I love natural gas. It’s a great fuel, but the focus in Europe has been almost entirely on natural gas and not about the potential for oil production using the same techniques.
One reason may be what to call oil from shales. Is it shale oil? Is it tight oil? The answer is it doesn’t really matter. Oil is oil as natural gas is natural gas.
The combination of hydraulic fracturing, horizontal drilling and technology first gave rise to natural gas extraction in the US back in the 1990’s but a few people like Harold Hamm of Continental Resources and Mark Papa of EOG took Mitchell’s ideas to the next step.What if the same techniques could liberate oil?
The answer was found first in the North Dakota Bakken, then in the South Texas Eagle Ford and moved into the Permian Basin in West Texas. There are any number of developing oil plays n the US on the radar, but the basic lesson is that although oil production is not as widely distributed as natural gas, there is plenty of opportunity to go back to resources which only a matter of years ago were considered impossible to access.
The US domestic oil production has increased by over 2 million barrels a day since 2011. The nation is expected to achieve energy independence and to become the world’s largest producer. This from the Economist last month highlights how reality has emerged so fast that outdated perceptions still exist even in the US:
The benefits of shale oil are bigger than many Americans realise. Policy has yet to catch up
That headline refers to the continuing discussion about US crude oil exports, something that seemed as ludicrous as, well natural gas exports did, back in 2010.
In Europe, we’re only in the first days of considering natural gas abundance. The question of oil is completely off almost anyone’s radar. Using US geological examples, just as we have great natural gas resource potential, it follows that there is substantial oil potential in the rest of the world. But, as European greens seem to forget, the rest of the world includes us. Not only are there great shale oil potentials in Argentina, Australia, Colombia and China, geologists with their annoying habit of looking at maps based on hundreds of million of years ago instead of borders today, tell us that there is significant oil potential in Europe.
Very few are paying any attention. This is especially bizarre in France, where the Paris Basin is thought of as a geological analogue to the Bakken. A popular saying in France is “We don’t have oil, but we do have ideas”. Yet the idea that flat, empty North Eastern France has enough oil to not only energise France’s economic prospects but enough to potentially turn the Euro into a petrocurrency is almost unknown.
Northern Germany, Spain, the Netherlands and Hungary are all equally prospective - and equally ignored. The handy rule of thumb from the US is that if there was once some oil, at either at a very small scale or exhausted by conventional means in the past, the new “shale” techniques change everything. But today's oil prices also changes everything. It's obvious that peak oil meant peak $20 oil. At $100 there's plenty, and as with US gas prices, improving extraction technology will mean the market can still make money at far less than today's prices.
Yet, oil simply doesn’t register on most people’s horizon scans or scenario builds. That’s interesting on multiple levels, but first things first and let’s look at the UK.
I’ve been pointing out here for over two years that the potential for UK oil is as encouraging as it is for gas. IHS think the Bowland has 4 billion barrels of recoverable oil as they told an audience at Royal Geological Society last year. I saw three reporters there, from the Telegraph, Independent and Times. They must have decided it wasn’t as interesting as controversial shale gas.
Similarly reporters could have picked up this from DECC's chief geologist. It was cleverly hidden in public testimony to the House of Lords. Those sneaky scientists making things complicated:
Lord Griffiths of Fforestfach: The report that you held up then is about shale gas. It is not about tight oil. Could tight oil also be a substantial addition to the UK’s shale resource?
Toni Harvey: When DECC commissioned the report, we were focused on shale gas. It came somewhat as a surprise to us, because we thought that Bowland shale was going to be very deeply buried and entirely in the gas window, but there actually is some Bowland shale in the oil window, which is less deeply buried. So again, back to this figure of 42, the light orange is the Bowland shale that is in the oil window, and the dark orange is the Bowland shale that is in the gas window. Because most of it was in the gas window and we had not scoped out the report to do an oil estimate, we stopped at gas.
DECC has now commissioned the BGS to do a report on the Weald basin in southern England, because that basin has not been buried as deeply and is likely to be mostly liquids. In that case, we will probably come out with a shale oil estimate, and we might not go to the effort of doing a shale gas estimate.
I’ve written on this before, and been published elsewhere on it too. Just not in the UK, so therefore the story doesn’t exist. Until the past week. There was a story in The Times that I missed since the paper lives behind a firewall so thick it doesn’t even appear on Google searches, but luckily the Daily Mail stole it the next day, although, yet again it was nothing the Telegraph or the Financial Times or Guardian or BBC thought worth repeating.The Daily Mail, as passive aggressive and clinically depressed as it’s readers, immediately saw the true story:
Oil-bearing shale rocks in the Weald area spanning parts of Sussex, Hampshire, Kent and Surrey are believed to be as rich in oil as the North Sea fields.
The area could hold reserves to equal a third of those under the North Sea, which would offer Britain greater energy security and could help to drive down prices.
But it would have to be extracted by fracking - the controversial technique which uses high-pressure water to split rocks - and attempts to exploit it risk an angry response from campaigners.
So let’s call the whole thing off? I think not.Green campaigners have any number of rationales to leave gas in the ground - and some make some sense to other people, me included. Using more natural gas and postponing the emergence of renewable technology is one fear not entirely without foundation, even if I think it exaggerated. The leave all fossil fuels in the ground now because we only have a limited carbon budget is another fear that if you only were only looking at electricity generation and weren't bothered with security or cost but CO2 alone, might make sense in that case.
Although I say that gas not only complements, but could actually accelerate renewables, the green view is one of gas as a direct competitor and using gas today locks in investments that will shut out renewables. I think it wrong, but from some viewpoints, it would make sense to see gas a threat.
What greens can’t ignore is that there is very little competition between oil and renewables. Speaking as a great fan of natural gas transportation in trucks, buses and even trains, I can still confidently predict that oil is going to remain dominant in what the wonks call the personal transportation sector and everyone else calls cars. Natural gas for cars will grow, but we have over 120 years of the gasoline engine and associated infrastructure to displace and that won’t happen even if there were radical advances in battery technology and cost.
Green cars simply won’t happen on a mass scale. The rather obvious question about electric vehicles is where the electricity comes from, which means that we remain locked in to oil powered cars. Of course even there, we are only locked in until we sell the car, so we can’t say that domestically produced oil will prevent the sudden appearance of $50K Tesla’s in the driveways. The lack of both charging infrastructure, and $50K each is preventing that.
The competition for UK produced oil is other peoples oil, since we import increasing amounts of oil and oil products this century as the North Sea has declined. Some may propose we use no oil at all Certainly, we are not using any more oil in OECD countries as cars become far more efficient thanks to pollution concerns and as public transport becomes more popular and simply because oil is so much more expensive than it used to be.
But we will need oil for the foreseeable future: In that regard there is no substitute on the horizon for our oil except to use other people's oil. So in that case, domestically produced oil will certainly be better for CO2 than imported simply because of lower transport carbon costs. We then have to ask why would be want to import what we already have as it involves exporting money that otherwise we can tax at home. We also have to ask ourselves, as Americans are doing, whether the true cost of oil alsoincludes international adventures to secure overseas what we have at home. In this case it's not a matter of worrying about the danger to peace and quiet of trucks on UK country lanes, but the physical danger to the military of UK tanks on foreign roads.
Producing UK oil has several benefits, but we need to know the size of those benefits first. I think the BGS report will suddenly concentrate people’s minds. If we look at US analogues, we could see the sudden appearance of several hundred thousand barrels a day of oil. Not from out of nowhere, but under our own feet. How much exactly? The answer as in gas, is that we’ll never know until we explore. A low impact exploration program may lead to substantial production.Then again, it may not, but we can have that argument only once we know what is -or isn’t- there. To reject exploration is simply anti-scientific obscurantism.
The obsession with risks can also obscure the benefits. Let’s use a conservative figures of 250,000 barrels a day production. That isn’t too off the wall, considering the three well pad Wytch Farm field was producing 110K per day during the 90’s for example. We didn’t notice it because it was very low impact and also because the average price per barrel of oil in 1985 to 1995 was $18.87, giving only £313 million a year to the Chancellor.
Today, things are different. We know we can get more oil, although not yet, how much. Most importantly Brent Crude is $103. Even assuming a drop to $80, 250,000 barrels a day from places like the Bowland, the East Midlands and the Weald would produce £3 billion in tax revenue each year. 400,000 barrels at today’s price would produce £6.2 billion. For only one good use, apart from the NHS or schools or trains or tax breaks too, that amount of money could accelerate green technology something awful.
But if we go back to the Daily Mail some people want to burn the lottery ticket before they've checked the numbers:
Plans for energy firm Europa Oil & Gas to sink exploratory wells in an area of outstanding natural beauty near Dorking, Surrey, have already prompted legal protests by the Leith Hill Action Group.
City financiers may not leave the M25 that often and are thus prone to a narrative of UK natural gas or oil will never happen thanks to a sylvan splendour spoilt only by the occasional Tory hobbit. But, apart from Wytch Farm and their £6 million apartments being safe from landscape impact, let me assure you that there are many sites in Southern Britain that are areas of outstanding natural ugliness. How do I know? Because I, and many others are out looking already. Some people don’t need to read the papers to discover what’s under our noses.