Thursday 22 September 2011

This Is The Big One

Returning from an extended overseas stint to be greeted by a really excellent piece of news. Cuadrilla, the firm that has been drilling for shale gas in the Blackpool area, has announced its initial estimates of gas reserves in place. And it's a whopper: 200 trillion cubic feet. Recoverable reserves will be less, perhaps considerably so: but to put it in perspective, the Groningen field, at 100 TCF, completely transformed the Dutch economy** in the '60's and 70's and will last to 2080. The largest North Sea gas field discovery to date - the Troll field in Norwegian waters - was about 50 TCF recoverable, and has been supplying France, Belgium and Germany since the mid '90s, with many more productive years to come.

Earlier in the year I met some Cuadrilla executives, and I couldn't help noticing that they seemed to be wetting themselves every time they thought about what they were finding. Now it seems they will be able to afford some new underwear.

Among other things, this completely stuffs the logic behind Crapper Huhne's electricity market 'reforms'. The moment Cuadrilla's announcement is ratified to everyone's reasonable satisfaction, even to within half an order of magnitude, that is good cause to put a stop to the entire charade and go flat out for gas.

Pinch yourself, because if this discovery is for real the UK's economic prospects are transformed. It really could be that good.


** some argue this was not for the best, but hey, it's a nice problem to have


CityUnslicker said...

I love it - but the earthquake near Blackpool was real and if that is found to be a reason to stop drilling for Shale in the Uk it will be sad - but Greenies are going to go full out here because they know the danger to their paradigm of finding a mere 400 years supply of gas in the UK.

Old BE said...

"...because if this discovery is for real the UK's economic prospects are transformed. It really could be that good."

When I heard the news on the radio yesterday I thought exactly the same thing. And I also couldn't wait to read your take on it!

Old BE said...

And if a few people have to abandon Blackpool and move somewhere else nicer then surely that's a double bonus?

Timbo614 said...

I too wondered when you would comment on this. It seems like really good news (my first thought actually was "is that the one ND put his money on/in?"). As you say it could be a transforming event - BUT will this allow the UK consumer to benefit - will the domestic price now be reduced eventually?

Do I smell a new windfall tax on the breeze something along the lines of "to be levied on any energy sources discovered within 200 miles of pleasure beaches"...

Mark Wadsworth said...


Which is why the Greenies and NIMBYs will be mobilizing like Hell to get these plans blocked.

Timbo, taxes on the value of natural resources are the best kind of taxes. If the stuff is worth £100/unit and costs £20/unit to extract and refine etc, then any tax of less than £80/unit (call it £70 for safety) has no discernible impact on anything.

Consider, you happen to own this land but don't have a clue about gas extraction, and the govt gives you the permission for free. Clearly, you would charge the actual extracting company about £70/unit anyway - what's the difference between a privately collected tax and a publicly collected tax?

Malcolm Tucker said...

Did you see C4's fact check on Huhne's conference speech?
Before the man had left the podium his figures were being questioned.

Is Chris Huhne’s middle name Pollyanna?

Anonymous said...

MW, the lawer types will correct me no doubt but it is remarkable where your ownership of the land and HMG (ostensibly crown rights) of mineral extraction begin, it's not very far down.

Timbo614 said...

@MW, Yes quite. I would advocate such a tax as this is a national resource discovered during a time of great difficulty and need.

Nick Drew said...

CU, MW - with a bit of luck the Blackpool mini-earthquake will pale into insignificance compared with the economic tremors this will cause: & the same goes for the inevitable greenie objections. I don't anticipate much nimbyism though because there will be enough £££ to buy everyone off good & proper (like they do with nukes in France), & in fact to do the whole thing properly - after all, for less gas than this you can afford to build 500,000 tonne structures and take them deep offshore in 50-foot waves!

BE, Timbo - IMHO yes, we will all benefit in one way or another (unless we work in the nuclear, wind or solar industries) because We Are All Consumers, and economics 1:01 states: supply up, price down

plus there will Huhne's discomfort to savour in due course

I realise, as do we all, that this and future governments will find ways to piss some of the benefits up the wall (hence the comment on the Dutch case), but heigh-ho, there we go ...

Malcolm - yes indeed I did. In fact, exclusive to all newspapers, no-one seems to believe what he said at all, which is only right and proper since it was Crap. I really do think it's possible he has been rumbled at last. And (C@W passim) - you read it here first!

Dick the Prick said...

Other than public safety - which, to be fair, is of considerable concern; I don't think the people of West Lancs would be too arsed. It ain't that pretty, it's mainly golf courses and fuck all else.

They've had it hard and yet have an incredible work ethic when tested but since trade routes have changed and tourism has shifted all from Cumbria down to Anglessey has been nicely left to ruin. Ofcourse environmental concerns should be factored in but I doubt many Scallies or North Welsh will miss an opportunity to restore their rightful place. As long as they don't fuck up Lytham St Anne's then the locals will be pragmatic.

This is an old Scouse docker's wet dream and those dirty bastards are reet pervs!

Timbo614 said...

@DtP: I know there is no such thing as co-incidence, but the tremor was probably going to happen anyway. IF it was caused by the fracking operation, then it must have already been, not on a knife edge, but a razor-blade edge. I don't think think that the power of a test rig is enough to move underground mountains.

@ND: (unless we work in the nuclear, wind or solar industries)

Ha You couldn't resist that one hey :)

[FOR SALE] Small solar power plant & Electric Cooker. Buyer collects (Available 2014).

On the other hand, will we need the profits to mitigate the CO2 effect of the large gas power stations?

Now off to invent the BG(Blackpool Gas) powered car :)

Nick Drew said...

DtP - yes safety is a fair one and I reckon there's every opportunity (i.e. £££) to do this one right

Andrew, you may yet be vindicated

EK - I shall put in a word for you with the QT Compo authorities. Your solution is ahead of its time, but only by a year or so, I'm guessing

Fred Wirral said...

Interesting news so will they be using the existing network they have in the Irish sea to push the gas down to Wales via the cleaning plant at the old point of Aire colliery but thinking about it British Gas closed all the Irish Sea wells due to excessive taxation by the idiot who Huhne.

rwendland said...

It is certainly big, but what are the extrcation costs? Is it economic? Nick Grealy says "Cuadrilla ... claim that the field is 5 – 10 times deeper than the Marcellus shale in the US." which sounds more expensive than US extraction.

In Nick Grealy's select committee session I recall the Geological Society expert saying gas prices would have to rise significantly to make most EU extraction economic. John Dizard of the FT figures full shale costs $8 per MCF, near twice current prices I think.

I know ND does not agree with this, but to present an alternative view on why the shale scene is so excited (aka hyped), Dizard's theory is:

"the shale gas exploration and production companies leased a lot of acreage in the recent boom that needs to be proven as gas-laden within a short time to be kept on the books. They drilled with investors’ and lenders’ money to do that, and squeezed their suppliers to stretch out the budgets.

Now they’re selling the semi-proven acreage. The majors, which can’t seem to explore their way out of a grocery bag these days, at least in the onshore US, needed those elastic “reserves” to replace politically risky hydrocarbons in geologically better locations. They, and the remaining independent producers, will be bailed out by gas at $10 an mcf – double today’s level – or higher."

I don't know if this is right, but would love to find out how much truth is in it. Is Cuadrilla game plan to sell stakes to the majors?

Weekend Yachtsman said...

When will Alex Salmond find a way to "prove" that all the money from this should actually go to Scotland?

Next week? Next month?

Answers on a postcard...

Nick Drew said...

WY - nice one ! he's just the man to do it

Mr E: today's UK gas price = 61 p/th, = approx $9.30 / MCF, so no probs there ! (shale gas surpluses have been dampening US gas prices significantly, of course - that's the whole point: and it is how we got enough LNG last December to see us through at very reasonable prices)

we should certainly be cautious until we some some actual production (esp when there are rather obvious vested interests in play); but equally, the 'experts' have been caught out badly from the start of the shale gas revolution: they didn't even notice it for a couple of years, & have persistently been wrong about its growth & potential. Cuadrilla is, as far as I am aware, not short of $$$.

FW - if it's true, the volumes involved will require new infrastructure, but that's OK. (BTW, Centrica can re-start that production any time they like)

dearieme said...

I wonder whether this extends into Isle of Man waters? Dear God that would make Man rich. (I'm assuming that "Isle of Man waters" exist.)