Are we on the eve of a turn in the Great Game? | 79 comments (79 topical, editorial, 0 hidden)

One more factor (none / 0)

Ukraine has Europe's third-largest shale gas reserves at 42 trillion cubic feet, according to the U.S. Energy Information Administration. While for years U.S. oil companies have been pressing for shale gas development in countries such as Britain, Poland, France and Bulgaria only to be rebuffed by significant opposition from citizens and local legislators concerned about the environmental impacts of shale gas extraction - including earthquakes and groundwater contamination caused by hydraulic fracturing or "fracking" - there has been considerably less opposition in Ukraine, a country that has been embroiled in numerous gas disputes with the Russian Federation in recent years.
[...] Ukraine took steps towards breaking its dependence on Russian gas.
On Nov. 5, 2013 (just a few weeks before the Maidan demonstrations began in Kiev), Chevron signed a 50-year agreement with the Ukrainian government to develop oil and gas in western Ukraine. According to the New York Times, "The government said that Chevron would spend $350 million on the exploratory phase of the project and that the total investment could reach $10 billion." [...]
Although stability and predictability are not exactly the words that people would associate with Ukraine these days, Western energy companies have continued to maneuver for corporate rights over Ukraine's shale gas deposits. Last fall, officials were in negotiations with an ExxonMobil-led consortium to explore for hydrocarbons off Ukraine's western Black Sea coast.
On Nov. 27, the Ukrainian government signed another production-sharing agreement with a consortium of investors led by Italian energy company Eni to develop unconventional hydrocarbons in the Black Sea. [...]
Royal Dutch Shell is also engaged in the country, having signed an agreement last year with the government of Yanukovych to explore a shale formation in eastern Ukraine. When it comes to Crimea, numerous oil companies including Chevron, Shell, ExxonMobil, Repsol and even Petrochina have shown interest in developing its offshore energy assets.

by das monde on Mon Apr 28th, 2014 at 05:35:42 AM EST

I hope I am not relying too much on the US (4.00 / 4)

experience, but shale gas is a bubble--essentially a scam.

Here is how it works in the US:

You hype a new technology, not mentioning that it is actually an old technology, little used heretofore because it is too expensive.
You accept eager, upfront investment money, and use it too buy drilling leases and drill some wells. The drilling companies are happy to do this. They get paid for the work they do, not the success of that work.
You downplay costs and tout your production numbers, which initially are indeed high. You use the high numbers to draw in more investment.
Just as you wells start into decline (about two years) you cash out, selling leases and wells and options on future opportunities. You move your new-found money off shore and out of sight: You have just flipped to the suckers.
If you are a bank, rather than a gas company, you are not done yet. You have helped with steps 1) through 4) and profitted at each stage. Now you sell financial securities on the declining wells. You can do this right up until the bubble pops.

Notice that while cash has been moved from the suckers to the scammers, at every stage real wealth has been destroyed, for net negative gain. At the end the ground water is permanently contaminated in a process that drags on for centuries, even if the well has been properly capped--which is in itself too expensive to ever happen. This loss shows up on nobody's books--certainly not yours. It's all good!

The Ukraine will produce food or it will produce five years of high-price natural gas. It won't do both.

--Gsianne

The Fates are kind.

by Gaianne on Mon Apr 28th, 2014 at 09:29:32 PM EST
[ Parent ]

Re: I hope I am not relying too much on the US (none / 0)

If governments faciliate this scam, what hope and expectations can we have?

by das monde on Tue Apr 29th, 2014 at 04:38:12 AM EST
[ Parent ]

Re: I hope I am not relying too much on the US (none / 1)

Well, it has certainly supplied lower energy costs to US manufacturers (and more marginally, to consumers), displacing coal and making certain energy-intensive industries more internationally competitive. So it seems they are being subsidised by the investors who are losing money on their gas wells? (And of course, by the incalculable environmental damage.)

_{It is rightly acknowledged that people of faith have no monopoly of virtue
- Queen Elizabeth II}

by eurogreen on Tue Apr 29th, 2014 at 05:16:07 AM EST
[ Parent ]

Really, you have to laugh. (4.00 / 2)

The frackers were so successful at getting investment money and drilling wells that they really shot themselves with their own gun. They flooded the gas market and drove prices way down below production costs.

The consumers got a temporary benefit, but even conventional drilling could not show a profit at the low market prices.

So then everybody lost money.

Well, not the scammers, at least, mostly not. They had been planning to cash out and run all along, it was just a matter of doing it earlier than expected.

--Gaianne

The Fates are kind.

by Gaianne on Wed Apr 30th, 2014 at 08:47:23 PM EST
[ Parent ]

Times are grim (none / 1)

But the stakes are so high, it is still a fight worth fighting. Even as a rearguard action.

--Gaianne

The Fates are kind.

by Gaianne on Wed Apr 30th, 2014 at 08:48:45 PM EST
[ Parent ]

Re: Times are grim (none / 0)

How will we see other outcomes?

by das monde on Sun May 4th, 2014 at 09:58:32 AM EST
[ Parent ]

Are we on the eve of a turn in the Great Game? | 79 comments (79 topical, 0 editorial, 0 hidden)

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