Discussion > Shale Gas Profits
Chandra
In my opinion you are bogus, I asked you why you were here but got no answer. You complain about a number of issues and if someone attempts to answer one of them you quickly jump to another issue. I would be most grateful if you would find another discussion to wreck, preferably on another blog more deserving of your talents.
Dung
Snap, Dung. Perhaps it's BBD again, pretending to be reasonable and fair-minded while trying to lead us down various rabbit-holes.
johanna
Chandra
Would you apply the same rule to wind farms? It's our air, after all.
Bishop Hill
Interestingly, the oil and gas rights were property of landowners until the 1930s, when they were nationalised. Best thing would be to repeal the act of Parliament doing this and return to the status quo ante.
Bishop Hill
Bishop Hill, I think we can be certain that if someone manages to sell air, the government will tax it. Until then, your observation will remain just amusing :-) On repealing the law you mention that would seem fair as long as it is preceded by the introduction of a substantial land value tax.
Dung, do you consider this blog your own little secret? That I should have to justify myself for daring to visit? Or is it daring to post? Lurking is ok, as long as I don't introduce any doubt into your shale gas dreams? You clearly have strong views on shale gas but are unable to answer my question (on how we should regard the changing fortunes of gas producers and consumers in the US). Your keenness for shale is apparently out of a desire to reduce gas prices. But I hear nothing from you or anyone else against my proposition that producers would be mad to provoke a serious fall in gas prices. That seems self evident. And my suggestion that we should maximise the profit we (the people) make from our gas seems to disturb you.
Johanna might think that no company will work for 30%, but such arrangements are not, I believe, unique. Resource nationalism is common in many oil exporters and the multinationals no longer get to set the terms. And let's bear in mind that we are sitting on huge reserves a mile thick. From what Dung and others say there is a bonanza in waiting. For what seems like low risk exploration 30% may well be quite generous.
Chandra Banerjee
BBD, forget it. You have been pwnd.
Meanwhile, back in the real world, there are tremendous economic and strategic considerations coming into play. We Aussies have hundreds of years worth of high grade, easily accessible coal, (and quite a lot of gas here and there) , so not so much of an issue for us. But in the UK and Europe, this looks like a real game-changer.
Energy policy is going to hot up significantly in the next few years.
johanna
Bish, re your point about landowners' rights.
It raises the point that if you produce energy from above the ground (windmills, solar panels) you get paid for it, but if it comes from below ground, you probably don't.
It's a complicated issue. I need to think more on it.
johanna
at the risk of feeding someone who is either a troll or someone totally ignorant of basic economics...
"my proposition that producers would be mad to provoke a serious fall in gas prices. That seems self evident."
Why is that self-evident? It is only self-evident if there is a total monopoly on the gas supply. However, what we are seeing is that new producers are entering the market. The previous nsuppliers have held gas prices high and so new entrants to the industry see a chance to undercut their pricing policies whilst still making profits for themselves.
We have seen it hundreds of time in the oil supply industry. I am frankly amazed that you have not noticed it. In the 1970s, OPEC could control the oil price. New entrants, such as the UK and Nigeria, not aligned with OPEC, destroyed the pricing power of the cartel.
Go ahead, live your faux-bucolic idyll. I just hope you don't live near to an agri-business/farmer. Those tractors starting at 5am and working all day on the fields can be noisy. The smell of pig/chicken slurry can be interesting. And as for those chemicals they spray on the fields...
If I were you, I would hope the farmer goes for the much safer/environmentally benign practice we call fracking.
diogenes
Your reply seems unnecessarily personal, as if you think attacking or ridiculing me substitutes for reason.
My understanding of economics may well be lacking, but as the economics profession has signally failed in its collective response to the great crash (and arguably earlier), I wonder at your enthusiasm for its teaching. Someone else suggested I had only to look at the extra supply of gas to conclude that the price would fall. To my ignorant self, this seems to ignore other aspects of the market (such as the cost of the gas produced, the level of demand and changes in demand according to the weather, industrial and domestic usage changes, price elasticity...) and simply assume that extra supply must result in lower prices. How much gas do you think it takes to move a market? Does dropping one new well suffice? Or 10, 100, 1000? Do they need to be linked into the gas distribution network to move the price or is it enough to truck the gas around? If you think you will see large changes in price, you must have considered and answered these questions.
As far as oil is concerned, I think you'll find that the Saudis could drop the price of oil to the floor if they chose. But guess what, they don't. They are in the business of extracting the maximum value from their oil without taking the price so high that they collapse demand.
You imagine Cuadrilla will undercut existing contracts by pounds, whereas if they do so at all it is more likely to be by pennies. And any savings will just boost the profits of the distributors and generators.
Chandra Banerjee
Chandra, you make a good case for what is usually termed free-market capitalism. Competition between suppliers drives prices down when there is not a monopoly supplier or cartel acting against the interests of the consumer.
michael hart
Update on the US situation in terms of exporting their shale gas, this from Platts/McGraw Hill Financial:
Washington—The Obama administration’s ongoing delay in ruling on 20
pending applications to export LNG is stalling US job creation and GDP
growth, according to a new report from a conservative economic think tank.
The report, released Thursday by the American Council for Capital
Formation, relies largely on controversial estimates by ICF International that
giving US LNG exporters unfettered access to global markets would help create
up to 452,300 US jobs and increase GDP as much as $73.6 billion over the
next 20 years.
“We fear that this protracted bureaucratic delay significantly undermines
the vast potential that LNG exports can bring to our nation’s economy,”
Margo Thorning, ACCF’s chief economist, said in a statement. “This inaction
endangers the state, local, national, and global benefits of producing and
exporting LNG. America is racing against international competitors for LNG
Dung
Anybody worried about pollution by drilling and/or fracking should go to the Cuadrilla website, select "Operations", select balcombe and note this para:
Air Quality & Water MonitoringIn addition to the monitoring by the EA, Ground-Gas Solutions (GGS) has been appointed by Cuadrilla to complete independent environmental monitoring at the exploration site in Balcombe. Their remit has included testing air quality, groundwater and surface waters as part of Cuadrilla’s environmental due diligence and in accordance with permitting requirements. GGS’s final pre-drill report is available via this link and represents a summary of the environmental data obtained to date.
Follow the link "this link" and you can see a hugely comprehensive report on independent test done on air quality and ground water quality PRE-DRILLING. They will not be able to get away with anything at all based on this monitoring.
Dung
I think I just discovered the reason why no new licenses are being issued in the USA that allow the export of LNG. We think we have dumb people in power over here but listen to this:
It is in fact the Federal Energy Regulatory Commission that gives the licenses and does 95% of the paperwork. Part of the submission which asks for a new license is a model that shows how far vapours from the gas will spread into the local area, F.E.R.C. have been using the same model for years but recently "somebody" decided that it should be updated :)
F.E.R.C. say they should not be the ones who have to do the work so they pushed it over to the Dept of Energy. D.O.E. said they had nobody capable of doing it and shoved it back and that is where it sits, nobody is doing anything at all and billions are being lost. Maybe we are not the only people ruled by idiots ^.^
Dung
Dung, There does seem to have been some progress. According to a report in the Chemical Engineer, five LNG export terminals have now been approved with a further 18 projects in various stages of development.
That is in the US. Two further projects have been approved - I think - in British Columbia.
This is just for LNG export, of course. Other products made from shale gas liquids or oil are also lining up to go after the international market.
mikeh
Posted this in Unthreaded.
According to BFMTV in France Total is the first major oil company to search for shale gas in the UK. This is attributed to The Financial Times.
SandyS
Chandra, given the option of a fracking well or a wind farm near their house I think most people would jump at the fracking well.
Why are you not out cmapaigning against wind farms on the basis they destroy people's house prices?
Nial
Nial
Cameron has learned nothing from the US experience with shale gas. In addition stories about how much shale gas we have that were used when interested parties were trying to downplay it seem to have stuck.
The UK does not have 50 years of gas it has several hundred years of gas. The difficulty of extracting UK shale has also been hyped and is not evidence based. You could not wish for better conditions than Cuadrilla has; over 6,000 feet thick shale deposits!
Cameron has at least got the message about the usefulness of exploiting UK shale but he does not seem to understand the market at all.
We are now drilling (or soon will be) in every corner of the UK which has shale potential, when these explorations turn into production we will have a glut. Until and unless renewable energy ceases to be given priority; no new gas fired plants will be built and neither will those mothballed at the moment be reopened.
We have pipelines into the UK which could be used to export some gas but they do not connect to the places where demand is highest and prices are highest (China, India etc). Most importantly just like the USA; we have no LNG export facilities and each one would take 5 years from the day a decision to build was made.
You know the experiment to find out how many times a goldfish swims into a glass plate before it realises what is happening? Cameron would not even pass muster as a goldfish.
Dung
Chandra Banerjee
So let me get this straight.
You want an additional 70% levy for gas extracted in the UK? This will be used to benefit us (less the administration say 30%)? So the price on the wholesale market is now 70% higher and the retail price marks that up by another 30%. So now thanks to your levy we're (private and industrial users) paying double for the gas. But, on the other hand, we're employing a whole department of civil servants to administer 25% of of the retail market turnover for our "benefit". Most will be going to support the unemployed from closed enterprises unable to cope with the high cost of energy.
This only makes sense to the Gordon Brown/Ed Balls/Milliband school of economics.
Far better to leave us to know how to spend our money for our benefit, rather than committing economic suicide as a nation.
SandyS
Other folk seem to be getting the message.
The Saudis have one gas-fired power station running (or about to) on shale gas with more to follow. It frees up more oil for export.
China is pushing shale, including buying into the US industry to access the know-how and technology.
Russia is about to drill its first well for shale oil in the Bazhenov formation. It's a $300m JV with Shell which makes the Total UK buy-in look pretty small beer.
mikeh
"Chandra
In my opinion you are bogus, I asked you why you were here but got no answer. You complain about a number of issues and if someone attempts to answer one of them you quickly jump to another issue. I would be most grateful if you would find another discussion to wreck, preferably on another blog more deserving of your talents."
Well I can tell you why I`m here. Because I have never read the comments of so many complete whackos deniers in my life. I always wondered which well spring of moral cesspools spawned such bag of liars and arrogant conceited self righteous sociopaths came from. And here you all are. Wow. I am truly blown away.
replicant
Would you like to make any specific allegations replicant?
Dung
UH, dats why I posted names of the documentaries on another thread. I didn't bring them over here. I sort of thought you wouldn't feed the trolls. I figured you'd probably had enough. I thought the evidence a tad much for a thread.
"To think in terms of the extinction of man kind, think of a dystopian future like Elysium, then think of documentaries like "Working Man's Death", "Seeds of Death", "Gasland" and actually a whole host of documentaries with similar and relevant themes like "The Cove" and "End of the Line" and documentaries that explain mechanisms of finance like "Secret City". And your response? "Yea, Go Baby!" And Why? I speculate that its cause is arrogance and conceit grown out of an obtuse mindset. It would have to be obtuse because the evidence for destruction is overwhelming. And it is arrogance and conceit ever since man learned to say "It is my God given right."
You know the old story. No flaming tap water before fracking. Then flaming taps afterwards. No fracking chemicals in the drinking water before fracking. After fracking, many fracking chemicals present. Monsanto lying about falsifying studies. Intimidating farmers. The extreme health hazaeds of everything Monsanto produces. Avalanche of plastic overwhelming the food chain, which soak up Monsanto chemicals ( and a whole soup of others) Species die-off. The usual stuff. I make all those claims. But if there's one particular claim you'd like to focus on. Be my guest.
replicant
SOME relevant documentaries
Gasland
Gasland 2
Workingman's Death
Seeds of Death
Monsanto
Secret City
4 Horsemen
The End of the Line
The Cove
Blue Gold
Addicted to Plastic
Dino-Darwins
http://thetyee.ca/News/2013/01/09/Leaky-Fracked-Wells/
One of the boldest claims made by the shale gas industry goes like this: oil and gas companies have drilled and fractured a million oil and gas wells with nary a problem. In other words fracture fluid or methane leaks are "a rare phenomenon."
But industry data disproves this dubious claim says Cornell University engineer Anthony Ingraffea, the main source for this series, who has studied the non-linear science of rock fractures for three decades.
Moreover industry studies clearly show that five to seven per cent of all new oil and gas wells leak. As wells age, the percentage of leakers can increase to a startling 30 or 50 per cent. But the worst leakers remain "deviated" or horizontal wells commonly used for hydraulic fracturing. In fact leaking wellbores has been a persistent and chronic problem for decades. Even a 2003 article in Oil Field Review, a publication of Schlumberger, reported that, "Since the earliest gas wells, uncontrolled migration of hydrocarbons to the surface has challenged the oil and gas industry."
replicant
no one who thinks of Gasland as a serious film needs to be taken seriously - the number of outtright lies and falsehoods it contains is extraordinary.
diogenes
Thanks, Chandra, I was taking the most conservative interpretation of your position.
You have just demonstrated what you really mean better than I could have.
Tell me, who in their right mind would open a business where the government confiscates 70% of their revenue?