Monday, 30 January 2012

Hail the Shale ? Not Just Yet

A quick round-up on shale gas, in the UK and a couple of bigger-picture developments.

Firstly, while UK shale is looking as prospective as ever - indeed,
another new discovery has been announced - activity levels are hardly frenetic. In particular, Cuadrilla has voluntarily suspended drilling in Lancashire in the wake of (a) accepting it caused two tiny tremors, and (b) having achieved what it really wanted to, namely boosting its own value by announcing what it has found already. Their interests are clear: they'll be selling out as soon as a decent price is on the table from one of the majors with the capacity to conduct proper production operations.

Yes, Cuadrilla is purely an exploration company - a very small one. And it shows: read this account of their inept handling of the locals in Sussex, where they'd like to drill in another exploration-licence area. (They have even contrived to screw up a big presentation to the rather favourably-inclined Energy Institute.) Good drillers they may be, but the PR side of things is completely beyond them and they are being left to twist in the wind by the rest of the industry.

Why ? Firstly, because right now there is absolutely no shortage of gas available, and prices are set to fall as recession kicks in. Secondly, and rather cynically, every boot applied to Cuadrilla's shins reduces the cost of buying them out in due course. There's no hurry for the majors: that gas has been under the ground for a while and it's quite safe where it is.

So - barring war in the Gulf, don't expect anything more than sporadic activity on the home front.

Elsewhere, though, there are some interesting straws in the wind. In France, there is a moratorium on shale gas exploration, but Total (effectively the French national oil company) is not impressed. They will eventually get to work on the politicians in France; and meanwhile are piling $2.3 billion into US shale, to gain both technology and experience.

Perhaps even more interesting is the evolution of Gazprom's position. For the past couple of years and with obvious motivation they have been vocal opponents of shale (always amusing to hear of their 'environmental concerns'); but to avid Kremlin-watchers
a Board meeting at the end of November marked a subtle shift, following which they ran ran a section on their website (since taken down) hosting a range of perfectly balanced views on shale from various commentators.

Did anyone really expect Total or Gazprom to get left behind on a gas industry development as important as this ? All the big players will be there when the time - and the money - is right.



Swiss Tovaritch said...

Good read.

I'd add that Total is pleased with the moratorium. Several exploration companies have paid for licences in France only to find the moratorium imposed, they now have cash flow problems.

As for Gazprom, it is eyeing this and has advanced projects for Poland, Belarus and most importantly Germany. It is even considering sports sponsorships in advance of any drilling to soften up locals.

rwendland said...

I do hope Total has bought into oil+gas shales. The economics of US gas-only shales look rather flaky to me, while the oil+gas operations are dumping gas for next to nothing to get at the oil.

James Higham said...

Are the tremors the byproduct or are they avoidable with better extraction techniques?

Nick Drew said...

Thanks for joining us, Swiss T - yes, the vultures are in the wings: & you see plenty of Gazprom logos on soccer shirts in Germany already

not so sure I'd agree, Mr W: these are no charities and the US shale boom has been real enough

of course, it has trashed the N.American gas price (that's supply & demand for you) - but there is a strong US pro-gas-export lobby to fix that ! (also quite a strong anti-export lobby - the petro-chem industry et al)

just bad luck really, James - they happen from time to time in the fracking process but are quite rare

and the ones in Lancs were very small: bigger ones happen every week across the UK (often related to subsidence of old mines)

generally, no-one notices: a big truck rumbling past your house would have more of an effect

(of course the really big tremors are caused by massive hydro projects ... and wind-farms aren't always gentle on the ear-drums)

Anonymous said...

Are shale-gas reserves generally located in politically stable parts of the world (or at least places where money talks?). It would be strategically advantageous to drastically reduce dependency on Saudi and other Islamic nations.

Steven_L said...

Shale gas? Would make a good scam wouldn't it?

Buy up a plot of wasteland in Texas, subdivide it and sell the 'shale gas' to mugs.

Give it a year or two!

Nick Drew said...

anon - prospective shale formations are all over the place: China, Russia, Australia, S.Africa, Algeria, Poland, France, Germany, UK, ...

only drilling can establish whether there is gas in 'em

Steven - may have been done already ...

if you get a chance to see Gaslands, it's remarkable cinema (full of **** of course, but a good film)

CityUnslicker said...

Still interested in San Leon energy and some of the other sahel explorers in Europe. by your analysis they wont' be around in a year or two as they will have been bought up for their experience.

Must be a decent long term equity bet. Will put the on my watch list.

Budgie said...

In other words shale gas in the UK is not viable for the next 5-10 years. So its back to existing technologies (clean coal (not CCS), imported gas and nuclear) to close the huge gap in generation visible in the next few years.

So much for pie in the sky wind, wave, shale and fusion. Real engineering is not amenable to political wheezes, or wishful thinking and always takes longer than the media says.

Nick Drew said...

good luck with the nukes Budgie but none of my £££ is headed for EDF

Budgie said...

Actually, ND, via the IMF and a few French banks your £££ is already headed for EDF.

Mark said...

Check out the 2.2Tcf that Tamboran found in Fermanagh, and a similar amount next door in Leitrim.