would rapidly deplete. The main shale pessimist was Art Berman and the Peak Oil crowd. Here in the UK, John Dizard of the FT has been consistently, if incorrectly, channeling Berman in calling shale a delusion. Russia's Gazprom sounds desperate or is that merely self-serving:
Alexander Medvedev, deputy chief executive of Russia’s state-controlled gas company, likened the shale gas boom to the internet bubble, “which first blew up enormously and then flattened itself out to some rational and logical size”.
These were often the same '"experts" who assured us that shale was too expensive to work at anything less than $7MMBTU. The same guys said that the rest of the world, and especially Europe had really low prospects for natural gas: They simply didn't have the right kind of rocks.
In the US especially, we could soon expect declining rig counts translating into falling production and rising prices. Someone forgot to tell the shale gas industry.
The Barnett Shale achieved record production of nearly 1.9 trillion cubic feet of gas in 2010, said Gene Powell, publisher of the Powell Shale Digest.
Secondly, how can shale be considered "unconventional' if it is in fact becoming dominant as measuredy by the first major shale play in the Barnett becoming the largest producer of any natural gas field:
The U.S. Energy Information Administration doesn't yet have production figures for specific gas fields for 2010, but its most recent data showed the Barnett to be the largest gas-producing area in the nation in 2009, with nearly 1.8 trillion cubic feet of output.
But more interestingly for those few conventional wisdom experts still around, we now see that despite a fallng number of rigs and a movement of those rigs to oil plays, production is increasing even as prices are falling:
Powell said he was surprised to see that Barnett production generally averaged 5.4 billion cubic feet of gas per day or more in the latter months of 2010. Low natural gas prices have reduced drilling activity to less than half its peak level of 2008, and Barnett gas wells are generally forecast to face steep production declines as they age. "Obviously the wells aren't declining as fast as we thought ... the wells are holding up much better than anyone thought," Powell said.
5.4 billion cubic feet is 153 MCM, which is more than the the entire daily UK North Sea production of an average 130 MCM recently. Using figures from Bentek for the last week of February we see some even more surprising ones. Daily Production in the Barnett, which has surely increased in 2011, was only marginallly lower than Russian gas imports on the Eastern Corridor to Europe in late February of 163 MCM for example. As in this chart, the only higher daily production was from Norway to Europe (ex UK) of 218 MCM.
Some people, but not No Hot Air, think that even if we get any gas in Europe, it will be years away. But using the Barnett analogy again may be instructive. Barnett production 9 years ago was basically non-existent. The Barnett was still making mistakes three years ago, whereas Europe will be using best practice from last year and this. But the main take-away is that this is only one of the possibilities that Europe will have. Europe can have two or three Barnetts - at least. I would say that this year we are going to see revelations of European shale resources equivalent not only to the Barnett, but also on a scale of the far larger Marcellus.