Looking at energy from a global perspective, we see two competing visions. In North America, a revolution in first shale gas and now shale oil extraction is strong enough to turn North America into a new Middle East – as a recent Citi report proposed. The shale revolution is also spreading worldwide, notably to China. But Europe’s energy policy – be it on renewables, nuclear, CCS or new pipelines – depends entirely on a perception of “peak” energy. Even as China surpasses Europe in shale, the European shortage narrative often includes a rationale of high prices based on competition for LNG with China – an increasingly unlikely scenario given the size of shale-to-LNG exports from the US, Canada and even Mexico currently planned. Is it wise for National Grid or Npower to bet against China’s ability to access its own shale or North American shale-to-LNG exports?
I do not have enough space to refute all the reasons the UK energy dinosaurs set out that will prevent shale changing their comfortable, and until now, profitable, game of inevitably rising prices. Four years of experience in shale means I can knock them all down if given the platform.
Much “expert” opinion that denies shale’s potential is based on outdated research conducted between 2008 and 2010 by precisely those with interests in shortage scenarios such as Chatham House, Poyry or the Oxford Institute of Energy Studies. Shale technology is evolving so rapidly that any opinion based on even 2011 geology or economics is likely out of date.
European conventional wisdom says the continent is too crowded and shale will be too expensive. There are pollution fears or that the US is blessed with a unique geology not likely to be found on the rest of the planet.
Considering shale formed 350 million years ago when the Bowland Shale of Lancashire was only tens of miles from Pennsylvania’s Marcellus Shale in the ancient supercontinent of Laurussia, we can dismiss the last objection.
Shale production in Europe from 2014 onwards will need a very small footprint. Europe’s population is concentrated in urban areas, with population densities in rural areas often lower than in shale areas in the US. But modern shale technology also means that we need far less space than even two years ago. For example, Cuadrilla in Lancashire foresees full production from as few as 40 well pads spread out over 1,200 square kilometres over a time frame of ten years. Are four football pitch-size pads each year intrusive, especially considering that the final footprint of a well head would be less than that of an electricity substation?
Rapid shrinkage of footprint is only one of many advances made in the US that shale gas in Europe will follow. US shale gas is now cheaper than conventional, off-shore and, most importantly, coal for generation. The US has achieved huge increases in efficiency, producing even higher volumes of gas as prices fall to levels one-sixth of those in 2008. That gas is coming to Europe, either in the form of US LNG exports or, if we are smart, by producing and taxing our own shale gas.
Finally, “experts” agree that shale is “controversial”, although there are no cases of the alleged pollution actually occurring. Any objections to shale on environmental grounds simply do not stand up to examination – or proof in court. This doesn’t stop the press printing unedited, self-serving statements by both political opponents of shale and corporates, who are aghast as the foundations of their business models crumble.
For example, National Grid stands to lose billions if it cannot build a super grid to transport renewable energy across Britain, or realise the completely crackpot carbon capture and storage scheme. Any of the big six similarly stand to lose fortunes from low cost energy. It is time for Europe to either embrace the shale revolution, or to get swamped by it.
Nick Grealy, director, No Hot Air
This article first appeared in Utility Week’s print edition of 15 June 2012.
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