Welcome to the ODAC Newsletter, a weekly roundup from the Oil Depletion Analysis Centre at nef dedicated to raising awareness of peak oil.
The announcement on Thursday that the government is lifting its moratorium on fracking held all the surprise of turkey on the Christmas menu. The decision, which allows the resumption of test drilling by Cuadrilla in Lancashire and opens the way to fracking across the UK, was inevitable following the government’s gas generation U-turn last week.
For some the fracking go-ahead couldn’t come soon enough. London Mayor Boris Johnson wrote an enthusiastic rant in his Telegraph column telling the story of the "miracle" that is shale gas. His grasp on the numbers might politely be described as ‘rough’, and has been forensically exposed by Damian Kahya at Greenpeace. But Johnson has the knack of getting away with such bombast, and his column will be read and retweeted many times more than the rebuttal.
The myth promoted by Johnson and other ‘frack-heads’ — as Observer columnist Andrew Rawnsley calls them – is that shale production will slash the price of gas in the UK. But this is hokum. Energy minister John Hayes gave a disingenuous interview to Radio 4’s World at One, in which he refused to make an actual price forecast but alluded to the US experience, where prices have slumped to below the cost of production – implying that Britain would enjoy the same. But there is no comparison. Not even the most fevered frack-head thinks Britain will become self-sufficient in gas, which means the price will continue to be set by the need to attract imports from Norway, Qatar and beyond, and by European demand for UK gas — to which we are umbilically connected (or exposed) by pipeline.
All the serious work in this area supports this view. A study from the Oxford Institute of Energy Studies has found "unconventional gas will not be a price setter at a European level"i. Research by VTB Capital concludes that European shale gas looks geologically and commercially "challenged" compared to the US, and that "Shale gas will not be transformative in Europe"ii. A report by the Energy Contract Company says "shale will not be a ‘cheap’ source of gas and there is unlikely to be a repeat of the US experience"iii. And a study by energy consultants Poyry suggests that if UK shale production were to reach 20% of Britain’s supply by 2030, prices would be just 2-4% lower than if there were no shale productioniv.
Gas prices are still expected to rise in absolute terms, however, in spite of any fracking that might occur. In the International Energy Agency’s ‘Golden Age of Gas’ scenario, which assumes the most favourable conditions for unconventional gas production, European prices rise from $7.4 per million British thermal units in 2009 to $10.9/MBtu in 2035v. The latest carbon budget report from the Committee on Climate Change, released on the same day as the fracking announcement, concludes "the average annual household bill in a gas-based system could be as much as £600 higher in 2050 than in a low-carbon system if gas and carbon prices turn out to be high"vi.
Johnson claims "The shale gas discovery is hateful to the Libs and the Greens, because it destroys their narrative about the ever rising cost of hydrocarbons.", but truth is just the opposite. Frack-heads like Boris are punting the big lie on gas prices because they are viscerally opposed to action on climate, peak and renewable energy. Shame on them.
Still the last laugh may be on the Conservative converts to fracking. As one Liberal official told the FT: "Most of the shale gas is under Tory constituencies, so we’ll see how much they like it when the drilling starts". What a delicious irony: for once, Nimbies may end up on the side of saving the planet.
i Can Unconventional Gas be a Game Changer in European Gas Markets?, Florence Gény, OIES, December 2010, http://www.oxfordenergy.org/2010/12/can-unconventional-gas-be-a-game-changer-in-european-gas-markets/
ii Shale Gas in Europe — A Slow Burn, VTB Capital, 24 May 2011
iii UK will miss US-style shale gas transformation, Financial Times, 25 September 2012, http://www.ft.com/cms/s/0/287378ee-0708-11e2-92ef-00144feabdc0.html#axzz2Ev7NYnqN
iv How will Lancashire shale gas production impact the GB energy market, Poyry, November 2012, http://www.poyry.com/sites/default/files/imce/files/shale_gas_point_of_view_small.pdf
v Are we entering a golden age of gas?, IEA, 2011, http://www.worldenergyoutlook.org/goldenageofgas/
vi Energy prices and bills — impacts of meeting carbon budgets, Climate vi Change Committee, December 2012, http://hmccc.s3.amazonaws.com/ENERGYbill12/1672_CCC_Energy-Bills_bookmarked.pdf
Oil
Oil Heads for Weekly Gain on China, U.S. Manufacturing Outlook
Oil rose in New York, extending a weekly gain as a report signaled manufacturing may expand at a faster pace this month in China, the world’s second-largest crude consumer.
Futures advanced as much as 1.1 percent and headed for the fifth weekly increase in six. A preliminary purchasing managers’ index for China by HSBC Holdings Plc and Markit Economics showed a reading of 50.9, higher than a median estimate of 50.8 in a Bloomberg News survey. A figure above 50 indicates an expansion. U.S. industrial production probably climbed 0.3 percent in November, according to another Bloomberg survey before Federal Reserve data today…
IEA Boosts Global Oil Demand Forecasts on China Economic Rebound
The International Energy Agency increased its world oil-demand forecast for this quarter and next year amid signs of a rebound in Chinese demand.
Global consumption in the final three months of 2012 will average 90.5 million barrels a day, about 435,000 barrels, or 0.5 percent, more than previously forecast, the Paris-based agency said in a monthly report today. Demand will expand by 865,000 barrels a day in 2013 to 90.5 million, the IEA said, adding 110,000 barrels to its previous forecast…
Opec quotas held despite demand fears
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Opec, the oil producing cartel, has left its output target unchanged, despite concerns about oversupply in the market and soft oil demand as the global economy continues to show signs of weakness…
Total: Oil Production to Peak at 98M Barrels per Day
New discoveries and technological advances have increased the oil industry’s ability to increase production in recent years, pushing global maximum oil production to 98 million barrels per day for longer than initially expected, Total SA’s Chairman and Chief Executive Christophe de Margerie said Tuesday.
Global oil production should plateau at that level for some time before dropping as reserves gradually deplete, de Margerie said during a meeting with the Anglo-American Press Association in Paris…
Why a potential role for the US as oil production king needs an asterisk
The peak oil folks have been saying it for years, but now a Wall Street house is sending out a caution flag as well.
One of the arguments long made by followers of peak oil is that organizations such as the International Energy Agency count crude and natural gas liquids equally.So the world market of 89 million b/d of liquids contains mostly energy-intensive versatile hydrocarbons such as crude oil—versatile in the sense that they can be processed to make products that do everything from propelling cars to making carbon black—and a lesser amount of NGLs with a far more limited use…
Oil at $60 or $120 Doesn’t Prevent U.S. Supplanting Saudis
Whether crude costs $60 a barrel or twice that amount, the U.S. is almost free of depending on imported energy and positioned to supplant Saudi Arabia as the world’s No. 1 producer of oil.
Even if U.S. benchmark West Texas Intermediate oil drops 30 percent from the current $86 a barrel, oil companies will boost production as new technologies allow them to extract crude from shale formations, said Ed Morse, the global head of commodities research at Citigroup Inc. The nation, which was last self- sufficient when Harry S. Truman was president in 1952, met 83 percent of its energy needs in the first eight months of this year, according to the Energy Department in Washington…
Bosses’ fears over energy and resource costs hit new high
More than half of chief executives regard energy and raw material costs as a major threat to their growth prospects, according to a new survey of nearly 800 corporate bosses from around the world.
Preliminary findings from PwC’s Annual Global CEO Survey reveal concerns over energy costs and resource scarcity are at a three-year high, with 53 per cent of chief executives claiming the issues have overtaken sluggish consumer spending as one of the top threats to future growth, a seven percentage point increase on last year…
Gas
Gas fracking: Ministers approve shale gas extraction
The government has given the go-ahead for a firm to resume the controversial technique known as fracking to exploit gas in Lancashire.
The company, Cuadrilla, was stopped from fracking after two tremors near Blackpool…
Gas ‘will add more to energy bills than renewables’ — government advisers
Household energy bills will be about £600 higher per year in the coming decades if the UK relies increasingly on gas, the government’s climate advisers warned on Thursday.
But the Committee on Climate Change found that bills would only be £100 higher than today’s average dual fuel bill of about £1,300, if the country concentrated on renewable power generation, such as wind power…
Ignore the doom merchants, Britain should get fracking
It’s green, it’s cheap and it’s plentiful! So why are opponents of shale gas making such a fuss??
If it were not so serious there would be something ludicrous about the reaction of the green lobby to the discovery of big shale gas reserves in this country. Here we are in the fifth year of a downturn. We have pensioners battling fuel poverty. We have energy firms jacking up their prices. We have real worries about security of energy supply — a new building like the Shard needs four times as much juice as the entire town of Colchester…
Time to get real about clean energy costs — and benefits
You read all sorts of wobbly hoopla about the alleged costs of "green" on our energy bills. Hooray, then, for a nice sane bit of perspective.
Today the Committee on Climate Change (CCC) – the Government’s statutory advisors on the economics of climate change – publishes a new version of its 2011 report into the real costs and benefits of renewables and energy efficiency on domestic, commercial, and industrial energy bills…
The fracking dream which is putting Britain’s future at risk
Amid the inky gloom that shrouded George Osborne when he delivered a wintry autumn statement of more cuts and further tax rises, there was a dreamy gleam in the eye of the chancellor. Like a Spanish conquistador setting out for Latin America, he thinks he can find a source of fabulous riches. This El Dorado is not made of bullion, but it sounds as good as gold when you hear him and other enthusiasts talk about this magic stuff. It is natural gas in underground shales. For believers, and there are now many of them in the Tory party, shale gas is going to provide Britain with a remarkable bonanza of cheap energy.
Before we go any further, we really need a shorthand phrase to describe them. The process of extraction is called hydraulic fracturing, also known as fracking. Believers in shale gas have a tendency to rave about it as if they are using a mind-bending substance. So I suggest we call them frack-heads…
Fracking: Untangling fact from fiction
The government has announced that it will remove a temporary ban on hydraulic fracturing across the UK.
Fracking, as it is known, is a controversial technique for recovering gas and oil from shale rock. But how concerned should people be about the environmental impacts?…
Fracking laws needed ‘to control UK’s dash for gas’, says MEP
Senior European parliament member says Britain ‘cannot be sure it knows what it is doing’ if it allows controversial gas extraction to go ahead
Brussels will move to regulate the shale gas industry, a senior member of the European parliament has warned, claiming the UK cannot be sure it knows what it is doing in embarking headlong on a "dash for gas"…
Drilling spills reaching Colorado groundwater; state mulls test rules
Oil and gas have contaminated groundwater in 17 percent of the 2,078 spills and slow releases that companies reported to state regulators over the past five years, state data show.
The damage is worse in Weld County, where 40 percent of spills reach groundwater, the data show…
Egypt Importing Gas for First Time as Exports Disappear
Egypt, a natural-gas exporter to markets from China to Chile, is set to become an importer for the first time just as the new government needs energy shipments to revive an economy weakened by civil unrest.
Gas producers including BG Group Plc (BG/) have curbed local production even as demand from electricity plants jumped. That’s prompted the government that took power after Hosni Mubarak was ousted to plan a liquefied natural gas import terminal as soon as May. Royal Dutch Shell Plc (RDSA), the world’s biggest provider of LNG, has begun studying how to supply Egypt…
UK
Government could buy up to £750m of green energy direct
The government will today commit to purchasing up to two per cent of its energy direct from green sources, with the launch of a major collective purchasing scheme, making the public sector one of the largest users of clean energy in the UK.
Ministers said that if successful the government could ramp up its use of clean energy to cover half of the power purchased through the Government Procurement Service (GPS), currently worth up to £750m a year…
Energy bill rises will outpace inflation next year, forecasters warn
Households face more big rises in gas and electricity bills, Treasury forecasters have said.
The Office for Budget Responsibility is predicting above-inflation rises in energy prices next year, adding to the pressure on household budgets…
Investment decision on Hinkley Point new nuclear plant may be delayed until 2013, EDF admits
EDF Energy’s chief executive has acknowledged for the first time that its decision on building Britain’s first new nuclear plant in a generation may be delayed until 2013.
But Vincent de Rivaz insisted that taking a final investment decision next year on the proposed plant at Hinkley Point in Somerset would be "fine" – despite EDF’s previous insistence that it would do so "by the end of the year"…
Climate
U.S. states threaten lawsuit against EPA over regulations
A coalition of seven eastern states led by New York plans to sue the U.S. Environmental Protection Agency for failing to issue new guidelines to curb methane emissions, a greenhouse gas that may be linked to climate change.
In a letter on Tuesday to EPA Administrator Lisa Jackson, the top law enforcement officials for the seven states said the agency should have addressed methane emissions when it revised emission control standards for the oil and gas sector in August…
Transport
Can flex-fuel cars put US on the road to low oil prices?
Eyal Aronoff identifies himself on his business card as an "oil addiction therapist". He’s got an unconventional detox method, claiming he can get Americans off oil by making it cheaper to fill up their cars.
The software entrepreneur is a co-founder of the Fuel Freedom Foundation, a new organisation trying to make the case for cutting America’s oil consumption — both foreign and domestic…
Philippines gives green-light to electric tricycles
The Philippines is to roll out 100,000 electric tricycles in an effort to replace the petrol-powered ones that currently ply its cities, one of the project’s financiers said Tuesday.
The "e-trikes" would provide an alternative to the gas-guzzling, smoke-belching motorised tricycles that now ferry Manila residents through narrow streets not served by buses, the Asian Development Bank (ADB) said…
