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Nick Grealy: The UK Could Have 700 Trillion Cubic Feet Of Shale Gas Resources

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Nick Grealy, No Hot Air Blog

The BGS Assessment of the Bowland Shale will be published, allegedly, by the end of the current Parliamentary session, July 18. A study for DECC on the price impact of shale gas, undertaken by Navigant will be released simultaneously I’m told.

Underlining again that the difference between the original gas in place (resources), and recoverable gas (reserves), is lost on not only most people but many journalists, let’s look at the subject again quickly.

Conventional oil and gas resources were relatively easy to assess, but we should bear in mind that according to conventional wisdom, the North Sea would have run dry years ago.  It hasn’t and we’re essentially have been looking at 20 year reserves estimates for the North Sea for most of the past fifty.

Unconventional oil and gas, which is rapidly becoming dominant, and thus by definition the new conventional paradigm is harder to assess. One or two wells in field is like looking the through the keyhole of a warehouse; there is no substitute for a lot of exploratory drilling.  The idea of exploratory drilling is to find the way to release the gas – or oil- from the rocks.

There are good shales, great shales and not so good shales, but as technology develops all the time, most experts see increasing production from every shale. We’re just starting to see for example that revisiting one of the oldest US shales, the New Albany in southern Illinois with today’s technology gives answers that simply weren’t even worth asking five years or so back.

This map, used by Avi Tucker of the University of Texas last week at UGOS, although originally from ARA resources underlines the prevalence of shales worldwide. By the way, an updated global resource estimate from the US Energy Information Administration could be released any day, one reason I think the following slides on UK potential from a presentation by Graham Dean of Reach CSG are worth considering.

Utexas map

Graham is a former chair of the UK Onshore Operators, and has a long history of oil and gas in the North Sea and elsewhere. Reach, like almost every one in UK onshore, originally targeted CBM, coal bed methane. The last UK licenses were issued in 2008, the start of the shale revolution and a point at which every player of the time, apart from those clever clogs at Cuadrilla Resources, were mostly unaware.  Graham gave a presentation at UGOS last week where few people were present . The conference had divided into two streams, I’ve seen Graham present three other times this year and I wanted to see what the Chinese were saying on shale gas during a rare visit to London.  I figured he wouldn’t say anything much new. I was misinformed: these are his numbers for not only the size of the UK resource, but what can be recovered from it:

gdean1

So we have according to this estimation, a recoverable resource of 200TCF, or 71 years if we kept using gas at the same rate we do today. The reality is of course that the North Sea gas, from the UK, Norway and Netherlands, won’t shut down and go away any more than the third of gas imported by LNG tankers will suddenly disappear either. That means, for over a hundred years, which from my view point is immortality, we won’t have any issues over energy security and following on from this, we certainly will start to see price pressure reduce, if not drop significantly.

The size of UK resources is so huge, that even a conservative recovery rate would be very significant. The UK used 80 Billion Cubic Metres (BCM) of gas last year or 2.8 Trillion Cubic Feet (TCF). Translating that into something everyone can understand each cubic metre has a value of roughly 20 pence, so all that gas is worth about £16 billion pounds a year at present prices.

I’ve been saying for sometime that Cuadrilla’s numbers alone, using a modest 20% recovery rate and a forty year time production window, will mean that LNG will be the first to go. That means taking £6 billion off the balance of payments and paying 60% tax and royalty to ourselves instead of sending the entire pile to the present dominant supplier, Qatar. But, if we include the rest of the prospective area of the UK, primarily in the Bowland alone, we don’t want to give you that.  You may not be a millionaire.  But you won’t be paying so much in utility bills and and you’ll be paying yourself when you do.

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