GWPF Newsletter: Shale Revolution 3.0

Fracking, Brexit And An Oil And Shale Gas Bonanza

In this newsletter:

1) Shale Revolution 3.0: Bahrain Hits (Black) Gold With Biggest Shale Discovery In World
The Times, 5 April 2018
 
2) Fracking, Brexit And An Oil And Shale Gas Bonanza
Gary K. Busch, Lima Charlie News, 4 April 2018 

 
3) China Owns World’s Second Largest Shale Gas Field
China Daily, 29 March 2018
 
4) LOL: Anti-Fracking Europe’s CO2 Emissions Go Up As Economy Recovers
Reuters, 3 April 2018
 
5) Trump Makes American Coal Great Again — Overseas
Foreign Policy, 4 April 2018 
 
6) Investors Stunned Over Oil Producer’s Climate-Change Exemption
Axios, 2 April 2018  

Full details:

1) Shale Revolution 3.0: Bahrain Hits (Black) Gold With Biggest Shale Discovery In World
The Times, 5 April 2018

The map of the world’s energy reserves and the corresponding balance of power was dramatically changed with the announcement that the tiny Gulf state of Bahrain has discovered a vast oil and gas reserve.

The discovery of 80 billion barrels of shale oil, equivalent to Russia’s entire reserve, catapults Bahrain to the top of the shale oil league.

Sheikh Mohammed bin Khalifa al-Khalifa said it was not yet known how much of the oil could be extracted. The scale of the find, however, is about to make it a big player in the global market, significantly boosting its economy and raising its profile in the region, where it plays a smaller fiddle to its giant neighbour, Saudi Arabia.

Bahrain has backed Saudi Arabia in a diplomatic row with their neighbour, Qatar, which holds the world’s third largest gas reserves. The split among Gulf Co-operation Council countries has all but paralysed the workings of Opec, the 14-member association of petroleum exporting countries.

The oil was discovered in the Khalij-al-Bahrain basin, located off its western shore. The field also contains an estimated 14 trillion cubic feet of gas and is expected to be on production within five years.

Bahrain is a minnow in the hydrocarbon sector, the smallest producer in the Gulf and 57th on the world scale. Before the discovery, it held reserves of only 125 million barrels. It is planning to invite international oil companies to help it to develop the shale oil basin, its first.

Full story (subscription required)

EIA: World Shale Resource Assessments
U.S. Energy Information Administration

This series of reports provides an initial assessment of world shale oil and shale gas resources. The first edition was released in 2011 and updates are released on an on-going basis. Four countries were added in 2014: Chad, Kazakhstan, Oman and the United Arab Emirates (UAE) and are available as supplemental chapters to the 2013 report Technically Recoverable Shale Oil and Shale Gas Resources.


Swimming in cheap energy: global shale basins (EIA 2015)

Full report

2) Fracking, Brexit And An Oil And Shale Gas Bonanza
Gary K. Busch, Lima Charlie News, 4 April 2018 

As the U.K. celebrates its final year as part of the European Union, it is standing on the brink of a major boost to its economy and prosperity as it awaits the first economic benefit from its rich oil and gas shales.


BRITISH GEOLOGICAL SURVEY (BGS)]

British exploration and production company Cuadrilla and others have fought a long battle to begin drilling in earnest for the extraction of shale oil and gas in the UK. British shale reserves are extensive and rich in gas and oil trapped in sedimentary basins in several parts of the nation, but especially in Lancashire and Yorkshire. The British Geological Survey estimates that the Bowland basin holds 1,300 trillion cubic feet (tcf) of gas. Almost seventy wells have already begun. The reserves are enormous.

“If a tenth can be extracted – and US frackers can do better than that – it would cover Britain’s entire gas needs for half a century,” according to Ambrose Evans-Pritchard in The Telegraph.  The same article quotes Cuadrilla’s chief executive, “We’ve just drilled the rocks and they are the best results we’ve ever seen. It is a huge resource. This could last us through to 2050.”

Britain used to be an energy exporter. Britain was a net exporter of energy until 2003, when the balance was reversed by the policies of the government of Tony Blair and sustained by the opposition of the Green Party.

This inability to deal with British energy supplies has produced a costly and threatening energy posture until recently, when the UK government gave the go-ahead to start drilling. The energy industry has shrunk from around 10% of GDP in the late 1980s to the current percentage of around 2%. In the interim, Britain has become a net importer of energy supplies and has been paying for energy supplies on the price terms of the international market.

 

Since that decline, Britain’s energy supplies and trade have been in imbalance. Britain began to import energy at a period when supplies were decreasing and the prices high. In a key study conducted by the UK Department of Business, Energy and Industrial Strategy in July 2017, “UK ENERGY IN BRIEF 2017” – the researchers pointed out that the UK was a net importer of energy.

The reaction to the constraints on the energy supply were also the result of European policy diktats. Britain has been held back in the development of its vast fracking reserves by the politics of the European Union as well as by its Greens. EU policy has allowed the EU to become dangerously dependent on supplies from Russia and has only recently sought to diversify its supply elsewhere. The diversity included allowing for import terminals to be built in Lithuania and elsewhere to import LNG into Europe, but it has not included the EU allowing for fracking to be pursued by drilling within the region.


[SOURCE: FRACK-OFF.ORG.UK]

An advantage of the UK leaving the European Union will be its embrace of energy resources that will enter the market from fracking and the immense collateral advantages of having a large domestic supply of energy at an inexpensive price. Included is the creation of jobs required in drilling, transport, and storing the oil and gas as well as the creation of a burgeoning market for steel pipelines, storage tanks, chemical processing of the feedstocks of oil and gas production, and an export industry of energy to the EU, among others.

A new generation of marine vessels needs to be built run on LNG or compressed gas, along with a bunkering facility for these vessels when they reach European and UK ports. Coal-fired electrical plants can be phased out and reconstructed using gas as a feedstock. Recent studies have shown that replacing coal as a feedstock by gas reduces emissions by more than two-thirds. The environmental advantages include stopping the spread of nuclear energy and augmenting the gas production by using Britain’s expanding offshore-wind energy supplies.

The trend towards using gas as an energy source has already changed the European energy market; however, with largely imported supplies.



[OECDMIX (IEA)]

Britain currently has a large domestic pipeline system with over 21,000 miles of gas pipeline in place, allowing for easy distribution of fracked gas throughout the nation. Major international gas pipeline interconnectors allow for the transfer of gas to the EU without the need for turning to LNG or compressed gas, which would prove competitive to U.S. and Russian LNG. […]

Brexit and Fracking

The U.S. found that the level of serendipity of fracking included many local jobs in shops and retail establishments, the decentralisation of major investments in factories and refineries towards the areas of energy production, and even the laying of fibre-optic cables along with the new pipelines which provided a broad network of rural internet connections.

The British Government has set up a scheme to reward the local communities in which drilling takes place and a proposed Shale Wealth Fund to make sure that local communities benefit directly from fracking in their neighbourhoods. A fracking bonanza could be a great benefit to all UK citizens and local communities.

The UK is now standing on the brink of an industry which could dramatically revive its fortunes outside the EU. By the time of the British exit of the EU and its “implementation” period the fracking industry will have begun to produce real returns for the country. The EU may find that it needs the UK far more than the UK needs the EU.

As Europe tries to free itself from dependence on Russian oil, the UK energy supply can play a major political factor in providing a reliable, interconnected, alternative source.

Full post

3) China Owns World’s Second Largest Shale Gas Field
China Daily, 29 March 2018

China’s first shale gas field Fuling, with an annual capacity of 10 billion cubic meters, has become the world’s second largest next to North America, Ecns.cn reported on Monday.



This marks the entry of China’s shale gas development into a large-scale commercialization stage and is of great significance to the country’s energy structure adjustment, relieving pressure on the supply of natural gas in central and eastern China, the report said, citing Dai Houliang, president of China Petrochemical Corporation (Sinopec Group).

It can also help to speed up energy savings and emission reduction as well as air pollution prevention and control, Dai said at a news conference Monday in Hong Kong when the company announced its 2017 annual results.

The Fuling shale gas field, developed by China’s leading oil refiner Sinopec in the southwest municipality of Chongqing, has by now accumulatively produced and consumed over 16 billion cubic meters, generating over 6 billion cubic meters of shale gas in 2017. The maximum daily output of shale gas reached 16.7 million cubic meters, which can satisfy the daily demands of 33.4 million households, according to the report.

It is estimated that 3 billion cubic meters of shale gas can help reduce carbon dioxide emissions by 4.2 million tons, which is the equivalent of burning 6 million metric tons of coal.

China has made breakthroughs in shale gas exploration both in capacity and drilling techniques, and by 2020, proven reserves of shale gas are expected to surpass 1.5 trillion cubic meters, according to plans released by authorities in 2017.

Full story

4) LOL: Anti-Shale Europe’s CO2 Emissions Go Up As Economy Recovers
Reuters, 3 April 2018

LONDON (Reuters) – Emissions regulated under Europe’s carbon market rose for the first time in seven years in 2017 due to stronger industrial output, data published on Tuesday by the European Commission and examined by carbon analysts at Thomson Reuters showed.

Around 45 percent of the European Union’s output of greenhouse gases is regulated by the Emissions Trading System (ETS), the bloc’s flagship policy to tackle global warming by charging for the right to emit carbon dioxide (CO2).

The ETS is expected to contribute around two thirds of the reductions needed to meet the EU’s target of slashing emissions by 20 percent from 1990 levels.

According to the analysts’ interpretation of the data, emissions totalled 1.756 billion tonnes of CO2 equivalent (CO2e) last year for companies under the ETS excluding airlines, up 0.3 percent on the previous year.

Capped emissions from power and heating generation fell by 1 percent, but the overall figure was lifted by a 1.8 percent rise in emissions from industry.

“The European economy grew 2.5 percent last year. Solid growth in the European economy resulted in increased activity leading to higher emissions,” Ingvild Sorhus, lead carbon analyst at Thomson Reuters, said.

Full story 

see also: U.S. CO2 Emissions Fall Again in 2017, Mainly Due to Shale Gas

5) Trump Makes American Coal Great Again — Overseas
Foreign Policy, 4 April 2018 
Keith Johnson

U.S. coal exports have exploded. Can that continue?

President Donald Trump vowed to make U.S. energy dominance a cornerstone of his foreign policy, and, sure enough, the United States this year is producing and exporting record amounts of oil and natural gas. More surprising, though, is the huge resurgence in U.S. exports of coal to countries all over the world, from Argentina to Ukraine. It’s a big silver lining for the beleaguered coal sector that has seen production and exports steadily dwindle in recent years.

But it’s not such great news for U.S. steelmakers, who are watching global rivals gobble up American coal to feed their steel mills — and who then turn around and export millions of tons of steel to the United States, prompting the Trump administration to levy tariffs on lots of imported steel.

After several dismal years, U.S. coal exports surged by 60 percent last year to 97 million tons, not far from the record export numbers reached in 2012 when the domestic market for coal nosedived, according to new figures just published by the U.S. Energy Information Administration. Exports of both the kind of coal used for power plants and coal used for steelmaking surged, with double- or triple-digit growth to every continent. The top buyers of U.S. coal were India, South Korea, the Netherlands, and Brazil.

“The kind of exports you see now, to the extent they are being driven by organic forces, that’s a healthier scenario” than in 2012, says Kevin Book, the head of ClearView Energy Partners, an energy consultancy, which just published a detailed study of how the U.S. energy boom is driving greater energy exports.

The export boom is the one part of Trump’s pledge to help the coal sector that is coming true.

Production ticked up a bit last year after a disastrous 2016 but is still at the lowest level since 1978. And despite plenty of promises to bring back jobs to coal country, coal mining employment only grew by some 1,100 jobs last year; mining employment is down about 40 percent since 2012. Meanwhile, closures of coal-fired power plants continue apace, with more than two dozen plants shutting down early last year alone, which means less domestic demand for coal.

In the rest of the world, though, coal is still widely used, and simple economics explain much of the turnaround and renewed appetite for U.S. coal. Increased demand for coal overseas led to slightly higher prices in 2017 compared with 2016, which made U.S. coal more competitive on global markets.

Full story

6) Investors Stunned Over Oil Producer’s Climate-Change Exemption
Axios, 2 April 2018  
Amy Harder

A new twist is unfolding in the fight between activist investors and the oil industry: an unprecedented move by federal regulators allowing a major producer to preemptively kill a shareholder resolution on climate change without a vote.

Why it matters: The Securities and Exchange Commission’s support of oil producer EOG Resources is emerging as a flashpoint in what has become America’s central battleground over climate change: what investors do about it. It’s an arcane fight, but a consequential one too, because President Trump is reversing course on climate policy.

The details: Trillium proposed a resolution calling on EOG to set a target to reduce its greenhouse gas emissions. EOG complained to the SEC in late December that the proposal would micromanage the company, calling it a "rigid, time-bound" target, and asked to omit it from consideration.

Responding in late February, the SEC agreed and took a veiled shot at shareholders, implying they don’t know enough to set company policy. The SEC sent another letter last month to Kron’s firm rejecting an appeal request.

EOG is the largest oil producer in Texas, according to state data. It also has operations throughout the U.S. and a few places overseas. Kron, whose firm manages more than $2 billion in investments with a focus on sustainability, said other oil producers, like Hess Corporation, have committed to greenhouse gas reduction targets.

The big picture: The development comes ahead of this year’s annual shareholder meetings that run through spring. Numerous energy companies are expected to face investor votes on non-binding, but symbolically important, climate resolutions in a process known as “shareholder democracy.”

Investors, including large asset managers BlackRock and Vanguard, are putting increasing pressure on fossil-fuel companies to acknowledge the risks climate change pose to their bottom lines.

Full post

The London-based Global Warming Policy Forum is a world leading think tank on global warming policy issues. The GWPF newsletter is prepared by Director Dr Benny Peiser - for more information, please visit the website at www.thegwpf.com.