keepcalmandfraconThis is another presentation, How I Stopped Worrying And Learned To Love Hydraulic Fracturing hot off the presses from Tudor, Pickering & Holt, the Houston investment bank in London this past week. TPH said that people back in Texas would be surprised so many people were in a room talking about international shale gas anywhere, but especially in London.

The event was notable for a round up of shale resources worldwide, but started out with an up to date assessment of what’s been happening in North America. Next time I go to one of these, I’m going to try and bring a UK opponent of shale gas so that they can see for themselves what the reality of US production is, and decide if they want to either get out of the way or get out of the debate.

Another speaker at the event was Energy Minister Michael Fallon who again underlined how from the top at least, UK shale policy is done and dusted:

We should not forget the US experience in the UK. The United States has felt the great difference shale gas can make.

Shale has reinvigorated its economy; gas prices have halved, reducing costs for industry and consumers, and it has created billions in new investment and thousands of jobs.

Nations including Argentina to China have looked on at this boom and are joining in.

Conditions vary from country to country of course, and it is clear that the shape and development of the industry in the UK will be significantly different to the US.

While we have the advantage of learning from the US experience, the UK is more densely populated than the US, which has implications for where and how you can drill. The geology of our shale is also much thicker in some areas...

... if shale gas can be properly and responsibly developed worldwide, it has the potential to put downward pressure on gas prices and wean the world off more damaging coal.

So I say to you categorically – the UK is getting serious about shale.

Going back to the TPH presentation, this gives us an up-to-date picture of US shale often lacking in the “controversial” shale gas and peak gas school typified by Paul Stevens and Bloomberg New Energy Finance, who think that 2012 or earlier shows us what 2014 will look like. For instance Slide 4 shows how conventional Gulf of Mexico offshore is declining. This again proves that if Greenpeace were really concerned about Arctic drilling, they’d get out of the way in UK drilling. As an aside, we may even have seen the first sign this week that shows frontier UK offshore drilling may no longer be as attractive as it was in the past

The American oil giant Chevron said Friday that it was putting its flagship British deepwater development project under review, saying high costs might not make it viable to continue.

The company said that rising costs of offshore drilling, pipelines and other related equipment and activities meant that the project, called Rosebank, “does not currently offer an economic value proposition that justifies proceeding with an investment of this magnitude.”

“For all the companies, capital spending has gone straight up” but profitability has not improved, said Fadel Gheit, an analyst at Oppenheimer & Co. in New York. He predicted that costly recent projects would be in trouble if oil prices fell to $70 or $80 a barrel. Brent crude, the North Sea blend, currently sells for about $110 a barrel

Back to TPH, slide 10 shows Marcellus costs lower than Gulf of Mexico with the next two slides showing the rising production of up to 200 billion cubic meters by 2020. Dave Pursell noted to the audience: This is why Art Berman is wrong. But we don’t want to give you just that. Last year’s bad press on the Ohio Utica shale now appears to be wrong. The Utica will bring another 40 BCM a year into the US North East, disrupting balances even further, lowering CO2 from power and guaranteeing further how LNG will be exported for one very simple reason: It has to be (slide 18), even after massive chemical industry build up described afterwards.

The ramp of US shales in general, and the Marcellus in particular shows how wrong the predictions of shale gas being decades away in Europe can be - if we want it. How can Lancashire take until 2030 to produce 10 BCM as some say when Susquehanna County PA alone has gone from zero to 20 BCM in four years. It certainly won’t be from any industrialization of the landscape, as there are only 9 rigs operating in the county according to Baker Hughes. Susquehanna is the sweet spot of the North East Marcellus, but it’s only 300 feet thick. Lancashire can do as good, or better. If we want it to.

Slide 24 shows even more amazing oil growth. Thanks to the Bakken, Permian and Eagle Ford, US oil production has increased 2 million barrels a day in just two years.

The UK could have a quarter of that too. Unless, of course, we don’t want to.

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