The Shale Gas Revolution has prevailed everywhere but New York and what’s happening in Poland and the UK will lead it to prevail there as well.
Last night I participated in a debate with some folks at Cornell, including my friend Walter Hang, who noted during his summary remarks the shale gas revolution had taken over everywhere except New York, which he hoped to hang onto (pun intended) as a safe haven. I wasn’t surprised because that’s what the Rockefellers are paying him to do: keep fracking out of New York, so they can protect their land interests. That’s what the whole battle is about–everywhere–because that’s what motivates the big-money funders of the fracking opposition.
Walter was telling the truth and that fact combined with two pieces by Nick Grealy at No Hot Air (and now Natural Gas 2.0) made me realize just how far we’ve come. We’ve reached a point where New York is almost an irrelevancy, except for the oppressed upstate landowners and residents being denied their rights who we’ll support till they prevail. The rest of the world has already moved on. Although the battle will continued to be funded by New York special interests such as the Park Foundation and the Rockefellers, nobody but Andrew Cuomo is listening anymore. The Obama Administration has signed onto natural gas and fracking and now Europe is rapidly coming on board as well. New York will as well–eventually.
Here’s the good news from the other side of the big pond, taken from two of Nick Grealy’s recent posts. Readers may recall we gave Nick a tour of Dimock a while back and he often writes about that experience.
Poland’s Shale Gas Revolution
Very exciting news from Poland this morning, via San Leon Energy’s announcement of significant gas flows from a vertical well. When it can be scaled up and replicated from a horizontal well, this, along with anticipated results of horizontal drilling already under way in the nearby BNK concession should provide confirmation of the commercial viability of Polish shale gas within the next few months.
That will not only be excellent news for Poland, but also provides great news for the European shale industry. Poland was the first European target back in 2007/08 when companies like San Leon, BNK and Three Legs started checking out the potential to replicate North American shale plays and target number one was the Gdansk Basin in north west Poland. We saw ExxonMobil exit from the Lublin Basin, and ENI left from the east only last week. But with similarities to how Cabot Oil and Gas fought through pretty thin times to make the the Marcellus work in Bradford and Susquehanna counties in Pennsylvania, Poland shows perseverance is the key ingredient.
Green opponents all over Europe have derived a great amount of pleasure at what they, and much of the conventional wisdom, saw as the failure of Poland’s shale efforts. They may not want to smile any more. Let’s not forget that the US shale experience was the result of constant experimentation, but in San Leon’s case it was third time lucky in the same well by achieving the correct combination of the frac design to unlock the resource. This from United Oilfield Services:
“The recovery of gas so early in the flowback of frac fluid is highly unusual and very positive. It suggests to me that the formation really wants to flow gas. In the upcoming horizontal well we can use the success from the frac design from the upper Ordovician to target the whole of the Ordovician, as I think that the lower Ordovician only flowed back during the early stages and then closed up. This lower formation layer may well have been the source of the very early gas, and our knowledge of what works from frac 3 should enable us to keep it open in future wells. I look forward to the horizontal with great anticipation as it stands a strong chance of proving up this play.”
It’s also significant how this is also a result of considerable hard work by the United Oilfield Services firm. UOS, founded by Dennis McKee from Oklahoma, is investing $250 million in two drilling rigs and a fleet of frack trucks.
So the geology appears to be there after all. As UOS show, we can forget about the lack of a service industry holding things up in Poland. We can also forget about the lack of infrastructure that naysayers often hold up: The field is only 12Km from the main trunk pipeline. I mischievously point out here that the pipeline is full of Russian gas heading to the German border less than a hundred miles away.
Over the next few months, some people will rejoice, some will keep their fingers crossed and some will start reaching for their checkbooks. One thing for sure, some will start reaching for their atlas, but you needn’t bother:
The conventional wisdom says this was never meant to happen. Just as the US was never meant to happen. What we can now see is that we are moving further from hope and more towards reality and that Poland’s success will mean favorable results throughout Europe, and beyond.
The UK’s Shale Gas Revolution
While Nick is enthusiastic about Poland (rightfully so, I must add), he’s absolutely giddy about what’s happening in the UK, engaging in some marketing of his home turf:
Here’s a fairy tale for US gas producers. Are we sitting comfortably?
Imagine a country where the natural gas industry doesn’t have to be thankful for a few throw-away lines in the State of the Union address.
That would be the UK. A country where the Prime Minister supports shale gas so eagerly that he tells world leaders at Davos about it. Natural gas is also supported by coalition partners and the opposition.
Imagine a country where it’s possible to pick up acreage, not in dribs and drabs via an army of landsmen, but in 80 sqKm (19,768 acres) blocks all at once.
That would be the upcoming UK Onshore Licensing round in June this year.
Imagine if the investment needed to get a license would be cents an acre. That would be the UK.
Imagine if there was already a vibrant and competitive world class service sector present, often including the same providers you use at home.
That would be the UK.
Imagine if there was a widespread gas grid already in place. Find gas and mid-stream tie-ins would be close by. Where you even needed them. That’s the UK.
Imagine a country that although lacking in much modern geological data, has over a hundred years of data in historical records, many already digitized and dirt cheap.
Imagine a country where polls say 65% have heard of shale gas and the support among them is two to one. That’s the UK.
Imagine a country with zero sovereign risk. That’s the UK.
Imagine a country where the gas price is over $10MMBTU and where even the most pessimistic predictions (mine) say $8 for years in the future, and where the former head of BP John Browne says gas can be produced for $5 to $6.
That’s the UK.
And we even speak English. No wonder Bracewell & Giuliani (yes that Giuliani) say:
Europe appears more than ever to be the next great energy frontier
Not only could gas producers live happily ever after, we have oil too. That would be the UK.
Of course it’s not that easy, but it’s nowhere near as hard as some make out either. Come on over! Door’s always open. At least until June that is.
Update: Better late than never department, the New York Times published my letter on this subject February 4.
Regarding “Why shale gas won’t conquer Britain” (Opinion, Jan. 15): First, it is wrong to say that British geology is not as favorable to a shale gas industry as the United States. Shale formations are different around the world: Just as Pennsylvania geology is different from that of South Texas, so too is Britain’s Bowland Basin (though the Bowland was where New Jersey is today when the Marcellus deposits were formed). And in one key respect the Bowland is very different than its American counterparts: In certain sections it’s over a mile thick, instead of the 200 to 300 feet of U.S. shales.
Paul Stevens is right to point out that the shale revolution in the United States was 25 years in the making. But why would Britain have to reinvent the wheel to develop this industry? Europe will actually find itself at a considerable advantage in the years ahead since it will be able to avoid the years of dead ends that American drillers encountered before they made the geology work.
Despite the dire predictions Mr. Stevens made in a 2010 report that shale gas extracted in the United States would quickly run out and thus push up prices, the steady improvement of shale gas techniques in America has allowed for prodigious output, at far lower costs and with far less impact on the environment. That is exactly the outcome that will ensure the success of shale gas in Britain.
The British Geological Survey estimates that the Bowland shale formation in the north of England could hold nearly 36 trillion cubic meters of shale gas. And the shale gas basins in southern England are broadly similar to the Bakken formation in North Dakota. While the United States is fortunate in many ways, it isn’t uniquely blessed with shale geology, as initial success in Argentina, Australia and China have shown.
Meanwhile, service companies in the United States are actively courting business in Europe as they see declining margins in America. Europe is a high-priced gas market with thousands of kilometers of pipelines in a regulatory environment that is more certain than in many American states. As a result, service companies are flocking to Europe.
Now, Nick is obviously getting pretty cocky here. He should remember we can supply those EU markets, too, with LNG produced over here at considerable lower costs. I know he knows it, because he’s written about it. Nevertheless, who cannot but marvel at what the shale gas revolution is producing and what is happening in Europe, so long held up by fractivists as the model of what we should be doing? It’s wonderful to see and I wish the Brits and the Poles every bit of success. They are our free world allies, after all. The shale gas revolution is lowering the cost of energy everywhere and changing the world for the better, improving economies, the national security of our free peoples and our health. Who can’t be happy about that?
Someday, New York will come along as well, dragging up the rear after pretending to be in the lead, just like it always does.