Thursday, 11 July 2013
The Shale Gas Panacea (Part 1)
Then pass the popcorn.
Conventional natural gas is pumped from vast underground pools like the deposits found under the North Sea, in Russia and in Saudi Arabia. Geologists have long known that there was also a huge amount of gas and oil trapped in tiny bubbles in sedimentary rock called shale, spread across vast territories around the world. However, traditional drilling techniques could not access this gas in a cost-effective manner; by comparison, it was far more cost effective to build and operate a drilling rig in the North Sea than drill for shale gas in Montana.
Two technological breakthroughs changed all that. The introduction of horizontal drilling meant resource extraction companies could drill a network of wells covering a huge area from a single drilling site, without displacing overlying farms, fields and even towns. Hydraulic fracturing, or "fracking", meanwhile, provided a means of crushing shale rock using high-pressure fluid, without strip mining the area. Once the rock is crushed, any pockets of gas or oil trapped in the rock would flow out along the path of least resistance - typically back along the tunnel created by the drill.
Suddenly, it became possible to extract tremendous quantities of shale gas and shale oil, overturning common assumptions about the availability of fossil fuels. As a result of the shale gas boom, natural gas prices in the United States are a fraction of the international gas price.
By 2015, the U.S. is expected to overtake Saudi Arabia as the world's biggest gas producer as energy companies tap the Marcellus, Bakken and other shale basins. In the UK, meanwhile, analysts are reporting breathlessly about the potential of the Bowland Basin, which some claim can supply the country with gas for the next 43 years. I'll be taking a closer look at that number next time, but for now let's agree that there's a lot of gas down there.
Why might this be good news for environmentalists? Per unit of energy, natural gas has a much lower greenhouse gas emissions intensity than coal or oil. In the United States, an abundance of cheap shale gas is ruining the economics of coal-fired power plants. In 2005, gas accounted for 19% of the country's electricity production; in 2012 this figure was 30%. Largely as a result, America's greenhouse gas emissions are falling rapidly - even before President Obama's proposed regulation of power station emissions comes into effect. Here in the UK, low prices for EU ETS permits reduce the incentive for power station operators to reduce emissions; it's cheaper to burn coal and buy a permit than use expensive gas. In addition to its CO2 emissions, coal combustion also releases mercury into the environment and contributes more to ambient air pollution than does burning gas. A massive influx of cheap gas could reduce output at the UK's coal-fired power plants, and force operators to shelve plans for new coal-fired generation. A cleaner environment and lower greenhouse gas emissions would be the result.
Why might the fracking revolution be bad news for environmentalists? For one thing, we need to be clear about what fuel shale gas is displacing. Not all that American coal is staying in the ground: as demand for coal falls in the U.S., its price has plummeted. As a result, it has been cost effective for some European utilities to buy (relatively) cheap American coal instead of more expensive European and Middle Eastern gas. Coal imports from the U.S. were up 23% in 2012. Seen at a global level, shale gas production may be displacing...gas, not coal.
In addition, hydraulic fracturing is not a tidy process. The hydraulic fluid is a potent chemical brew and has the potential to contaminate local groundwater supplies. Changes to underlying rock formations have led to a spate of earthquakes in some areas after the introduction of fracking. And many environmentalists are concerned that the gas may not always flow as intended - unplanned releases of inflammable gas can pose a safety hazard, and with a 100-year global warming potential 21 times greater than CO2, natural gas releases from fracking could undo some of the benefit that comes from displacing coal. Other studies argue that this fear is overblown, and energy companies have both the capability and financial incentive to minimise leaks.
While this debate will rage on, I predict that there will be some fracking in the UK, and it will continue to grow in the U.S. The question, then, is whether we can mitigate potential harmful environmental impacts, and use this resource boon as wisely as possible.
We'll return to this issue in a subsequent article.