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Ohio Shale Experience Is the Future for UK?

LNG - Nick Grealy ReportsNick Grealy
Administrator of NoHotAir/ReImagineGas Blog

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The Ohio shale experience suggests how development of the UK’s Bowland Shale may go and the future is looking pretty darned good.

A lot has advanced in the six years since Cuadrilla Resources revealed their estimate of 200 TCF in natural gas reserves for their section of the Bowland Shale back in 2010. Sadly, the UK debate hasn’t been one of them. Yet. But the time is coming.  Back in 2010, people saw shale as a flash in the pan. It was, of course, the biggest bang to hit energy markets since the light bulb. Yet, the UK debate still uses outdated economics, 2010 flow rates and 2010 energy policy concerns. Shale is still “controversial.” Meanwhile, in the US, the unconventional is the new normal, 70% or higher of 2016 production and nowhere is it more conventional than in Ohio.

ohio shale

Utica Shale drilling rig at work in Ohio (Business Journal Daily)

As the shale debate in the UK has barely moved, the one in the US has moved incredibly fast. Compare the UK Bowland Shale and the Ohio shale (Utica) experience. The Utica Shale didn’t even exist outside of a gleam in the eye of geologists in 2010. The first drilling started in 2012. Yet, this month it’s producing at a rate of 37 billion cubic meters per year, a shade under the 40 BCMY produced in the UK North Sea. That could have been us. But the naysayers and handwringers produced absolutely nothing.

The Ohio Utica is never mentioned by UK opponents who talk about the Pennsylvania Marcellus as if it’s a living hell of afflicted communities. That’s in part because they are stuck in 2010, the year the Gasland movie came out. Yet, Ohio proves, like the UK could, how, if given the chance, natural gas extraction can be low impact, high production and zero damage.

The unintentionally hilarious “List of the Harmed” barely mentions Ohio, for example. Even an anti-fracking report this year from Environment Ohio omits their home state even as it recycles the List of the Harmed horror stories and places them everywhere else. It’s strange to talk about fracking threatening the Grand Canyon, while missing it entirely in their own backyard. Perhaps nothing is actually happening after all?

Just as will happen in the UK, Ohio is easily missed because there isn’t that much to actually see. The Baker Hughes Rig Count shows the number of rigs per state on a weekly basis. It’s rarely been over 18 in Ohio in the last few years and was only 13 last week, further proving the most recent increases in drilling productivity possible today. If we extrapolated Utica to UK numbers, we’d be talking of a handful of rigs.

Using BCMY divided by 13, we see that each rig in Ohio, which is drilling a well every couple of weeks in various locations, or increasingly from one pad, can produce 2.85 BCM a year. Thus only 5 rigs could theoretically produce 14 BCM a year, or enough to remove all 2015 UK LNG imports. UK drill rigs may well be relatively static and won’t wander too much from one pad for 18 months at a time, drilling a new well every other week. Whatever the numbers are, they are a far cry from anyone’s definition of industrialization of the country – or city – side.

But, what if there were another threat to the landscape? What if there were 14 new facilities that had several truck deliveries per day – for ever? That would be Waitress grocery store chain and its plans for 2016. What if there were 80 new facilities opening in 2016, in bigger stores and even more trucks and traffic. For that, the Aldi discount grocery chain is the one for you.

A few weeks ago at an All Party Parliamentary Committee on Shale Gas meeting, the leading anti in Ryedale was visibly shocked when his pet fear was exposed as—excuse the pun—groundless:

John Blaymires, Chief Operating Officer of IGas, said:

“We understand the need to do this [estimate site numbers]. It is one of our biggest issues.”

He said some of figures being talked about for the number of sites were “ludicrous” but he described the figures mentioned at the meeting as “not unreasonable.” He added:

“There are limited places to which one can go. We cannot pepper the countryside and nor would we wish to.”

Francis Egan of Cuadrilla has often said how, in a few years, people’s first question will be: “Is that it? Is this what all the fuss was about?” Remove protestors and nothing will be visible. It would be a good plan to ask planning to set up a protestor camp. Oops. That rational plan may slow things down. But, then, a protestor camp is likely to be as welcome to Roseacre as an alternative music venue, even if they are often the same thing. Gas drilling is apt to be less concern, as the following Cuadrilla video demonstrates.

Only the strong, and the long, survive in UK shale. Whatever hurts us makes us stronger. There are four reasons why shale gas will move from zero to hero, but much depends on finding some gas and and, more importantly,  not losing sight of the four strategic reasons why UK shale will prosper.

  1.  Much of UK gas consumption  isn’t going anywhere. The UK is faced with falling gas demand for various organic reasons around insulation, efficiency and competing renewables, but not as fast  as collapsing UK North Sea supply. London, for example, uses 9 BCM a year of gas, almost all for heat and hot water. It, for only one example, will do so for years.
  2. The entry costs are far lower than international equivalents. One can get huge blocks of shale fields, by US standards, all at once, leading to further efficiencies. The UK lends itself for political reasons to minimize surface expenses.
  3. Midstream infrastructure—the pipeline system to deliver gas to customer—is not a problem. The international oil and gas industry has been in far more hostile, or inaccessible, areas, sometimes devoid even of roads. Any costs around UK planning delays or public opinion are outweighed by the ease of delivering any discoveries to market.  The UK onshore is the  least stranded energy asset on earth.
  4. The killer reason is price. Get through 2 and 3, and prices are phenomenal by US standards. UK gas prices will be set by US LNG imports (or the threat of them). UK gas prices are also volatile in the winter, 80% higher than US Henry Hub. That basis will exist for years. In parts of Pennsylvania gas prices are below $1, and yet the industry still grows even as new mid stream pipelines are unavailable at any price. Expenses may be higher than in the US, but not 80% higher.

Add these together and UK shale will be worth the wait. Better, and great days, are coming.

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