Before commenting on the game-changing impact of Total’s entry into the UK shale energy scene, and the revolution in the UK shale debate at the government level, let’s look at where it all began.
The US also finds itself at a crossroads in shale history. From the view of the wildcatter, the US party is over. All the exciting land grabbing phase, the place where drillers make the real money, is over. This from Shale Daily,
The U.S. land grab is "substantially" over as operators turn their focus -- and the funding -- to scale and efficiency, said transaction experts PLS Inc. and Derrick Petroleum Services.
…What we are witnessing now is the transformation of the industry from land acquisitions to derisking and development. As this trend proceeds, drilling capital intensity will increase and players will rebalance portfolios to keep their finances in order. These adjustments will continue to provide ample opportunity for dealmaking.”
From now on the dealmaking is going to be in rearranging the furniture in the musical chairs game of the gas industry. The exciting stuff, described so well by Greg Zuckerman in “The Frackers” is history:
The Frackers tells the dramatic tale of how a group of ambitious and headstrong wildcatters ignored the ridicule of experts and derision of colleagues to pursue massive, long-overlooked deposits. Against all odds, they changed the world—and made astonishing fortunes in the process.
Ridicule and derision is something I can relate to, and I live in hope of even an everyday fortune. The maturity of the US industry means the focus will not only change to world shale, but that the world industry will benefit from a move in the exploration to the production cycle based on the mundane everyday process improvements coming from what are now effectively the gas factories scattered all over North America, as this ad from the New Yorker in 2009 told us:
But going back to the Total deal, this is the loudest shot yet in the global shale revolution, notwithstanding the small size of the money involved. As the WSJ noted in an editorial this week “the revolution has to start somewhere”.
Total have been a shale pioneer in alliance with a key fracker, Aubrey McClendon who built Chesapeake into a multi-billion fortune and lost a lot but is bouncing back again lately. Aubrey has been, at least up to now, pretty disinterested in global shale, a view shared by most of his fellows. It was a disappointment at World Shale in Houston last November, that there seemed a deep lack of interest in the shales developing worldwide. One can’t blame drillers when there are so many opportunities to make money in the US in familiar places. But the returns will be squeezed and the natural gas industry will become what it always was: boring. There’s going to be more development of the big trend of shale oil that other frackers such as Mark Papa of EOG and Harold Hamm of Continental Resources opened up and maybe Mark and Harold have too much money to bother themselves with the interminable waits of European shale.
Total, the fifth largest oil company in the world are smart people. I used to work for them way back,after all. Not only did they get into the Barnett earlier than ExxonMobil, they were also among the first to get into Argentina and Australia and China. That means that their interest in the Gainsborough Trough is very significant, but just as much for the Paris Basin as the Bowland. But the truly surprising aspect of the announcement is how simultaneous it was with David Cameron’s full throttle entry into the UK shale debate. What’s done is done but old readers here can only share my headspinning and head scratching at not only the speed but the degree of change. This is someone who famously told us barely 19 months ago that UK shale wouldn’t be a solution, as the very crowded NHA time machine /I told you so generator app recalls. But I’m not bitter as they say, especially when Cameron starts channeling me before Parliament:
Many opponents of gas fracking are “irrational” and simply “can’t bear the thought of another carbon-based fuel”, David Cameron said on Tuesday.
The Prime Minister attacked people who he described as “religiously opposed” to shale gas exploration.
He said that fracking is a “real opportunity” for Britain and that it could solve our gas needs for decades to come.
The Prime Minister warned that people refusing to back the process despite being presented with evidence that it is safe are not being “helpful”.
The entire debate will now move on and No Hot Air, will very shortly move with it. If the title of this seems a bit valedictory, don’t panic, I’m not going anywhere. But I will be somewhere different.