Articles from 2013
Shale energy: The halo or the handcuffs?
- Written by Nick Grealy
- Published: 09 December 2013
2013 has been the year where any doubts about the reality of the US shale revolution have entirely disappeared. This was the year for example where the Peak Oil site The Oil Drum shut, an amazing development for a trend which was at the height of it’s influence only a couple of years ago. Any doubts over shale's sustainability have been swept aside by volumes of gas that can only be described as phenomenal. The debate, at least in the US, has transformed from shortage to seeking customers for gas.
The bounty from the US, by year end seems to be providing the basis for what Europe lacks: an economic recovery.This from CNBC shows how the ripple effect of shale is becoming, according to Goldman Sachs, a “halo effect”:
Rapidly accelerating U.S. shale production will create a virtuous cycle next year that will contain energy prices, support the recovery and encourage the Federal Reserve to pare back its monetary stimulus, Goldman Sachs said Friday.
The conditions are favorable to a longer-term stabilization of energy prices, the firm's analysts said. Record production on the back of shale and natural gas will keep "the U.S. energy market oversupplied and reinforcing downside price risks."
Those forces will restrain price pressures, boost economic activity and assist the Fed in its quest to wean the economy off crisis-era stimulus.
For the US at least, it’s been post-crisis and post peak oil. This is turning the energy debate away from the environment ministries and towards finance chiefs all over the world. Japan, China, OPEC, Brazil, Russia and Australia amongst others are waking up to the new reality. But in Europe, we don’t believe in halos as Alan Riley noted in the WSJ on Friday. As others look for the benefits of the shale halo, in Europe there are many who reach for the handcuffs:
In October the European Parliament narrowly voted to extend the EU's Environmental Impact Assessment (EIA) directive to the drilling of a single shale-gas well. National ministers are due to vote on the move in the EU Council this month. If they uphold the measure, all shale exploration underway in Europe—from the Bowland Basin in Lancashire, England, to Lublin Province in Poland—will face significant new delays.
The larger danger for Europe is that energy investors may take such a decision as a signal to give up on the EU as a place to develop shale oil and gas. There are now so many more opportunities world-wide for shale-gas development that the industry may conclude its best strategy in Europe is to stay out of it.
Even here in the UK, where government support is unambiguous at the national level, the fundamentally undemocratic planning system allows literally one person to hold up development (of anything) for several years. Imagine what happens when a dozen get involved.
An example near me is a site closed down in 1980. Thirty three years later, no decision on redevelopment has been made. (Similarly, the Eurostar Terminal at Waterloo closed in 2007 and stands empty still). This is not democracy, this is insanity, and even if the time scale is only 5% replicated for shale exploration wells, I would overwhelmingly advise anyone not to spend money drilling for UK shale gas, but to take the money and bury it: They would get a better return.
Allan Campbell, CEO of AJ Lucas, a major shareholder in Cuadrilla told the London Sunday Times yesterday:
You painted the world pink, now you’re fracking useless
Cuadrilla’s Allan Campbell believes shale gas could transform Britain. But the Australian can’t understand why we’re so lame about exploiting it
“The regulatory and planning system here is just bullshit. The gumption and the balls of the lot (the British) to get on their bikes and conquer foreign lands and paint the world pink just does not exist today. It would be impossible for these guys to create an empire now, wouldn’t it?”
I’ve never met Allan, but I’d bet we’d get along just fine. Instead of having inane arguments over the number of jobs created by either shale gas or the “green transformation”, the big picture is the one painted by Goldman of the US success while the UK reality is closer to that other Alan (Riley), a long time co-conspirator with NHA in the shale revolution. I would differ with Alan over the EU impact. European countries have a record of building infrastructure far quicker than the UK, and they also have a record of conveniently ignoring EU legislation when it suits them nationally. But we can’t simply sit out the transformation of the USA’s energy, industry, political and carbon fortunes. European Greens, who can’t seem to get that this is about far larger global trends may succeed in pleasing themselves as they handcuff everyone else.
Fracking in the UK is essentially going to be a battle between whether we want to be a modern country or not. This, from Stephanie Flanders in the FT on the eternal pessimism of the UK describes what we're up against:
The British often seem to be the only people who can feel schadenfreude about their own misfortunes. In the past five years, we have seemed to relish bad economic news, much as we enjoy wallowing in the despair of losing international football games on penalties. It is, after all, what we expect.
But now the news is good. And if history is any kind of guide, it will continue to be good for some time to come. There is no reason why the UK should not be the fastest growing country in Europe over the next five years – if not the G7 group.
BTW for a thoroughly entertaining and illuminating view of the US experience, warts and all, I recommend Greg Zuckerman’s The Frackers. I had the pleasure of meeting Greg last week while he was over on a book tour, and he proves yet again what I’ve known since 2008: Not many people read this site. But they’re all smart. This is what might be in the UK. Or maybe we should all go back to sleep and UK shale companies will go to places where they are assured of a warm welcome, i.e. just about anywhere else.
Zuckerman’s exclusive access enabled him to get close to men like George Mitchell, who developed a new way to drill for gas in shale rock; Harold Hamm, who discovered so much oil he’s now worth more than the estate of Steve Jobs; and Aubrey McClendon, who lost more than $2 billion on a misguided gambit. Zuckerman shows how the frackers are now using their wealth to shake up Hollywood, education, politics, sports, and other fields, much like the Rockefellers and Gettys before them.
He also explores the debate over the environmental risks of fracking, and whether those risks are worth it for the United States to achieve energy independence and for the rest of the world to follow.