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Oliver L Campbell : Shale gas production

 

 

If you have been to the northwest of England, you may have visited Blackpool, a seaside town some 30 miles north of Liverpool It is a holiday resort, popular with the young for its Coney Island type of attractions which include a landmark tower, illuminations six miles long with over a million light bulbs, and the Lytham St Anne's golf course which is host to Open Championships. It has been in the news, not for any of these attractions, but for a small tremor of 2.3 on the Richter Scale which occurred on 1st April last year. The headline was "Blackpool Rocked" which is a play on words referring to Blackpool rock, a very sweet candy popular with children--and some adults too.

The tremor was caused by Cuadrilla Resources which were drilling nearby in their search for shale gas. This "tight gas" needs to be freed by injecting water and chemicals under high pressure into the subsurface and the process is known as "fracking" because it fractures the rock formation to release the gas. Cuadrilla Resources say they found shale gas and they estimate probable reserves of some 200 trillion cubic feet, though the amount recoverable will be much less, typically around 20 percent. This estimate has been extrapolated from just two wells drilled and its size has been questioned, but the discovery is certainly significant..

This is good news for some and bad news for others. Finding oil in the North Sea (shared with Norway) was a bonanza, and now the discovery of shale gas on land has comes just in time as the production of associated gas from the North Sea is rapidly diminishing. S trategically, it will reduce UK vulnerability to imports of natural gas from Russia and of liquid gas from Qatar. Economically, it will produce savings on importing natural gas and it may curtail the need to construct costly wind farms. It should benefit power plants and industry and lead to lower consumer prices or, at least, shelter the UK from increasing world prices. It will also give employment to a fair number of workers, though the oil and gas industry is capital intensive rather than labour intensive.

It is bad news for those who fear production of natural gas will put back the development of renewable energy. However, looking on the bright side, natural gas is a relatively clean fuel with low toxic emissions. It is burned in power plants and also in homes. Some are worried extraction will cause earthquakes though this is highly unlikely. It may cause small tremors, but these also occur naturally with some frequency and are often not felt by persons at all unless they take place close to urban areas. It is true the injected chemicals can pollute underground water, but Cuadrilla Resource assert the gas has been found at depths well below the aquifers. The government will certainly approve the chemicals that can be used and monitor the water quality.

The Scots in particular are very much opposed to fracking and believe it should be banned. So the UK government was faced with the dilemma of putting economics first and developing the shale gas, or putting the environment first and prohibiting it. The government has just stated it will approve shale gas development. The USA has huge amounts of oil and gas shale reserves in Colorado, Utah and Wyoming and is already producing gas in enough quantities to have caused a fall in the price of liquid gas imports. This has affected exports from Trinidad to the USA and the country is seeking other markets..

Great Britain is a small island and yet it has substantial reserves of shale gas. There is no doubt that, worldwide, huge amounts of shale deposits exist and oil companies are already producing gas from them in several countries. Some years ago, Jeroen van der Veer, the President of Royal Dutch Shell, made the comment that Shell was an oil and gas company but that, in the future, it could well become a gas and oil company.

There is support for shale gas production in the UK on economic grounds. If the country is fortunate enough to have large reserves of shale gas, it makes no sense to leave them in the ground and import gas from Russia and Qatar. But I am also sympathetic to those with ecological misgivings. W e are just sojourners--a lovely word from the bible--and tenants of our planet As good stewards, we should ensure "England's green and pleasant land" (William Blake) is kept that way. But this can be achieved if the government exercises a strict control and monitors the operations as I am sure it will do.

Oliver L Campbell

25.05.12

 


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Oliver L Campbell MBA, DipM, FCCA, ACMA, CGMA, MCIM was born in 1931 in El Callao, Venezuela where his father worked in the gold mining industry. He spent the WWII years in England, then returned to Venezuela in 1953 and worked with Compañía Shell de Venezuela (CSV) where he became the Financial Controller. Upon nationalisation of the oil industry, he went to Petróleos de Venezuela (PDVSA) as its Head of Finance. In 1982 he returned to England and became the Finance Manager of the British National Oil Corporation prior to its privatisation. He then worked as an oil consultant and retired in 2002 after fifty years in the oil industry. Petroleumworld does not necessarily share these views.

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Petroleumworld News 05/21/2011

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