Shale Gas News and Information
Christof Rühl: A decision point for those of us interested in the environment
- Written by Nick Grealy
Christof Rühl and I met three years ago and we shared an appearance in Moscow last month, although unfortunately not on the same day, so we missed each other. Christof is Chief Economist of BP, but unlike many in Big Oil, he long ago understood the multiple implications of the shale revolution. I wish he was taken more seriously by many in his own company who, like colleagues at other oil majors, often still can’t get their heads around shale.
Notwithstanding the popular perception of economists as dismal number crunchers, the best often divine the story the numbers are telling us long before the conventional communicators in PR and journalism
Christof recently posted a series of articles on Linked In, republished at Energy Post, the most recent being “The five global implications of shale oil and gas”. Regular readers know I’m a sucker for this big picture type of thing. Much of what he says has been discussed here over the years, but one section is worth reproducing in it’s entirety.
Bring on the wildcatters
- Written by Nick Grealy
Internationally, 2013 was the year when any doubts about shale energy potential evaporated in the face of production of both natural gas and oil in the US achieved levels that were simply prodigious. The shale “bubble” theory was beloved not only by hybocarbondhriac shale antis, but also by many in the financial community, especially in Europe. Friends of the Earth and Co may have reputational capital at stake in the energy debate, but it was the financial capital invested in not only renewable technologies but elsewhere in energy that was felt to be at risk. Thus proponents of any number of expensive energy projects fear the emergence of a world where oil and gas were not running out. Whether shale lowers prices or not is both open to question and besides the point. What shale certainly proves is that prices will not be going up.
Among other things, the shale revolution is starting to put an end to “big” energy. Nuclear, Nabucco, Shtokman, Severn Barrage and Desertec are some examples, but 2014 will start to see the unwinding of positions in other mega projects. Even some major offshore projects, and the LNG projects attached, are likely to be disrupted or postponed this year. The lesson from the USA is simple: There are hydrocarbons almost everywhere and we no longer need to go to the ends of the earth to chase them. The new energy paradigm is a world where the most attractive projects are those closest to markets. In the older “conventional” model costs and geology were paramount, and Big Oil would consider undertaking any resource project anywhere. Today, in natural gas at least, local markets are key and oil is going to go feel some of that effect. OPEC oil and Russian gas will never be unimportant, but they do have to cast off some outdated concepts around resource scarcity that they shared, often unwittingly, with Big Green. A world where oil is abundant under not only the US, but in the UK, France, Germany, Argentina and Australian sub-surface as well, makes several new off-shore projects look expensive. West of Shetland, Arctic Oil and offshore Brazil suddenly don’t seem so important anymore. Mature provinces in the North Sea and Gulf of Mexico will thrive because they have both existing take away capacity and will be able to use some tight oil technology to produce more, but gone are the days when Big Oil was desperate enough to show up in the back of beyond producing expensive oil in habitats that were environmentally fragile and politically dubious.
When capital providers say that, for example, UK oil has both physical geology and political constraints that will make the industry difficult, one has to ask the old question: Compared to what exactly? A barrier to world shale energy has been the perception that the US was the exception and the rest of the world, especially key markets such as Europe and China would be either unable or unwilling to face up to the new reality. The US shows that even a fraction of their success will be game changing world-wide.