Huge reserves of shale gas could transform energy supplies in the west—and cut carbon emissionsby Derek Brower / March 22, 2010 / Leave a comment
It’s a blast: sand, water and chemicals are forced into horizontally-drilled wells in shale rock, releasing gas as a result. The process is known as fracking
Europe’s politicians and bureaucrats have spent the past five years trying to figure out how to wean the continent off its reliance on natural gas from Russia. Costly new pipeline projects and efforts to promote a rapid rise in renewable energy were two responses. What no one in Brussels seems to have realised, however, was that a small firm of wildcat drillers in Texas had found a solution: releasing natural gas trapped in shale rock through hydraulic fracturing and horizontal drilling.
Hydraulic fracturing, called “fracking,” involves blasting a mix of water and some chemicals into the earth to smash open the shale and release the gas. Horizontal drilling—turning the drill sideways and allowing it to travel horizontally for several kilometres underground—has helped make fracking possible across large tracts of shale. The combination of these techniques is set to transform North America’s energy sector. In Europe, vast reserves of shale gas could reduce our reliance on companies such as Gazprom, while China, the middle east, Africa and Russia also have huge potential reserves. And as natural gas burns cleaner than other fossil fuels there is potential for reducing carbon emissions.
The large-scale use of these technologies was pioneered by a company called Mitchell Energy in the Barnett shale, a huge geological structure in Texas. Mitchell had been trying to prove the technology since the 1990s. It came good when soaring natural gas prices suddenly made the techniques profitable. Now the method is cheaper than traditional drilling for gas, and the Barnett shale alone meets 7 per cent of US natural gas demand. A host of new projects in North America, from Louisiana to British Columbia, are under development and all of the big oil companies want in. In December, ExxonMobil spent $41bn (£27bn) buying one specialist shale-gas developer.
The notion that US natural gas production had peaked and was in decline—a mainstay of energy planners just a few years ago—has been turned on its head. Last summer, the authoritative Potential Gas Committee of the Colorado School of Mines, said “unconventional” reserves now offered the US 100 years of natural gas supply. Many analysts expect that figure to grow, if it hasn’t already. And as the output from these fields has ramped up, natural gas prices have slumped, making the fuel competitive with coal, which accounts for half of America’s electricity. Switching to natural gas would slash emissions, because burning natural gas emits about half as much CO2 as coal. Now a battle is shaping up between America’s powerful coal lobby and an oil-and-gas sector that is suddenly asking Washington to pass climate legislation that would price coal out of the market. A mere $30-a-tonne levy on carbon, say executives in the gas sector, would knock out the black stuff.
The advent of shale also boosts US dreams of energy independence, an Obama campaign promise. The mega-investor T Boone Pickens has hatched a plan to convert the country’s vehicles to natural gas. Switching America’s fleet of 18-wheeled trucks to gas, say supporters, would halve the crude oil imports from Opec.
All of this has already affected Europe and other importers of natural gas. With its own ample domestic reserves, the US has now almost disappeared as a force in the global liquefied natural gas (LNG) market. Politicians and the mainstream media haven’t recognised it, but the world is facing a glut of natural gas. Britain still needs storage infrastructure to prevent spikes in price, but long-term supply worries are dissipating, even as conventional output from the North sea continues its precipitous decline.
A host of companies, including the big oil-and-gas multinationals, are now scouring the EU for shale-gas structures. Poland, Hungary, Germany, Austria and other countries in—coincidentally—the region of Europe most exposed to Russian gas, show promise. No one yet knows the extent of Europe’s reserves, but the International Energy Agency says they could be 35 trillion cubic metres—six times the size of the conventional existing reserves. Some analysts say the resource is much larger.
There are obstacles. Some environmentalists—and Gazprom—say the drilling process threatens water sources. For that reason, New York has prevented shale-gas exploitation in its share of the Marcellus shale (while Pennsylvania, which shares the field, has allowed it). Inhabitants of densely populated Europe, unaccustomed to disruption by the oil industry, might not like the rapid rate at which multiple shale wells must be drilled to sustain output.
But take Gazprom’s objections with a pinch of salt. The arrival of shale gas in the mainstream threatens its business model, which is based on the development of huge, expensive conventional gas fields in inhospitable regions of Russia. Some of these projects are already being mothballed.
Oil-and-gas executives say that natural gas’s low emissions and its new abundance make it the ideal “bridging fuel” as the world moves to renewable energy. A couple of years ago such an idea looked ludicrous. Now, thanks to the frackers of Texas, natural gas could be the oil of the 21st century.