My word, shale gas won’t be a game changer at all. Nope, the people who support renewables tell us so.
Exploitation of the UK’s significant shale gas resources is unlikely to result in low natural gas prices, according to new research by leading energy analysts Bloomberg New Energy Finance. The cost of shale gas extraction in the UK is likely to be significantly higher than in the US, and the rate of exploitation insufficient to offset the decline in conventional gas production, meaning market prices will continue to be set by imported gas.
So that’s that then, eh? Windmills it is for all.
Bloomberg New Energy Finance estimates that the cost of shale gas extraction in the UK will be between $7.10 and $12.20/MMBtu, against comparable costs for dry US plays of $4.54 to $4.83/MMBtu. These figures are based on capital expenditure estimates from leading oil and gas engineering companies that suggest that wells in Europe will cost 2-3 times their US counterparts, coupled with ranges in possible flow rates based on comparable US sites. It should be noted that these UK cost estimates exclude the potential additional costs of building local pipelines and processing equipment to get gas to market. In the event that the UK plays are not dry (i.e. they produce liquids that can sell into the oil market), the additional capital cost of infrastructure would be significant.
That last sentence is rather important really. For if they are indeed wet, if they do indeed produce liquids as well, then yes, there will be additional expenses. There will also be additional revenues which they have, amazingly, failed to take into account. And the revenues from a wet play can indeed be substantial.
Our cost range of $7.10 to $12.20/MMBtu is similar to the range of market prices for natural gas seen in the UK during the course of 2012.
SDomething which is interesting, whether true or not. They then go on to tell us that of course this won’t mean a decline in UK gas costs.
But then so what? All the projections we have, the ones that are being used to plan windmills and the rest, assume that gas prices rise into the future. Prices staying static is actually a win.
Compared with the US, the UK has a higher population density, a stronger environmental movement and tougher local planning rules. In addition, the structure of mineral rights differs from the US, where subsurface rights are generally the property of landowners. In the UK, state approval will be required to exploit each new resource; even if this is expedited by the proposed Office for Unconventional Oil and Gas, landowners will have little incentive to welcome development. The net effect will be a slower development of shale gas in the UK than that seen in the US – a rate that will not eliminate the need to import gas.
And that’s really very odd indeed. That the gas belongs to the Crown means that, if said Crown so desires, the permitting process can be fasdter than having to negotiate with individual land owners. You’ve only got to have permissions for the drill pad, not from each and all of the land owners above the reserve.
Can’t say I’m greatly impressed with this.