Welcome to the new version of European Tribune. It's just a new layout, so everything should work as before - please report bugs here.

Wimpy Europeans and shale gas

by Jerome a Paris Thu May 26th, 2011 at 08:19:32 AM EST

The European Energy Review has an article about Europe's reluctance to embrace shale gas (free subscription probably required) which is more interesting for the number of clichés about Europeans it carries.

The article conveys the thoughts of one Frank Umbach (see a short CV here), director at a new think tank, the European Centre for Energy and Resource Security (EUCERS) in London, founded in September last year by the Department of War Studies at King's College and who seems to have a long history of being critical of Europe's dependency on Russian gas.

His point is that Europe should embrace shale gas as an attractive domestic source of gas which would allow us to snub Gazprom, but that somehow we won't, because:

  • we're just whiners
    in Europe we always seem to be focusing on the potential problems of a new technology. In the US and Asia they look at the positive prospects.

  • we're wimpy and cowardly avoiding facing  off the Russians
    There is a strong feeling among some companies not to upset Russia in any way. That lobby is also having an effect on government policy in some countries, like Germany.

  • we're just not enterprising enough
    European companies are at risk of missing out on a crucial development, he says. `They believe they still have plenty of time. That's dangerous. It is now non-European companies that are most active in shale gas - grabbing the best pieces of land and obtaing first-mover advantage.

  • in fact, we're basically  incompetent
    in addition to their strong commitment to the existing gas market structure, including their strong ties with Gazprom, the energy companies face another obstacle. `They lack technical and management expertise'

  • we care too much about stupid enviro rules
    In Europe, he says, we have so much engineering experience and such strict environmental regulations, that these problems can be avoided. (...) `Public acceptance is going to be the main issue for future unconventional gas development' [hey, what happened to our lack of technical expertise?]

  • our labor costs are too high
    according to estimates from the Oxford Institute of Energy Studies, production costs in Europe could be four times as high as in the US. This is because drilling costs and labour costs are much higher here than in North America.

  • in fact, Europeans are just anti-progress these days
    in Germany there is `a general mood of cynicism among energy producers', because just about all their activities are being resisted by the public - be it shale gas exploration, nuclear power, coal-fired power, CO2-storage, or even wind power. `No investment at all seems to be able to go ahead.

Along the way, we learn that we really have no idea if the resource actually exists in Europe, even less of an idea of what it might cost to produce (in fact, it might only be viable under the very same long term pricing arrangements that are in place with Russia and cause that author so much grief) and, of course, that governments should subsidise the sector to make it take off (sorry, "establish a policy framework, with investment mechanisms to stimulate shale gas exploitation).

Let's burn more fossil fuels, let's show the Russians, and let's ignore our pampered, wimpy and overpriced populations... Sigh.


Display:
Nice frackin' catch.

"Life shrinks or expands in proportion to one's courage." - Anas Nin
by Crazy Horse on Thu May 26th, 2011 at 08:57:30 AM EST
  This is classic-- when all the facts are against a self-interested view, then the PR pitch must in essence be that "the other guys" are slobs and they stink, too.

  How, you might wonder, could such a crass approach "work"?  Well, at least part of the answer lies in the fact that our times are characterized in a very important way be the never-far-from-consciousness assumption that affective qualities--even when unfairly alleged as deficient--are what counts most.

   This is the "style-over-substance" tendency which a people-ized consumer-and-mass-media-driven society makes paramount.

   DSK, for example, dresses well, has lots of friends in high places and 'moves in the right circles,' and has, of course, lots of money.  It's these, then, and not his real personal attributes which count when it comes to forming an opinion of him.  He "looks good", ergo he must be "good".

   Us?  We're "whiners".  That's a really terrible thing to be, never mind if in fact, the whiners' complaints are completely well-founded.

"In such an environment it is not surprising that the ills of technology should seem curable only through the application of more technology..." John W Aldridge

by proximity1 on Thu May 26th, 2011 at 10:01:06 AM EST
Again with the hype... Shale gas is not a game changer.

It's not even a 'game changer' in North America.

And it's so much less in Europe

So yes, go forth and drill as much as you want. A bit of expensive gas is probably better than no gas. But in the end the only unlimited resource is human blabla.

Schengen is toast!

by epochepoque on Thu May 26th, 2011 at 10:04:21 AM EST
I disagree here! In the US, it has completely changed the game. The predicted US gas shortage failed to materialise (to my sorrow, as I had put money in US nuclear generators) and turned into a glut. The LNG import projects are being converted to export projects. Sure, shale gas will not allow an increase in consumption to fuel say, a massive increase in new gas fired power plants, and it has put a definite floor on long term gas prices which is higher than where prices used to be, but it does seem perfectly able to replace the decline in conventional gas fields. For maybe a generation. If that's not a game changer, I don't know what is.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Fri May 27th, 2011 at 03:23:28 PM EST
[ Parent ]
As an NG extender, to facilitate a gentle letdown of North American (and European) NG production shale gas is certainly viable. But a new lease on life it probably isn't. The high rates of drilling and price needed, the high decline rates and mostly low productivity make it volatile enough so that it can't be counted on to deliver NG as needed i.e. to completely fill the gap left by conventional gas. E.g. in the wake of the Great Recession and because of low prices the rate of drilling has dropped so sharply that production can be expected to drop again in the medium term. The law of receding horizons applies.

As to environmental impacts the most pertinent issues are water contamination and GHG emissions. The EPA is studying the groundwater issue and will present results 2012-2014. That's highly dependent on local geology. So probably no definite answers.

The other water issue is how they dispose of the drilling fluids. That's something that can be handled with proper regulations though with higher cost. "Indeed, efforts by shale gas producers to remain exempt from the Safe Drinking Water Act are surely counterproductive and counterintuitive if the production of shale gas is really as benign as the industry contends.55"

GHG emissions (over full cycle) are controversial (a study says it's actually more than coal because of escaping methane) but in my view irrelevant. Whatever is there will be produced high GHG emissions or not.

Anyway this report challenges the consensus opinion about newly abundant gas.

In Europe there is so much less shale gas available that under the best of circumstances it will only serve to cushion the decline.

Schengen is toast!

by epochepoque on Fri May 27th, 2011 at 05:00:07 PM EST
[ Parent ]
Well, the US shale "boom" happened at a time of massive fall in demand, so the impact on prices was probably more than it would have been in normal times.

Don't forget that this boom, under the most optimistic assumptions, would only be big enough to replace Canadian exports to the US, ie 15-20% of domestic consumption.

And we'll have to see if production can continue to grow with current prices...

Wind power

by Jerome a Paris (etg@eurotrib.com) on Sun May 29th, 2011 at 12:50:15 PM EST
[ Parent ]
Any difference shale gas has made here will end abruptly when they finally start regulating fracking, or when the frackers start getting their butts sued off for what they're doing to aquifers, which is likely to come first.
by rifek on Sat Jun 4th, 2011 at 11:43:27 PM EST
[ Parent ]
a new think tank, the European Centre for Energy and Resource Security (EUCERS) in London, founded in September last year by the Department of War Studies at King's College

A think tank to advocate war by other means.

*Lunatic*, n.
One whose delusions are out of fashion.

by DoDo on Thu May 26th, 2011 at 02:04:39 PM EST
that's why I noted where it was created. The writer seems to be looking for ways to have a confrontational relationship with Russia and show them their place.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Thu May 26th, 2011 at 03:46:30 PM EST
[ Parent ]
More John le Carre characters waxing nostalgic for the Cold War.
by rifek on Sat Jun 4th, 2011 at 11:46:06 PM EST
[ Parent ]
Seems like the security policy types are waking up to resource scarcity.

I suspect that the ITPOES reports of 2008 and 2010 (among others) stirred some attention and made their way to the establishment via Chatham House and Dep of Energy & Climate Change.

Additional circumstantial evidence: the US Joint Chief's of Staff warning in the JOE2010 report, the Bundeswehr report last year though the German government has its head firmly stuck in the sand. It seems that awareness about problems ahead always needs to come from the public first until governments can't deny it any longer. They are usually the last to admit realities.

We will see more shops like EUCERS spring up with a range of narratives and opinions about what to do. A number of them will go for the 'unconventional business as usual' model. Their recommendation will be to exert ever more effort to tread water.

Ugo Bardi has this wonderful new piece at The Oil Drum that shows how -for a while- activity increases even after resource peaks have passed. The people that always make a real killing in 'desperate gold rushes' are the equipment and service guys because so much more elaborate investments have to be made to keep supply seemingly at the same level.


Schengen is toast!

by epochepoque on Thu May 26th, 2011 at 05:56:48 PM EST
[ Parent ]
Who is paying the bills for this EUCERS? I ask because, as I read your list of points being promoted, I thought this sounded a lot like something the rather nasty Koch brothers would be behind. And they always seem to do it in a very sub rosa manner, hidden behind front organizations.
by Mnemosyne on Thu May 26th, 2011 at 07:36:47 PM EST
But I feel a bit confused about shale gas. One side says it's perfectly ok environmentally speaking, while the other claim it's horrible. Does anyone actually have any facts and numbers on this thing? It's not like this would be the first time the fossil fuel companies in the US screw over the environment and the locals, but on the other hand it wouldn't be the first time whining greenies blow everything completely out of proportion either.

So, uh, does anyone around here actually have a grip on this issue? I'd love to hear more about it.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Fri May 27th, 2011 at 03:16:57 PM EST
As one supremely shitty brand of beer once claimed, "It's the water."

Shale gas is released from the rock matrix by the process of hydraulic fracturing or "fracking", in which various chemicals are pumped in at high pressure.

Aside from being more expensive/energy intensive than conventional NG, the major catch seems to be what goes down must come up: the chemicals leach back to/near the surface, for enormous pollution potential.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt t gmail dotcom) on Sat May 28th, 2011 at 03:10:22 PM EST
[ Parent ]
Indeed, but can this be managed in a reasonable way? Many useful industries utilize potentially hazardous chemicals and substances, and are able to deal with them in a safe and reasonable way.

By the way, this is a fascinating quote: "State regulators, initially caught flat-footed, tightened the rules this year for any new water treatment plants but allowed any existing operations to continue discharging water into rivers."

Is this how things are done in the US? Everything is legal, except what is forbidden? Around here, any and all potentially polluting activities need to get permits before they are initiated. They are not allowed to start helter skelter and then regulated in hindsight.

Peak oil is not an energy crisis. It is a liquid fuel crisis.

by Starvid on Sat May 28th, 2011 at 06:49:10 PM EST
[ Parent ]
Starvid:
Many useful industries utilize potentially hazardous chemicals and substances, and are able to deal with them in a safe and reasonable way.

If you're designing a closed industrial plant, then full containment is possible 99.5% of the time. But in this case you're pumping chemicals into an unbounded geological matrix ("real world") that is only understood on a very general level.

The fact is that what we're experiencing right now is a top-down disaster. -Paul Krugman

by dvx (dvx.clt t gmail dotcom) on Sun May 29th, 2011 at 04:36:46 AM EST
[ Parent ]
By the way, this is a fascinating quote: "State regulators, initially caught flat-footed, tightened the rules this year for any new water treatment plants but allowed any existing operations to continue discharging water into rivers."

Is this how things are done in the US? Everything is legal, except what is forbidden?

Yes, that's true, but what the quote refers to is "grandfathering in". New regulations often exempt existing things.

Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Sun May 29th, 2011 at 06:40:09 AM EST
[ Parent ]
Many useful industries utilize potentially hazardous chemicals and substances, and are able to deal with them in a safe and reasonable way.

But not by themselves. They have to be regulated:

The aim of REACH is to improve the protection of human health and the environment through the better and earlier identification of the intrinsic properties of chemical substances. At the same time, REACH aims to enhance innovation and competitiveness of the EU chemicals industry. The benefits of the REACH system will come gradually, as more and more substances are phased into REACH.


Economics is politics by other means
by Migeru (migeru at eurotrib dot com) on Sun May 29th, 2011 at 06:43:32 AM EST
[ Parent ]
Not at the current prices.
by tjbuff (timhess@adelphia.net) on Tue May 31st, 2011 at 11:01:34 AM EST
[ Parent ]
After watching the documentary 'Gasland", with its scenes of flammable faucets,  I am impressed by the advantages of having both natural gas and water delivered by a single set of pipes.

Remember the old Bob and Ray routine, where Ray was picketing a toxic waste dump, because "They're just throwing that stuff away, when poor people could use it" ?

by greatferm (greatferm-at-email.com) on Sun May 29th, 2011 at 09:46:32 AM EST
A supposedly independent committee will provide binding? advice to ExxonMobil on what technology and chemicals are allowed in their test wells (one about an hour from here). The committee will release it's report next March on the findings from the test bores.

In German here.

I'm glad we're not Texas.

"Life shrinks or expands in proportion to one's courage." - Anas Nin

by Crazy Horse on Tue May 31st, 2011 at 09:52:28 AM EST
but does Europe even have extensive shale formations to worry about?
by tjbuff (timhess@adelphia.net) on Tue May 31st, 2011 at 11:02:36 AM EST

Poles apart in search for shale gas in Central Europe

An April report by the US Energy Information Administration (EIA) on shale gas resources outside the US put Poland's technically recoverable shale gas resources at 187 trillion cubic feet (cf), making them the largest in Europe. That compares with the 862 trillion cf of technically recoverable shale gas in the US




Wind power
by Jerome a Paris (etg@eurotrib.com) on Tue May 31st, 2011 at 05:21:40 PM EST
[ Parent ]
There are three major basins in Europe: Southern North Sea (offshore fracking - that's a non starter), Northern Germany, Poland (that's why some people in Poland are dreaming of becoming the next Norway). See this report (page 17) or this report by Eon. The latter report is especially interesting since it's by an energy major and says:
US

􀁹 Gas prices of $4/mmbtu (~10/MWh) indicate that development, drilling and production is competitive

􀁹 Some studies (BENTEK) estimate breakeven costs below $3/mmbtu (~7/MWh) for various shale plays possible

􀁹 Even conservative estimate (Wood Mackenzie) for breakeven cost lower than current gas forward prices of $7/mmbtu (~17/MWh)

􀁹 Both investment and production decision with very short time lag

Europe

Estimates indicate that economical breakthrough requires gas prices above 25/MWh (~$10/mmbtu)

􀁹 European gas forward prices (NBP) currently at 13/MWh for 2012 (~$5/mmbtu)

􀁹 Optimistic estimates put breakeven cost at 14/MWh (~$6/mmbtu) in Hungary and at 25/MWh (~$10/mmbtu) in Poland

⇒ These estimates do not reflect uncertainties such as dry wells, Estimated Ultimative Recovery (EUR), assumed initial production

And thus...
Unconventional gas resources are 7 times smaller in Europe compared to North America 􀁹 Geology of unconventional gas in Europe is not well understood so far 􀁹 Access to resources more difficult than in North America 􀁹 Higher environmental constraints 􀁹 Services more expensive ⇒ Production will be later, slower and more expensive than in North America
They expect 10-15 bcm/year to be produced after 2020 but more and more (the vast majority) of the 600+bcm/year will still have to be imported. So "No 'unconventional gas revolution' in Europe."

Regarding Eon's assumption that "Gas prices of $4/mmbtu (~10/MWh) indicate that development, drilling and production is competitive" one has to say that the question whether US plays are so easily economical is controversial. On the one side there are the industry guys who say it's abundant AND cheap. Then there are people like Arthur Berman who say that the manufacturing model has failed and the current glut keeps gas prices artificially low by draining shareholder equity for drilling. "It seems inevitable to me that it is sort of a bubble phenomenon; but bubbles can go on for 25 years or so, even though everyone knows that's what's happening. As long a capital markets continue to fund these things it's going to keep on going. I'm not saying that's even a bad thing, though I wouldn't put any money in it, that's for darned sure."

The US experience indicates that of those vast areas only a relatively small central area is economically viable for production. So this and more stringent environmental regulations (can't dump millions of liters of drilling fluids by 'surface disposal' and build roads at will) will ensure that Northern Germany probably won't look like this:



Schengen is toast!

by epochepoque on Tue May 31st, 2011 at 05:24:12 PM EST
[ Parent ]
and yet J's link shows Germany at 8 trillion cubic feet and Poland at 180. Do we have discrepancies here?

"Life shrinks or expands in proportion to one's courage." - Anas Nin
by Crazy Horse on Tue May 31st, 2011 at 07:02:24 PM EST
[ Parent ]
Shale basin doesn't mean there is gas (of exploitable quantity). It's one geological precondition for the resource to exist. Only parts of the basins have gas of consequential amount and only part of those areas are (in the long term) economical to drill in. Those Polish areas seem to have the best geology/potential/resource-whatnot - as far as that has been explored. But you can't really know the resource/reserves until real drilling has been done. The numbers Jerome quoted are estimates that point out the general direction. 'Technically recoverable' can mean anything at this stage.

From Schlumberger/EPIC

From MPI plasma physics

Schengen is toast!

by epochepoque on Tue May 31st, 2011 at 08:14:17 PM EST
[ Parent ]
Shell drilled for the shale resources in southern Sweden as indicated by the map, but gave up as the geology supposedly wasn't good enough. Also, there was strong local opposition. Probably has something to do with the Swedish mineral regulation which awards essentially all the profits to the extractive company without companesation to the landowner, and also make straight out land expropriation possible.

Peak oil is not an energy crisis. It is a liquid fuel crisis.
by Starvid on Wed Jun 1st, 2011 at 04:09:46 PM EST
[ Parent ]
His point is that Europe should embrace shale gas as an attractive domestic source of gas which would allow us to snub Gazprom, but that somehow we won't, because:

... because it would require us to take leave of our sanity?

Gazprom delivers reliable supplies. Using existing infrastructure. Which is fully amortised. Cheaper than fracking will ever be.

Why, precisely, is it that we should not want to trade with them, again?

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Tue May 31st, 2011 at 05:29:23 PM EST
they are evil and they say 'no' to us now and then on various topics and that is just not tolerable.

Wind power
by Jerome a Paris (etg@eurotrib.com) on Wed Jun 1st, 2011 at 04:06:43 AM EST
[ Parent ]
Oh, right. I forgot. They are evil for not honouring contracts that we got by bribing Yeltsin into giving us a fat cut of fields which GazProm has adequate capital and superior engineering expertise to develop. Clearly, this justifies using more expensive and dirtier domestically produced gas.

- Jake

Friends come and go. Enemies accumulate.

by JakeS (JangoSierra 'at' gmail 'dot' com) on Wed Jun 1st, 2011 at 07:29:42 AM EST
[ Parent ]
If this refers to Sakhalin (which you mentioned elsewhere recently), it's probably not the best exemple. Shell gained access to it in a reasonably clean way, and the later rebalancing of the shareholding was also a relatively fair thing in view of what had happened on the ground in the intervening years. And Gazprom is actually still unable to do LNG on its own for financial/contracting reasons more than for engineering reasons.

Now Yukos fits what you had in mind better...

Wind power

by Jerome a Paris (etg@eurotrib.com) on Thu Jun 2nd, 2011 at 04:30:13 AM EST
[ Parent ]


Display:
Go to: [ European Tribune Homepage : Top of page : Top of comments ]

Top Diaries