Andrew Rawnsley is the Chief Political Correspondent of the Observer, so what he says today about fracking will be read by many people who know little or nothing  about it. They won't be educated by this and I'll only refute the main premise here:

Frack-heads talk feverishly about the reservoirs of shale gas being the equivalent of Britain's share of the original North Sea oil reserves. If that were to prove true, this would indeed provide a rich source of energy for Britain and a big boost to tax revenues for the Treasury. Some Tories even believe that shale gas could do for David Cameron what the black stuff did for Margaret Thatcher. The shale deposits under Lancashire alone, so they claim, could power the country for more than half a century. When they get really carried away, they reimagine Blackpool as the "Dallas of the North" with kiss-me-quick hats swapped for stetsons. Climate-change deniers are prominent among the frack-heads. Yet it also seems to offer something to greens because shale gas emits half as much carbon dioxide as coal.

Well, it is only human to dream and the temptation to fantasise about miraculous treasures is all the greater if you are a politician looking for relief from many more bleak years of austerity. The trouble with their dream is that it is very risky for Britain.

We can very easily knock the do we, don't we argument on the head by simply releasing the BGS for DECC estimates. The reason for not releasing them is so hilarious I'm saving it for my book, but the general point to consider here is that the resources, having been under the ground for 450 million years, aren't going anywhere. What is a fact, because the Chancellor tell us so, is that we have years of austerity ahead. It would be only human to dream, but what if there actually are miraculous treasures? Rawnsley tells not us, who knows better, but unfortunately several hundred thousand readers who don't, that shale is a mere illusion:

Shales in Europe are generally thinner and deeper, and therefore much more expensive to tap, than those that have been successfully exploited in the United States. And Britain looks likely to be one of the less promising prospects in Europe because its shales are typically among the thinnest.

That's a very sweeping statement. Where's the proof?  What if we could have an independent estimate if not of resources, then of the thickness of shales?  There are a number of geological factors that are used to assess shale plays, but among the most important is the thickness of the shale. Andrew Rawnsley says they are thin - and worthless.  Here's what DECC say:

decc

As I've noted recently, the Bowland shale is actually one of the worlds's largest gas fields, easily in the top ten and possibly as high as three. It's so big that it's size one way or the other is meaningless. If I tell you it's number four, we can rest assured Damian Carrington will write a story talking about the defeat  for frack heads if we only make it to the top 12. 

We need to cut  the bureaucratic log jam over the resource estimate. Ed Davey could release it tomorrow. The fact he isn't shows the internal battles still raging.

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  • Andy

    So until this week when the "50% more gas" story came out, the only public domain number for shale gas in the UK was Cuadrilla's original numbers?<br /><br />The more I see the rest of the world, the more I think the US' secret weapon in exploiting shale is its federal system. If you don't the USGS number for Bakken, the state of North Dakota is happy to supply a different one. If you don't like North Dakota's number Continental Resources is happy to provide another that's compliant with SEC rules. If none of these are good enough, the USGS is happy to go back and reanalyze the rock and update its estimate.<br /><br />The point is, no one can get away with dominating the discussion by sitting on their numbers in the US.

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  • S. Spence

    Dreadful article by Andrew Rawnsley.<br />Utterly untruthful and introduces a new "F word" to the frantic wordmongers.<br />But hey-ho it's what[B][U] 'they'[/U][/B] want to hear.<br /><br />However let's look at the truth, these are statements to the ASX [oz. stock exchange]. ..........<br /><br />[B][U]AJ Lucas European Shale Assets Update<br />JP Morgan Shale Corporate Access Day I 10 May 2012[/U][/B]<br /><br />Slide 16 gives a Bowland v. Barnett anology. Whole pdf is well worth perusing ino..<br /><br />http://www.lucas.com.au/files/ASX-Announcements/ASX-2011-12/AJL_European_Shale_Assets_Update_100512.pdf<br /><br />And;-<br /><br />"Having said that, we are very encouraged that the Bowland shale is a super giant continuous gas accumulation which has the ability to transform the socio-economic landscape in the UK; much like has happened in the USA from the development of its shale gas reserves."<br />Abstract from <br /><br />[B][U]AJ Lucas Group Limited 2012 Annual General Meeting.<br />Chairman’s Address, 30 November 2012.[/U][/B]<br /><br />http://www.lucas.com.au/files/ASX-Announcements/ASX-2012-13/121130-Chairmans-Address-2012-AGM-ASC-version-Final-Adjusted.pdf<br /><br />So, who's telling 'porkies' then?<br />Rgds.,<br />Steve.

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  • andagain

    In reply to: S. Spence

    [I]"Having said that, we are very encouraged that the Bowland shale is a super giant continuous gas accumulation which has the ability to transform the socio-economic landscape in the UK; much like has happened in the USA from the development of its shale gas reserves."[/I]<br /><br />Perhaps someone should ask Mr Rawnsley to consider the effects of that on the political landscape of the UK. The way things are going, in five or ten years there may be a brand new industry in northern England and South Wales, with the Tories as its only supporters.

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  • Geckko

    The only rebuttal needed of Rawnsley is that people place their own capital at risk to find and extract resources. They make the judgement based on best information. There is no role for government or journalist to tell investors how or where they should place capital at risk.<br /><br />The rebuttal is a simple, who cares what you or the government think are the chances or magnitude of potential profits.

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  • Hambone

    In reply to: Geckko

    Absolutely right!<br />Who cares what Rawnsley thinks re the thickness of the Bowland. <br />It's not just about thickness either. <br />Flow to surface from a specific zone is always good.

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  • roger

    The UK Boland shale if it has 300 TCF is close to the 350 TCF of Russia biggest field which produces 260 BCM yearly.<br /><br />Lets imagine a crazy parallel world where the UK Boland produces 100BCM/yr, less than half the similar sized Russian field.<br /><br />+ ~£22 billion yearly gas produced at todays prices<br />+ ~£10B in royalties allowing the state to employ more nurses and teachers, cutting taxes, paying higher pensions, etc<br /><br />Coal power stations mothballed and shut down, the UK consuming 90% less coal<br /><br />Pros:<br />Big CO2 reduction<br />About 100,000 more jobs directly and indirectly<br />£10B to HMRC a year<br />More secure energy not reliant on qatar or Russia<br /><br /><br /><br />This one shale may ultimately yield £1.5 Trillion to GDP over its whole lifetime and in excess of £800 Billion in taxes. Poor Qatar no more LNG exports to the UK….. don’t feel bad your GDP per head is twice that of the UK you can afford it

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  • Darwineurope

    In reply to: roger

    Just a small addition to your calculation;<br /><br />The owner of the shale is 25% aj lucas, 75% cuadrilla. The latter in turn is owned for 42% by the same aj lucas.<br /><br />Surely the owners will see reflect some of this value in their sharevalue.<br /><br />You can buy all of aj lucas on the asx for $100 mln, at 75ct a share.<br /><br />That is so out of line cheap, that it must indicate shale will never ever materialize in the uk, or in netherlands, or in poland, where cuadrilla also holds key acreage.

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  • Striebs

    In reply to: Darwineurope

    I don't understand why investors don't get it either .<br /><br />The same is true to a lesser extent with regards to Aussie shalers other than the very impressive Beach . How can people forget the CSG boom so quickly ?<br /><br />More than anything else shale shows the differences in entrepreneurial spirit between the US plus Asia and the rest of the World . <br /><br />Hardly surprising that the most common objection is thinly disguised anti-Americanism .<br /><br />Here in Europe nobody is ready to risk it for a biscuit .<br /><br />Worse still there will be no end of people living nowhere near a shale site who have been doing their level best to confound onshore E&P complaining if people who risked their capital made profits out of it .<br /><br />Worse still even , the Govt will listen to them and transfer them a share of the profits or taxing shale a punitive rates .

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  • roger

    In reply to: Striebs

    [quote]I don't understand why investors don't get it either .<br />[/QUOTE]<br /><br /><br />The £1.5 Trillion is a gross figure over 5 decades or more with an 80% recovery rate and the price of natural gas staying at 60p/therm. All of those are probably wildly optimistic (especially the recovery rate and prices staying at 60p). <br /><br />The following would perhaps be more realistic yet still optimistic<br /><br />300TCF at 40% recovery = 120 TCF<br />10 billion therms in a TCF<br />Assume gas prices at 40p a therm[B]<br />= £480 Billion over the lifetime of the field[/B]<br /><br />The government is likely to take 60% of that if not more via royalties.<br />The remaining £192 Billion needs to pay for the rigs/sites/men/other taxes/capital/etc over 50 years.<br /><br />Only what remains after that would be the original investors profit.<br />And that profit over 50 years has a far lower net present value.<br />For instance £10B in 50 years time is worth less than £1B today<br />And that is before you even start to try and put some risk into the equation.

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  • Jon Frum

    The New York Times ran a notorious article claiming that shale gas was a fraud, and would never pan out. While the article was being printed, gas was being produced and more wells were being drilled every day. The New York Tines doesn't talk about that claim any more.

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