Articles from 2012
NY Times, Cuadrilla & DECC on UK shale
- Written by Nick Grealy
- Published: 13 November 2012
Maybe this is one way of getting the UK press to write a proper story on shale. Generally you can expect the UK press to print a story from the New York Times weeks later, usually prefacing it with the dated and childish "exclusive" tag loved by the UK press. From the IHT today:
Just outside Blackpool, a town of faded cabarets and amusement rides on the Irish Sea, a drilling rig sits in a muddy farm field. The big white and yellow machine represents the latest attempt by Cuadrilla Resources to see if it can bring Northwest England the sort of shale gas revolution that has transformed the U.S. energy picture.
Cuadrilla’s chief executive, Francis Egan, who joined the company four months ago after a career spent in the international oil industry at giants like Marathon and BHP Billiton, says that Cuadrilla believes there is 200 trillion cubic feet of gas beneath the company’s 900-square-kilometer, or 348-square-mile, concession in the area.
“That is a huge amount of gas,” he says. Even if only 10 percent were extractable, it would be enough to fuel Britain’s current consumption for about seven years.
That is of course, rather dated estimates but Cuadriilla want to be conservative ahead of the actual projections that are coming over the next few weeks. The Guardian thinks even the present estimates are ludicrous on the basis of one report from Deutsche Bank, later updated but still never corrected by the Guardian. The FT thinks 10% won't change anything, although as I have pointed out for over a year, even the conservative figure is almost current North Sea production. But even ten percent is equal to 1 TCF of production per year for twenty years, which is equal to 28.3 Billion Cubic Metres, enough to totally replace and more last year's imports of 25.4 BCM of LNG. At the current 60 pence per therm for gas, that is 21.4 pence per cubic metre or over £6 billion pounds. Another way at looking at the "controversial" shale gas is that it takes £6BN off the balance of payments and allows the UK to tax it at 62% tax and royalty, instead of keeping the Qataris in Ferraris. Or to be exact, Lamborghinis:
From a standing start, in the last two years Qatar has become Britain’s biggest supplier of imported liquefied natural gas (LNG). Last year Qatari LNG accounted for 85 per cent of Britain’s liquefied natural gas imports, providing power to homes across the land. But that figure is rising, and by the final quarter of 2011, Qatari supplies had jumped to 95.5 per cent of our total LNG imports.
For some, at least, our dependence on Qatar for a major part of our power has become a significant cause for concern. (LNG already accounts for one quarter of the UK gas supply.)
As one union leader put it: ‘They have vast sums to spend, they invest in our strategic industries and that in turn allows them to influence the type of society we are.’
Certainly, as North Sea oil reserves diminish, this tiny Gulf state has become pivotal to Britain’s future energy security and our prosperity.
It is little wonder that both David Cameron and his predecessor as Prime Minister, Gordon Brown, have been assiduous in courting the Qatari leader, Emir Hamad bin Khalifa Al-Thani, and his glamorous wife, Sheikha Moza bint Nasser Al-Missned.
Our gas bills allows princelings to join the most expensive slow rider club in the world just behind Harrods (which the Qataris also own). It's far better to cruise there than in the parking lot of Sainsburys, which they only own 25% of. The distinctive colour is that of the Qatari Royal Family.
The Times goes on to note why I think Cuadrilla will be good for everyone in European shale:
Cuadrilla’s efforts in Britain are being closely watched as a test case. The company is backed by a leading U.S. energy private equity firm, Riverstone Holdings, which owns a 41 percent stake. John Browne, a former chief executive of BP and now Riverstone’s chief in Europe as well as Cuadrilla’s chairman, still enjoys great prestige in Britain.
“If companies like Cuadrilla can make one example work, we believe that bans in other countries may be lifted” said Menno Koch, an analyst at Lambert Energy Advisory in London.
Too bad the Times didn't ask one of their most loyal readers his opinion, but in the spirit of balance some old friends get a mention:
Nathan Roberts, a Frack-off campaigner, said that his group was opposed to shale gas and other so-called unconventionals in part because these techniques required many wells to be drilled.
“If companies go ahead and look to exploit all the unconventional gases they could exploit, you are looking at tens of thousands of wells over this tiny island, which is densely populated,” he said.
Frack Off shows their true colours: They appeal not to noble causes of climate change, they are simple nimbys at heart. I don't know how often I have to point out that shale exploitation in Europe won't look anything like the US, so I'll let the Cuadrilla evidence to the Parliamentary Committee on Energy and Climate Change speak for them on the Europe is too crowded for shale gas myth:
2.1.3 The experience of the shale gas industry in North America is that improved knowledge, a product of continuous technical development and operating experience, leads to better recovery and some mature shale plays now have recovery estimates of up to 40%.
2.3.2 In the case of onshore shale development, on-going drilling of new wells does not mean populating the countryside with ever-increasing drilling locations. Horizontal wells can radiate from the same well bore like the tines of a fork, and radially in several directions. Because, as we said above, we have learned the Bowland shale is unusually thick, this can be repeated at different vertical levels, so called "vertically stacked" horizontal wells. One pad can manage around 36 such horizontal wells, using present day technology, and as technology evolves, more in the future. Each horizontal well is equivalent to a piece of keyhole surgery. The "drill" is a remotely controlled turbine whose position may be two kilometres down and three kilometres away, but whose location is always precisely known. The horizontal wellbore is comparatively narrow, about 8 inches in diameter. All fractures are typically thousands of feet below aquifers. Above the Bowland shale formation in Lancashire lies the Manchester Marl, a thick impermeable rock forming the ‘regional seal’, a barrier between the hydrocarbons trapped in the Shale rock below and the aquifer a further several thousand feet above. A lot of development can thus take place from a single pad -- hence our view that the UK offers a low-density development opportunity.
Note how in this case Cuadrilla up the estimates, but it's pointless really. Even a mere 200 TCF at 10% is game changing. As Francis Egan recently said, it's not how much gas do we have - it's how much gas do you want? Land impact is a legitimate concern, but can be easily addressed via using new technology and Cuadrilla's luck on being on top of the thickest shale in the world (so far). I estimate that we could be seeing as much as 1 BCM from a single football field size well pad, which after 6 to 9 months will shrink to something the size of tennis court. This is interesting. Cuadrilla could need as little as two or three rigs at one time spread out over 7 to 8 years to reach full production, leaving a couple of dozen tennis courts in a 1200 sq KM license area. For minimall disruption to the curtain twitchers, the country gets £3.6 billion a year in tax revenue. This could also mean that we could see noticeable production not years in the future but as soon as the year after next as this slide from a recent presentation by Cuadrilla shows, which they said at the time could be conservative and 2015 could be 2014
So the scare stories of mutliple wells certainly don't apply in Cuadrilla's case given that they, and the UK, have the great good luck, if we choose to have it, of sitting on top of a truly world class shale. But don't take my word, or Cuadrilla's. This from DECC puts the Bowland in international context:
But we don't want to give you that. The bad news of the upcoming resource estimate coming from DECC and the BGS is that it's only for the Bowland. But the Bowland is far bigger than Cuadrilla's license alone far to the left here. With my experience of end users I see the mouth of the Humber and think: These could be the luckiest petro chemical plants on the face of the earth. Shale gas wells literally in the parking lot.
What we need to look out for here are all the Basinal Mudstones. Keep an eye out for them. They smell of money. And if you're looking for even thicker shales we probably can find some even bigger. I'm thinking Argentina or even better China.