SHALE GAS DECLINE
The recent confidence in shale gas was likely premature, according to several new reports published in the US. In particular a study from the University of Texas claims the US boom will tail off by 2020 and not keep going to 2040 as previous less thorough analyses have predicted. To anyone who has been closely following the industry in recent years, this difference in predictions will not be surprising, of course.
In 2013 the US Energy Information Administration (EIA) already noted that Norway's assessment of its shale gas potential went from 83 trillion cubic feet (tcf) (2011) to zero (2013) due to results obtained from test wells in the alum shale, and how Poland's estimates went from 44tcf to 9tcf due to stricter application of requirements for successful shale formations. But at that time the EIA did not comment as strongly or publicly on similar concerns about the accuracy of the US shale data.
The UK picture
Likewise concern about overestimates of shale potential is becoming louder in Britain, which is at a much earlier stage in terms of shale gas exploration but has a similarly enthusiastic government. Last month scientists from the UK Energy Research Council suggested that promises by ministers about greater energy security and lower energy prices through shale gas were premature and unlikely to be deliverable. Additionally there are concerns over whether investment in shale gas is still profitable, while numerous potentially costly environmental concerns have not yet been dispelled either.
What then are the reasons for these unreliable calculations? And why do governments promote shale gas with such conviction when it is surrounded by such uncertainty? One possible factor behind inaccurate judgement of shale gas potential is that both official organisations like the EIA and industry specialists rarely release the data behind their forecasts.
The terminology is also surely to blame: there are resources, and then there are reserves. While this is clear to experts, the distinction is not made consistently in the media. This prompted a recent note by the UK Parliamentary Office for Science and Technology urging the government to address the variance.
Experts distinguish between total resources, potentially/technically recoverable resources, and reserves. The reserves is the amount that is economically recoverable, and is normally a fraction of the total resources. Even then, the North American experience demonstrates that well productivity is highly variable.
When UK prime minister David Cameron announced that Britain was to go "all out for shale," there was no more detailed information available for the UK than the size of the total resource. Reserves could still be anywhere between substantial and zero.
One cannot help but be reminded of the nuclear energy discussion from the 1980s. Less than a month before the Chernobyl accident, The Economist described the technology as being "as safe as a chocolate factory" – and has since castigated itself for its remark. Today, shale gas is lauded to be both an economical solution and environmentally amenable –- before there is ample evidence for either claim.
Politics at play
Given election cycles, politics is naturally drawn to short-term solutions. The fact that shale has brought US gas prices to lower levels than were probably imaginable a decade ago makes it attractive to this mindset. Lobbying interests will be part of the picture too – it does not surprise that countries with major petroleum companies would push the shale gas/oil agenda.
The idea of tapping into a new petroleum resource also sits well with the underlying and largely uncontested objective of faster and continued economic growth. Equally, the idea of technological innovation fixing future problems and therefore allowing the status quo to continue is too good to pass up.
There are many things about alternatives such as renewables or conserving energy that are less comfortable or popular. When you read recent UK energy strategy White Papers, despite much talk of climate change prevention and a need for renewable energy, growth and revenue are more linked to fossil fuels and the traditional energy industry. Shale gas fits the bill.
I don't categorically deny the possibility of continued revenue and profitability in the shale gas business. My point is that it should be treated as just that: a possibility, not a promise. In an era where the need for more transparency is a statement that appears in nearly all policy proposals, energy politics should be no different. What is needed is clear and factual communication between experts, policymakers and the public about the opportunities and drawbacks. Environmental costs should also be part of those considerations. As these latest US reports remind us, this has to include an accurate account of what is known about it and what uncertainties remain.
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