Articles from 2013
The UK could have 700 TCF of shale gas resources
- Written by Nick Grealy
- Published: 10 June 2013
The BGS Assessment of the Bowland Shale will be published, allegedly, by the end of the current Parliamentary session, July 18. A study for DECC on the price impact of shale gas, undertaken by Navigant will be released simultaneously I’m told.
Underlining again that the difference between the original gas in place (resources), and recoverable gas (reserves), is lost on not only most people but many journalists, let’s look at the subject again quickly.
Conventional oil and gas resources were relatively easy to assess, but we should bear in mind that according to conventional wisdom, the North Sea would have run dry years ago. It hasn't and we’re essentially have been looking at 20 year reserves estimates for the North Sea for most of the past fifty.
Unconventional oil and gas, which is rapidly becoming dominant, and thus by definition the new conventional paradigm is harder to assess. One or two wells in field is like looking the through the keyhole of a warehouse; there is no substitute for a lot of exploratory drilling. The idea of exploratory drilling is to find the way to release the gas - or oil- from the rocks.
There are good shales, great shales and not so good shales, but as technology develops all the time, most experts see increasing production from every shale. We’re just starting to see for example that revisiting one of the oldest US shales, the New Albany in southern Illinois with today’s technology gives answers that simply weren't even worth asking five years or so back.
This map, used by Avi Tucker of the University of Texas last week at UGOS, although originally from ARA resources underlines the prevalence of shales worldwide. By the way, an updated global resource estimate from the US Energy Information Administration could be released any day, one reason I think the following slides on UK potential from a presentation by Graham Dean of Reach CSG are worth considering.
Graham is a former chair of the UK Onshore Operators, and has a long history of oil and gas in the North Sea and elsewhere. Reach, like almost every one in UK onshore, originally targeted CBM, coal bed methane. The last UK licenses were issued in 2008, the start of the shale revolution and a point at which every player of the time, apart from those clever clogs at Cuadrilla Resources, were mostly unaware. Graham gave a presentation at UGOS last week where few people were present . The conference had divided into two streams, I’ve seen Graham present three other times this year and I wanted to see what the Chinese were saying on shale gas during a rare visit to London. I figured he wouldn’t say anything much new. I was misinformed: these are his numbers for not only the size of the UK resource, but what can be recovered from it:
So we have according to this estimation, a recoverable resource of 200TCF, or 71 years if we kept using gas at the same rate we do today. The reality is of course that the North Sea gas, from the UK, Norway and Netherlands, won’t shut down and go away any more than the third of gas imported by LNG tankers will suddenly disappear either. That means, for over a hundred years, which from my view point is immortality, we won’t have any issues over energy security and following on from this, we certainly will start to see price pressure reduce, if not drop significantly.
The size of UK resources is so huge, that even a conservative recovery rate would be very significant. The UK used 80 Billion Cubic Metres (BCM) of gas last year or 2.8 Trillion Cubic Feet (TCF). Translating that into something everyone can understand each cubic metre has a value of roughly 20 pence, so all that gas is worth about £16 billion pounds a year at present prices.
I’ve been saying for sometime that Cuadrilla’s numbers alone, using a modest 20% recovery rate and a forty year time production window, will mean that LNG will be the first to go. That means taking £6 billion off the balance of payments and paying 60% tax and royalty to ourselves instead of sending the entire pile to the present dominant supplier, Qatar. But, if we include the rest of the prospective area of the UK, primarily in the Bowland alone, we don't want to give you that. You may not be a millionaire. But you won't be paying so much in utility bills and and you'll be paying yourself when you do.
Grahams’ numbers are that much larger however that we can see we may have a problem: We will produce far more gas than we can consume. This chart, shows that UK shale gas could ultimately out produce the UK North Sea, perhaps by as much as a factor of three:
Our new worst case is for a total replacement of not only imports but even North Sea gas. The mid range would mean replacing every drop of diesel in trucking and every chunk of coal. It would be hard to overstate the health impacts of the reduced pollution, but it would also mean significant drops in CO2 production.The challenge, which the rest of the planet may have at the same time, is how to use all that natural gas. Greens must stop concentrating on production of natural gas, and start reducing consumption of imported higher carbon fuels. For one, if the UK has resources this size, the true Golden Goose of CO2, albeit 20 years of could be one where most of China's coal consumption is displaced, effectively solving the CO2 crisis. Does that sound crazy? Or does that sound like what some people were saying about US gas exports in 2008?
The conventional thinking is that if have enough to use ourselves, we then have to create export markets, but there could be just a small window for them to the rest of Europe via the Interconnector, because if natural gas is so prevalent, the question will quickly become, export to who exactly? If the UK produces shale, then so can anyone - and in various time frames, they will.
Although the UK’s Bowland Shale does appear to be a particularly promising shale, it’s a good news/bad news story. The good news is the United Kingdom has a whole shed load of shale. The bad news is, so does everyone else. The competitive advantage for the UK is to access ours ahead of others in Europe, thus getting not only the early drop on production, but to start a European shale industry beach head that could ultimately add far more value to the economy.
We will thus have to start finding ways for gas to displace other uses. Since we will already not end up with any coal generation sometime by 2030, we can't substitute that. But we also will have to start replacing diesel with gas powered vehicles. That will displace the $500 million a day import bill we have from oil imports, as it cleans up air and reduces CO2 footprint of trucking and buses by 30% percent. We can also use the exisiting chemical industry to use more gas as a feedstock, especially if the Bowland, as appears likely, has ethane contained in it.
Finally, we must stress that much works needs to be done. But if we can start to see the potential size of the prize, we should welcome the challenge of reaching it. For now, this is simply a thought experiment as the PR crowd say. The experiment however can be tested scientifically, and if the resources are of this size, it is inevitable that they can be turned into some not inconsequential reserves. But only if we want it to. It is, after all, up to the owners of the gas: Everyone in the UK. Time for a national debate, and one of the options must be to leave gas (and oil which I haven't touched upon) in the ground. Those who choose that option will have to now enter the second stage of the debate, and will thus have to explain exactly what they propose instead. Pretending shale gas doesnt exist is no longer part of the debate. Three years ago I published a report, now in the library section, called "Shale Gas: What Now? What Next?"
What next is the question for the next several years.