The rapid rise of US shale gas is prompting great interest in whether other parts of the world – particularly Europe and China – could also see a similar boom, but it’s early days for both.
So how promising is it? Below are extracts from an FT Energy Source interview on the subject with Rhodri Thomas, who is Wood Mackenzie’s Europe and Sub-Saharan Africa upstream research manager:
Is shale gas truly proven, an economic source of energy?
There are still many unknowns in terms of shale gas, but what has been proven is that significant volume can be produced at below market prices in the US.
The industry has been extremely successful in driving down costs and the price required to make shale gas viable has fallen in a number of areas in North America. Everyone expected the processes and technology developed in the Barnett shale play (the first one to be developed on any significant scale) to be transferrable, but what caught people out is how quicky it was transferrable.
On FT Energy Source:
- Conoco, Devon, and the international pullback
- Does crude oil storage data affect prices, anyway?
- China-Australia LNG deals and green bank equity in Energy headlines
- Losing interest in the environment?
- Green cash but no long-term science certainty in UK budget
- The oil industry doesn’t know what’s good for it
- Unrealistic expectations for hybrid and electric vehicles
- The rise of North Dakota does not an oil boom make
- The first mover disadvantage on climate
- A clever site – and iPhone app – on climate scepticism (H/T)
Last week we wrote about the usefulness or otherwise of weekly EIA data on US crude oil in storage, given the shortcomings of the data itself and the comparative paucity of similar indicators from other big oil importers.
Well John Kemp has crunched some numbers to prove* that it’s not too useful — at least, not now:
Source: Reuters/John Kemp
He says the correlation is there, but it’s ”very weak and too unstable to have much predictive value”.
ConocoPhillips’ plans to halve its 20 per cent stake in Lukoil, Russia’s second biggest oil producer, had been discussed and discounted by many an analyst in the days before it happened. Few believed the sale would go ahead because the asset has been a good performer for Conoco and, amid the resource nationalism sweeping the world, big oil companies are trying to get into places like Russia – not out.
But the interesting thing about this economic downturn is that it has forced companies in the energy industry to think about what is really important to them. And while Russia is important to a lot of big oil companies, and remains so to Conoco, so are generating shareholder returns. And Conoco believes it must reward shareholders who have stuck with the company through the past year of difficulties, particularly if it can do so while also retaining a 10 per cent stake in Lukoil, its Russian relationship and a foot in that market.