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Haynesville – Official Site of the Haynesville Shale Documentary Film | Energy News | Shale Gas Will Rock the World – by Amy Jaffe

Energy News | Shale Gas Will Rock the World – by Amy Jaffe

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There’s an energy revolution brewing right under our feet.

Over the past decade, a wave of drilling around the world has uncovered giant supplies of natural gas in shale rock. By some estimates, there’s 1,000 trillion cubic feet recoverable in North America alone—enough to supply the nation’s natural-gas needs for the next 45 years. Europe may have nearly 200 trillion cubic feet of its own.

We’ve always known the potential of shale; we just didn’t have the technology to get to it at a low enough cost. Now new techniques have driven down the price tag—and set the stage for shale gas to become what will be the game-changing resource of the decade.

I have been studying the energy markets for 30 years, and I am convinced that shale gas will revolutionize the industry—and change the world—in the coming decades. It will prevent the rise of any new cartels. It will alter geopolitics. And it will slow the transition to renewable energy.

To understand why, you have to consider that even before the shale discoveries, natural gas was destined to play a big role in our future. As environmental concerns have grown, nations have leaned more heavily on the fuel, which gives off just half the carbon dioxide of coal. But the rise of gas power seemed likely to doom the world’s consumers to a repeat of OPEC, with gas producers like Russia, Iran and Venezuela coming together in a cartel and dictating terms to the rest of the world.

The advent of abundant, low-cost gas will throw all that out the window—so long as the recent drilling catastrophe doesn’t curtail offshore oil and gas activity and push up the price of oil and eventually other forms of energy. Not only will the shale discoveries prevent a cartel from forming, but the petro-states will lose lots of the muscle they now have in world affairs, as customers over time cut them loose and turn to cheap fuel produced closer to home.

The shale boom also is likely to upend the economics of renewable energy. It may be a lot harder to persuade people to adopt green power that needs heavy subsidies when there’s a cheap, plentiful fuel out there that’s a lot cleaner than coal, even if gas isn’t as politically popular as wind or solar.

But that’s not the end of the story: I also believe this offers a tremendous new longer-term opportunity for alternative fuels. Since there’s no longer an urgent need to make them competitive immediately through subsidies, since we can use natural gas now, we can pour that money into R&D—so renewables will be ready to compete without lots of help when shale supplies run low, decades from now.

To be sure, plenty of people (including Russian Prime Minister Vladimir Putin and many Wall Street energy analysts) aren’t convinced that shale gas has the potential to be such a game changer. Their arguments revolve around two main points: that shale-gas exploration is too expensive and that it carries environmental risks.

I’d argue they are wrong on both counts.

Take costs first. Over the past decade, new techniques have been developed that drastically cut the price tag of production. The Haynesville shale, which extends from Texas into Louisiana, is seeing costs as low as $3 per million British thermal units, down from $5 or more in the Barnett shale in the 1990s. And more cost-cutting developments are likely on the way as major oil companies get into the game. If they need to do shale for $2, I am willing to bet they can, in the next five years.

When it comes to environmental risks, critics do have a point: They say drilling for shale gas runs a risk to ground water, even though shale is generally found thousands of feet below the water table. If a well casing fails, they argue, drilling fluids can seep into aquifers.

They’re overplaying the danger of such a failure. For drilling on land, where most shale-gas deposits are, the casings have been around for decades with a good track record. But water pollution can occur if drilling fluids are disposed of improperly. So, regulations and enforcement must be tightened to ensure safety. More rules will raise costs—but, given the abundance of supply, producers can likely absorb the hit. Already, some are moving to nontoxic drilling fluids, even without imposed bans.

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