Shale gas- costs and limits

 There has been speculation and assertions about the impact of shale gas on gas prices. UK PM David Cameron said unequivocally that ‘fracking has real potential to drive energy bills down… gas and electric bills can go down when our home-grown energy supply goes up’. But Lord Stern disagreed, arguing that the economics were very uncertain.

 www.independent.co.uk/news/uk/politics/baseless-economics-lord-stern-on-david-camerons-claims-that-a-uk-fracking-boom-can-bring-down-price-of-gas-8796758.html         

While Sir David King, ex Chief Scientist, said the eco-impacts of shale gas may be large and the UK contribution limited: www.theguardian.com/environment/2013/sep/16/david-king-fracking-shale-gas

Energy Secretary Ed Davey warned that it was ‘no quick fix and no silver bullet’ and was at ‘the very early stages’. So the UK was unlikely to see benefits from shale gas until the next decade and, with the uncertain scale and nature of the resource, it was ‘far from clear that UK shale gas production could ever replicate the price effects seen in the US’. www.ft.com/cms/s/0/6090d082-1954-11e3-83b9-00144feab7de.html#axzz2eQ6sk4mW

However some see the prospects differently given international energy trading patterns: www.independent.co.uk/voices/letters/letters-frack-and-cut-gas-prices-by-a-third-8800063.html . It is certainly complicated. Prices have certainly fallen in the USA, though that may be a unique event- the geology and population densities in the EU are different. So is the market. The US doesn’t import much gas, and in the past hasn't used as much gas for heating as the UK- it’s been expensive there and they didn't have the North Sea boom. So Shale gas has had a big impact, expanding the market and pushing the price down. They can even export some-and some freed up coal. In the EU there is a big internal gas market fed from the North Sea but increasingly from Russia, and prices are competitive- topped up though by expensive imports of LPG. Shale gas might reduce the scale of the later, but then LPG may get cheaper now the USA is exporting into the world market. So shale gas may change patterns of supply, but it’s hard to say whether a shale gas boom in the UK or EU would reduce prices. Especially since Japans use of LPG to replace nuclear (hopefully temporarily until renewables can take over) has raised global LPG prices.

Then again the shale gas boom may not last. Well productivity falls rapidly, so early gains may not be sustained: you have to invest continually in new wells and the costs are significant.  Jeremy Leggett has provided regular updates to his book ‘The Energy of Nations’ and says ‘the top 15 players in US shale drilling have written off $35 billion since the boom started, and that investors are beginning to pull out. Meanwhile, production has peaked and is now falling in all but one of the major shale-gas drilling regions. The boom is looking like it could turn into a bust before too long’. www.jeremyleggett.net/

So not surprisingly views on what will happen next vary.  Writing in New Scientist (10/8/13), Michael Brooks noted the concern expressed by Sergey Paltsev, an energy economist at MIT, that, seduced by a false promise of cheap, plentiful energy from shale gas, we will cut back on investment in renewable alternatives. If so, Brooks said, as the costs and emissions associated with shale gas rise, as they inevitably will, we will end up on a costly bridge to nowhere. DECC by contrast still sees shale gas as the bridge to a green energy future.

However, despite DECC’s assertions that shale gas has lower GHG impacts than coal or imported LPG, the environmental impact issues continue to be debated.  http://www.eeb.cornell.edu/howarth/web/Marcellus.html Fugitive emissions/leaks of the powerful GHG methane are a key worry, water contamination another, along with the sheer volume of water needed, and there is also the possible risk of radioactive radon gas pollution: http://gdacc.org/2012/01/10/radon-in-natural-gas-from-marcellus-shale-by-marvin-resnikoff-radioactive-waste-management-associates/


For a good overview of the impacts issues see www.carbonbrief.org/blog/2013/08/shale-gas-more-or-less-polluting-than-coal/ For a short if partisan guide: http://www.resilience.org/stories/2014-04-21/those-fracking-lies And for an independent technological assessment, which identifies a range of worrying drilling and site problems associated with fracking, see: www.davidsmythe.org/fracking/fracking.htm

The debate in the UK has gone on, as more details emerged. An AMEC report for the government, said that a major fracking effort could deliver about 25% of the UK's annual gas needs in its peak years in the 2020s and provide up to 32,000 jobs. But that could involve up to 2,880 wells being drilled and run for 20 years.  Fracking would need 58-144bn litres of water, with up to 108bn litres of waste water being contaminated by fracking chemicals and radioactive elements that occur naturally in rock. This would AMEC said ‘place a significant burden on existing wastewater treatment capacity’.  Some of the fracking water would need to be trucked into sites, with wastewater being trucked out, and Amec estimated 14 –51 journeys a day for each site, which ‘could have an adverse impact on traffic congestion, noise or air quality’. www.gov.uk/government/consultations/environmental-report-for-further-onshore-oil-and-gas-licensing

However the pressure is on to press ahead fast. Energy Minister, Michael Fallon said. ‘There is a huge amount of shale gas underneath us all and what is important for public confidence is to show the regulatory framework is robust’ and Shale gas fracking could take place across over half of Britain if plans to ‘step up the search’ for shale gas and oil are fruitful, with many new exploration sites being licensed.

To help things along Local Councils that back shale gas projects will get to keep 100% of the business rates collected from the schemes, rather than the usual 50%, and up to £10m per wellhead if shale gas is successfully extracted in their communities, through a1% levy on revenues. Fallon said ‘We expect 20 to 40 wells to be drilled in exploration over the next couple of years and I think it's very important that local communities see some of the benefit”.

So what next? While the Lords Economic Affairs select committee said that the UK was  ‘exceptionally fortunate’ to have substantial shale gas and oil resources, and urged the Prime Minister to lead a ‘sustained and concerted effort’ to go ‘all out’ for shale development , it accepted that drilling could not proceed without the support of the public, even if the majority of environmental and health concerns were ‘unfounded’ and leading to unnecessary delay. DECC, and Ed Davey especially, has been less that forthright is backing rapid expansion: DECC says shale gas has to be put in perspective: it should be pursued in combination with carbon capture and storage, and should not be seen as an alternative to renewables.

www.gov.uk/government/news/davey-uk-shale-gas-development-will-not-be-at-expense-of-climate-change-targets

That view was reinforced by a WWF reaction relayed by the Economist Intelligence Unit: the UK needed to decarbonise, so shale gas, which may not be cheap, plentiful or fast, was a diversion  http://www.economistinsights.com/energy/opinion/uk-shale-gas?

And  Paul Mobbs writing  in The Ecologist saw it unequivocally as a diabolical stitch up:

http://www.theecologist.org/News/news_analysis/2417288/fracking_as_bad_for_climate_as_coal_uks_dodgy_dossier_exposed.html

The National Trust and CPRE may be wobbling a bit, but local protests continue, further stimulated by the spectre of gas pipe link up projects going ahead without consultation. 

So what’s the bottom line? We can all agree that tight regulation will be needed if shale gas  goes ahead on any scale, but it is still far from certain that it will- much less should. Not least since the threat to renewables still remains. AD biogas from waste would be a better bet surely. Some say it will in fact all blow over: the US shale gas boom is a short term one-off episode driven more by speculation than by the scale of the realistic resource. Some see it accelerating in net terms, up to 2040 and beyond (see the EIA’s projection for the US at http://www.eia.gov/pressroom/presentations/sieminski_03012013.pdf). Others think it will fade way long before then.  In practice the outcome is likely to be shaped by other factors- for example, if carbon emissions are taken seriously then shale gas use may be constrained, unless CCS can be deployed on a wide scale.  The US EIA suggested that under high carbon costs, renewables and nuclear would boom more, with coal being all but extinguished. In the short term however shale gas does represent a threat to non-fossil fuels. It’s one reason why nuclear has declined so dramatically in the USA, but its impact on renewables has so far been more muted- as their costs fall, they are still booming in the US and elsewhere, although perhaps not as much as they would if there was no shale boom. Then again there are those that say fossil gas, of whatever sort, is a good partner for renewables. So shale gas represents no real problem. Although try telling that to those having fracking projects imposed on them!