No Hot Air

Stored Solar: This year's model

One story we got real excited about in August 2008 about the same time we discovered shale, was the work of Daniel Nocera from MIT on storing solar power:

In one hour enough sunlight falls on the earth to power the world for a year. There are just two problems with solar energy: it's still expensive- and night. But now researchers at the Massachusetts Institute of Technology have figured out a way to store solar energy when the sun don't shine. To accomplish the technological trick, the scientists sort of turned over a new leaf: their innovative process imitates what nature does: photosynthesis.

Whatever happened to that?  Daniel Nocera is still around, still at MIT and still thinking of creating energy through chemistry:

What if you had a solar panel on your roof that could easily make hydrogen from the sun, use the sun's rays to make hydrogen? And you power up your own personal fuel cell, you store that solar energy in the form of hydrogen over time and you just click a switch and use it when it's needed. Well, with the right chemistry and the right catalyst, it might be possible.

Will anything happen here?  We don't know.  But we should think of possible game changing technologies like these instead of game freezing technologies such as CCS.  Carbon Capture and Storage is incredibly expensive and may not work.  But even worse it locks the mid 21st century into electrical generation technology from today. Spending a huge amount of money on something like CCS will prolong an already doubtful technology long after it can be supplanted by the likes of stored solar or oilgae or any number of breakthroughs in producing, using and storing energy.

In 2050 CCS may work.  It also may be as useful as an electric typewriter, or a fax machine or a video cassette is to us today.

The China as energy bull story: soon to be bull?

We've remarked before on how common, yet outdated, perceptions of China's energy demand and resultant carbon emissions are used by a variety of energy market participants to talk up their own book at the expense of end-users and or tax payers. The basic approach of the various actors is to talk up China as some sort of bottomless energy pit, but the results depend on who is talking up the bull market.

Energy consultants, oil traders, peak oil theorists, CCS developers, climate change deniers are among those who in general want to talk up energy as a big problem.  Some have political axes to grind. Others are only in it for the money;  for describing the big problem, they can offer a solution with a fee relative to the size. A big part of the problem is to have an alarmist, hysterical and unrealistic view of China which describes a narrative of China as bottomless energy pit.  

China is often used for example, as an excuse not to act on carbon reductions at the  company, local and/or national level.  Similarly, those who want to push up prices, or finagle end users into fixing long term,  or bullish traders on oil and gas markets often use China as a threat to scare people into acting emotionally instead of rationally.

Those who expected me to mention shale gas in China, will be disappointed here.  China seems to be doing just fine on the supply/demand balance even before any shale gas comes into play.

China's domestic gas production will increase 50% in 2010 according to Sinopec's Xie Dan.  Most of that is due to the Puguang gas field coming on line.  China seems to have not exhausted any possibilities yet on conventional natural gas, as a recent discovery in Chonqing is allegedly three times the size of Pugang.

Where does this leave China in a few years?

China's natural gas consumption has been growing at double-digit rates for the past few years, but industry officials said the growth is likely to slow in the next few years.

"With a number of LNG projects, the second West-to-East gas pipeline, the volume of imported natural gas will grow quickly in the next few years," Xie told the conference, adding that the annual supply of natural gas is expected to increase by 2 bcm a year.

Demand from industrial users may weaken due to rising prices and the introduction of alternative energy forms, Xie said.

"Some regions may see an oversupply of natural gas," he said

Where will that leave us?  Without China sucking up every spare molecule on the planet, it means simply there will be more for everyone else.  Which means less for those pushing China as a problem.

Indian shale gas

Reliance Industries, one of India's biggest companies and Cairn India, a spin off of Cairn UK are getting active in Indian shale exploration:

Reliance Industries (RIL)... may join global oil majors in search of shale gas.

RIL has been studying the breakthroughs and the new technologies that are being used in producing shale gas that is now a huge rage in the US.This unconventional gas has caught the fancy of every big oil company ever since new technologies made the fuel commercial. According to an energy analyst, the cost of production of shale gas has come down by as much as 80% over the past five years in the US with new technologies and fiscal incentives provided by that country to encourage exploration.

Back home, in India, early steps are being taken for this new-age fuel as well. Cairn India, which recently started producing oil from its field in Barmer, Rajasthan, has begun work on shale gas in its fields. Mr Bott, who has come in as the new COO, is leading a team of technologists and explorers to search through the layers of rock in the Barmer hills. “We are very excited with the studies and possibilities and are hoping to have pilot projects over the next 12 to 18 months before we submit a detailed plan. The early signs are very positive,” he said.

Why would anyone in the UK care about Indian shale?  The answer is LNG. Qatar's top four customers in 2010 are likely to be Japan, South Korea, India and the UK.  The less India takes, the better for UK customers.  This is a classic example of the impact of shale elsewhere in the world on UK prices.  Whether or not the UK has any shale gas or not is irrelevant in that regard.

Where the UK should be concerned is if gas exploration companies aren't interested in the UK. As the largest single gas market in Europe, it would be surprising if there isn't under the radar activity going on.

Consider the other possibility: The UK's planning process is so famously hostile to any movement away from the status quo, that expros are going to environments such as the Netherlands, Germany and Poland where governments already see the value of shale and work with them.

IEA on gas again:

Two countries, two views:

Apart from the FT, we couldn't find much in the UK press where the International Energy Agency talks about the gas glut, so we have to find out their views from the German press:

Unconventional gas is unquestionably a game-changer in North America with potentially significant implications for the rest of the world,” said Mr. Tanaka. The share of unconventional gas in total US gas output jumped from 44% in 2005 to around 50% in 2008 and, in the Reference Scenario, is projected to rise to almost 60% in 2030. The boom in North American unconventional gas production, together with the recession’s impact on demand, is expected to prolong the glut of gas supply for the next few years. The analysis of WEO-2009 shows that the annual under-utilisation of inter-regional pipeline and LNG capacity could rise from around 60 billion cubic metres in 2007 to 200 bcm by 2015. This glut could have far-reaching consequences for the structure of gas markets, with suppliers to Europe and Asia-Pacific coming under pressure to modify pricing terms under long-term contracts, to de-link gas prices from oil prices, sell more gas on a spot basis and to cut prices to stimulate demand.

But The Times doesn't want to hear from someone like the head of the IEA, when they can give a forum to the cheerleader in chief for nuclear, CCS, gas storage and everything with a government subsidy attached, Dieter Helm.  Mr Helm is an Oxford man, but he hasn't heard of gas:

How did we get to this state? Partly because energy policy has never been taken seriously. Without a crisis, it is always someone else’s problem — and one for the future. Most solutions require customers (and voters) to pay more now — and that is something politicians are loath to admit. But bad news on bills — and an energy crisis — is coming unless radical action is taken soon.

But what about un-radical action, like gas for example?  It's a strange world where the right is seeking radical action and old lefties like myself are promoting free market solutions.

Gas is barely mentioned on Planet Dieter and it's the same old story.

North Sea gas reserves have been running out

So?  Big deal in a gas glut.

He said something that since we know that Ireland generated just under 40% of it's power from wind recently, we got a bit suspicious about:

We not only pay among the highest bills for wind, but in Europe only Cyprus and Malta generate a lower proportion of their electricity from it

What is he trying to say?  That we generate too much wind or not enough?  Is he saying that our pitiful contribution to wind power is among the best in Europe?  If that is the case we didn't have to look far. Same newspaper, same day:

High winds across Spain on Sunday meant that for over five hours, over 53 per cent of the country’s power came from wind energy. The towering white wind turbines which loom over Castilla-La Mancha — home to Cervantes’s hero Don Quixote — and which dominate other parts of Spain, set a new record in wind energy production.

Red Electrica said this year wind power is expected to produce 13 per cent of all electricity, hydroelectric power 10 per cent and solar power 2.5 per cent. Spain’s solar industry is one of the fastest growing in the world.

Less Hysterical Tones on European Gas

From Datamonitor via iStockanalyst a story which starts out plainly noting that Nord Stream, the Russia/Germany pipeline under the Baltic has all the necessary approvals but then provides some of the best analysis of European gas going, and that includes us:

Thus it appears that the fundamental beliefs which have underpinned European states' energy planning for the past five years may soon be turned on their heads. From 2011, Nord Stream will increase the security of Russian supplies to Europe. LNG regasification capacity will also be far higher and it is reasonable to assume that LNG supply will remain strong for at least the next four years. Finally, indigenous supplies may not actually be declining at the rate previously assumed. Hence, over-reliance on gas (the central obstacle facing policy makers between now and the new generation of nuclear plants' activation around 2020) may not present such a critical flaw as previously thought. Of course, under-investment in new infrastructure resulting from the financial crisis could yet leave the gas market tight by 2015 (particularly if the global economy were to rebound powerfully) but perhaps the debate surrounding Europe's energy strategy might now be conducted in less hysterical tones.

Less hysterical, and less paranoid. And dare we ask realistic to boot?  It will take a while for the gas Chicken Littles to get worked out of the system, but their days may be numbered

Two sides of the global gas glut

All of a sudden everyone says what we've been saying for over a year:  There is a global gas glut.

 There may be an “acute glut” of natural gas in the next few years because of rising production of so-called unconventional fuel in the U.S. and Canada, according to the International Energy Agency.

Bloomberg have been slow on shale, whereas the WSJ has been on this since the beginning.

The International Energy Agency says in its annual outlook, published Tuesday, that a glut of natural gas is looming. The boom in North American shale gas and a demand-depressing recession mean there will be a giant amount of unused pipelines and liquefied gas terminals, enough to move 200 billion cubic meters, or 7.06 trillion cubic feet, by 2012. That’s more than enough for all of Africa or Latin America.

Back to Bloomberg:

Gas prices will tend to rise in Europe and Asia-Pacific because of the predominance of oil-indexation in their long-term supply contracts, diverging from those in North America,” according to the report

But WSJ says:

The consequences of that have already been felt on the European spot market. LNG exporters, discouraged from selling into the U.S. market, are increasingly offloading their cargoes in Europe and Asia, depressing spot prices.

That, the IEA says, “could increase the pressure on gas exporters and marketers in Europe and Asia-Pacific to move away from, or to adjust, the formal linkage between gas and oil prices in long-term contracts.” More uncontracted supplies being released to the spot market could push down prices and boost demand, especially in power generation, it says, which would soak up the supply glut.

The IEA report seems to have something for everyone's point of view.  It mentions how uncertain shale gas is outside the US, while also mentioning what a game changer it can be:

The extent to which the boom in unconventional gas production in North America
can be replicated in other parts of the world endowed with such resources remains
highly uncertain. Outside North America, unconventional resources have not yet been
appraised in detail and gas production is still small. Some regions, including China,
India, Australia and Europe, are thought to hold large resources, but there are major
potential obstacles to their development in some cases.

 This projection is subject to considerable uncertainty, especially after 2020; there is potential for output to increase much more.

No wonder people are confused.  The IEA puts in all the usual dampers on shale outside the US and then says it can be much more.

We tend to believe the Wall Street Journal more.  The IEA assumes that the gas/oil link will still be strong enough outside the US, whereas we and the WSJ think the gas oil link is wobbling in 2009.  To assume it will still be around at all in 2020 is very optimistic.

The Oxford Institute for Energy Studies asks:

Continental European Long-Term Gas Contracts: is a transition away from oil product-linked pricing inevitable and imminent?

The spot market is too volatile which doesn't help anyone: producers,end-users or transporters.  There has to be a new way to provide long term funding for gas without crippling volatility.  But it might make gas geology look simple.

Geography and natural gas

Back in the old days, or at least the last century days of drill, baby, drill gas and oil were considered to be so rare that nowhere was too far away to find it, and wherever that was no self respecting oil or gas company would let polar bears, newts or indigenous people stop them extracting it.

But shale gas is so abundant that we can see the rise of a new phenomenon:  the choosy gas driller. We remarked on that recently when Chesapeake Oil walked away from drilling in the NYC watershed part of the Marcellus Shale in upstate New York.  Aubrey McLendon said simply that "we don't need the brain damage".

I was reminded of this by news out of Canada, where the emergence of shale plays in the Eastern US and Canada has led to choosy buyers.

emergent economic forces don’t care about the mountains and are progressively challenging the traditional west-to-east flow of natural gas. In fact, the whole character of where North Americans get their natural gas is undergoing realignment of seismic proportion. Recent events provide indications of how the dynamics are changing

Alberta has traditionally been the Canadian Oil and Gas patch.  But the emergence of the Marcellus Shale has changed a lot:  Gas from the Marcellus Shale doesn't have to pay 3000 miles of transport fees to reach markets that are next door.  Marcellus drillers can charge a premium over Barnett or Haynesville gas but the customers make money anyway.

Everyone's a winner.  Apart from some gas transporters.  Which may explain why National Grid is eager to join in as the final link in CCS, transporting CO2 from power station to depleted gas field.   In the UK, if there were significant shale finds, National Grid might even get shut out of transporting them since the local grids were sold off.  Local grids could  transport shale finds the short distance to generators, CHP or larger end users.

In Europe, if shale is produced in Poland or Northern Germany  why generate electricity in Berlin, Hamburg or Warsaw with gas imported from Russia, Norway or Nigeria?  Shale is so abundant that it may well be under most people's feet.  Not only will this make energy security risk meaningless or disrupt capital flows, it will make energy simultaneously cheaper and more precious.

BBC discovers shale

Until now the BBC, the outlet which usually leads UK print media and puts it to shame, has not had it's finest hour in reporting on shale gas.

But now even they have suddenly discovered shale, and unlike those who report shale more as a US phenomenon, the BBC goes straight to what we've always said is the heart of it all:

  Upgraded shale gas reserves are particularly relevant ahead of the Copenhagen summit, as it could help the world meet the Kyoto targets for carbon emission cuts,

With coal being too dirty and wind farms and nuclear power plants arriving late, it seems the world is left with a stark choice: keep on polluting or turn out the lights.

Unless, that is, someone comes up with an alternative.
Energy executive Rune Bjornson thinks he has the answer.

"Natural gas, more than any other fuel, is an option we have here and now," he tells the BBC in an interview.

The video is the really interesting part here:  Bjornson when asked for a comparison of shale reserves in Europe says they are 14 times those of the Troll field, which is already the largest off shore field in Europe and in the US the reserves are "significantly more".

We have to point out here that it is Statoil who supply 80% of UK gas imports, so we're glad to see they are being listened to.

The BBC, in the spirit both of "balance" and good old fashioned English pessimism (notice we didn't say British pessimism) is desperate to create a controversy.  So who pops up, but Arthur Berman the world's most popular shale gas debunker.  Of course that is a very small field.  In fact, apart from Berman, it's empty.

The Texas-based geological consultant believes the latest estimates are vastly exaggerated and suggests the shale gas reserves are neither as large as nor as profitable as many in the industry predict.

The BBC doesn't provide balance to the many who have an alternative view on Berman :

HOW ARTHUR BERMAN COULD BE VERY WRONG…

There isn't anything in the BBC story that hasn't been said here at some length and some months ago.  However, to have shale put into the spotlight, directly discrediting previous BBC lights are going out stories will be important in changing the UK energy debate.  With a piece on shale in the UK's small, but influential Spectator Magazine, unavailable online,  and some other news coming up that we know of,  ignorance will soon be no excuse for UK energy "experts".

Which leads us back to the BBC piece, directly to No Hot Air's target audience:

Unconventional gas will exert downward pressure on energy prices for years to come," predicts Mr Sterne - in the US, as well as elsewhere.
"As shale gas fields come on line in the next five years, it is likely that European prices will drop in half."

Which leads us to ask:  Why use an energy consultant in a world where security of supply and energy prices risk no longer exist?

Daniel Yergin on Shale

There is not a better energy expert worldwide than Daniel Yergin, so his latest update from the WSJ can give Europe some examples based on the US experience. Number one is the speed and the breadth of the transformation:

...the natural gas revolution has unfolded with no great fanfare, no grand opening ceremony, no ribbon cutting. It just crept up. In 1990, unconventional gas—from shales, coal-bed methane and so-called "tight" formations—was about 10% of total U.S. production. Today it is around 40%, and growing fast, with shale gas by far the biggest part.

The potential of this "shale gale" only really became clear around 2007. In Washington, D.C., the discovery has come later—only in the last few months. Yet it is already changing the national energy dialogue and overall energy outlook in the U.S.—and could change the global natural gas balance.

No Hot Air first ran a story on shale in July 2008, three months after I started, a time as I noted recently that anyone who questioned the conventional wisdom that gas was like so over, was considered borderline bonkers.

A lot  of time has passed, and there have been a few peeps in the UK media, but Whitehall has failed to learn any lessons from Washington so far. Whitehall bases energy policy on the 2007 Energy White Paper, which based on an assumption of gas shortage promotes CCS, nuclear and all the expensive options.

The fours stages here are ignorance, denial, acceptance and action. We still have a lot of work on ignorance, but the denial stage will come soon enough. That will mean trying the water issue, pipeline access, the "Europe is too crowded" issue and for the truly desperate they'll disinter Arhur Berman and the Peak Oil crowd who are horrified to see the career choice of a lifetime which sold a lot of books two years ago suddenly evaporate into irrelevance.

 It may be half a decade before the strength of the unconventional gas revolution outside North America can be properly assessed. But what has begun as the shale gale in the U.S. could end up being an increasingly powerful wind that blows through the world economy.

We do have a need to properly assess shale in Europe, but we think two to five years to start production is about right, but surely existing shale programs from industry and academia will give us better indications sooner. We can't criticise shale on the grounds that we don't have any answers when so far we aren't asking any questions.

CCS at coal-fired plants to almost double cost of power production

Based in Canberra, the Global Carbon Capture and Storage Institute is a cross government organisation that is tasked with promoting CCS.  But if this is promotion,  we'd hate to hear anything negative:

The use of carbon capture and storage (CCS) technology at coal-burning power plants would add 78 per cent to the price of producing electricity, according to a new report released yesterday.

"A viable business case for commercial-scale, integrated projects has not been established at this time for coal-fired power generation and other large CO2-emitting industries," said the report, titled Strategic Analysis of the Global Status of Carbon Capture and Storage.

Their solution of course is for governments to dip into our pockets and support coal CCS.  Whereas last time we looked, all gas is asking for is a level playing field and a carbon price. Which won't cost most people anything at all, and certainly far less than the untried CCS technology which appears to be up to 20 years away anyway. We're trying to find out about CCS at gas plants, but can't find much that makes sense. The GCCSI report states that gas carbon capture is twice as expensive as coal.  Any hints out there as to why?