Original URL: http://www.theregister.co.uk/2011/01/24/all_about_shale_gas/

Hot air: Energy industry talks shale gas

A revolution 50 years in the making?

By Andrew Orlowski

Posted in Science, 24th January 2011 13:41 GMT

With standing room only for Future Energy Strategies' seminar on shale gas last week, there's no doubt what the big excitement in energy is right now. Shale... It's the new thorium!

This is all a bit strange for something that relies on a technique that's 50 years old. Shale gas drilling licences were snapped up in 2002, and two years ago, production began to tip market prices significantly for both gas and oil – the two diverged for the first time ever. Yet still, news hadn't broken beyond the trade silo, for the political classes to digest the implications.

Shale gas relies on the combination of two techniques – horizontal drilling and the hydraulic fracturing of rock. The rock is blasted using a liquid that's usually water with sand and a cocktail of lubricants added. The drilling goes deeper (7,000 to 12,000m) to draw the gas up from impermeable rock.

At the seminar we heard from a skeptic, a proponent, and a practitioner who has been setting up wells (they still call them wells, naturally) in Poland for five years. There were also some interesting exchanges with a couple of professional environmentalist campaigners.

Gas markets consultant Leigh Bolton of Holmwood Consulting gave a wary view of shale's prospects. It was a comprehensive catalog of concerns, focusing on the difficulties of drilling and uncertainty of return, rather than eco-alarmism. Bolton said that the European experience of shale would be very different to that of the US. Partly this was because of the high population density, but also because of red tape, and the lack of a services infrastructure here. By contrast, the US has a tradition of wild-catting, and established services pop up as soon as excavators need them. This means higher costs.

Bolton reckoned the new shale plays require a gas price of $6 MMBtu (per million Btu), whereas the US gas price is closer to $4.5 MMBtu. "The liberalised market price in Europe won't match it for many years," he predicted.

Nobody could be more bullish than long-time advocate Nick Grealy, who has been both an energy provider and buyer (for the NHS) in his time. In 2008 he started the No Hot Air blog, before most people here had heard of shale.

The case for shale

Grealy began by ridiculing the current political wisdom. He quoted Energy secretary Chris Huhne, who had declared that "Left untouched, the electricity market would allow a new dash for gas, increasing our dependence on a single fuel, and exposing us to volatile prices".

That's rubbish, he said, because we'd be able to generate our own gas so cheaply, in such abundance. Grealy described gas as the cheapest low-carbon fuel source, winning support from eco-warriors ranging from the Sierra Club to The Hon Sir Jonathan Porritt.

The figures sound impressive.

One field alone in populous Texas, Barnett Shale, has produced 226bn cubic metres (BCM) since 2004. The UK needs to import 10.4bn cubic metres of gas. A few fields here could see Britain exporting LNG – something the US shale producers are already doing in volume. He said every pessimistic estimate to date had been proven wrong – the recoverable reserve estimates in Argentina and India had grown tenfold and twentyfold respectively in just two years.

"The UK's energy policy depends on the perception of insecure and expensive gas. Instead we have expensive solutions to a problem we'll no longer have."

Exploiting the UK's shale could bring in a 5550 per cent reduction in CO2 emissions by 2020 2025, at no cost in subsidies or higher energy bills. Attempts to pursue low-carbon strategies by other means were vain, he said.

"Why give people a £5,000 subsidy to buy an electric car to assuage their guilt for working in the City?" he asked the City audience.

The Polish experience

Next we heard some input based on practical experience from Dr John Buggenhagen, a geologist who has spent five years in Poland as head of exploration for San Leon Energy.

Poland receives 70 per cent of its gas from Russian-owned Gazprom, which has turned off the pipeline to neighbours the Ukraine and Belarus. Poland sits on perhaps the largest potential reserves of shale in the world, and for the fast five years has seen a gold rush, with 11 energy companies acquiring licences, drilling rights and creating exploratory wells.

Buggenhagen said it was a massive learning curve for both sides, and required sensitivity to local culture and administration that might not come naturally to Americans. But his biggest help was the enthusiasm of the local population, particularly in rural areas.

"For six months it's noisy and loud, there's trucks and noise, then it's ready. And they get roads and infrastructure and 50 years of local, low-cost gas." A well is surrounded by trees and looks like a small spinney – hard to spot from Google Earth, he said. Poles were delighted to be energy-independent from Russia, he said.

One unexpected threat came from Gazprom's funding of an environmental movement ... which popped up during question time.

"We're not particularly excited about shale," said a representative of the Combined Heat and Power Association. "It's more fossil fuel that we can burn, and exploiting more fossil fuel will lead to more combustion and carbon emissions."

"You're from a power association?" asked Grealy. "You sound like a vegetarian President of McDonalds".

Jenny Banks of the WWF (formerly known as the World Wildlife Fund) asked about contamination. Could the shale proponents cite one independent report that "unequivocally" showed there weren't issues, she asked.

Grealy suggested starting with the GWPC (the GroundWater Protection Council) the national association of state water regulators. They'd put out a statement criticising the film Gasland – first for factual inaccuracies, and secondly for the film-maker Joshua Fox's claim the GWPC refused to be interviewed for the movie. He'd never asked, they said. The GWPC recommended best practices but hadn't found a problem. Nor had anybody else.

Gasland gave shale some notoriety for showing householders with flaming water coming from their taps. But the local Oil and Gas Conservation Commission declared the combustible material had come from decomposing surface material, not the well.

Environmentalists fear that deep drilling may disturb Silurians,
the race who live under the Earth's crust. (In Dr Who)

This isn't too surprising when the aquifer is at 100m, and the fracking takes place several thousand metres below. Contamination is likely to emerge through pipe leakage – half of the water/chemical solution returns up the pipe. A blowout would be much more serious. Examples aren't hard to find of complaints of contamination, and the odd isolated blowout; it's likely more stringent regulations will be introduced. A total ban, which is what the environmentalists want, doesn't seem likely.

None of the opposition seems to faze the shale enthusiasts, who point out the technology is changing all the time. George Soros has backed shale exploration via his hedge fund; Soros has a 22 per cent stake in San Leon Energy, and stakes in at least three others.

Shale will continue to have powerful opponents: the eco-lobby, the coal industry, Russia's Gazprom, and the nuclear industry. Early reports and blog posts on UK shale are rapidly adorned with negative comments, many from people purporting to be American residents affected by shale excavation. They must have uncanny radar.

If shale proponents think they're going to walk this one in Europe, by appealing to our budgets and common sense, they should consider the story of GM foods here - once the "Frankenfood" scare caught hold.®

Andrew warmly welcomes your comments.