Shale gas

The new estimates of shale gas resources published by IGas, one of the energy companies involved in exploration in the UK, complicate still further the decisions facing the Government on energy. Ed Davey, energy secretary, talks about moving to a point at which power supplies will be almost carbon free. But at the same time civil servants across Whitehall, including some from his own Department, have been asked to produce a paper on the competitiveness of UK energy supplies at a time when US costs are falling dramatically. That will be an interesting piece of work and should be published openly. 

The news that Exxon is to build a $10 bn LNG export facility in Texas marks another significant step forward in the story of shale gas and its disruptive impact on the world energy market. Those who want a parallel for the painful process through which so many of the established forces of the industry on one side and the lobby groups on another have struggled to come to terms with the reality of shale gas over the last three years should read John Heilbron’s fascinating book on Galileo

Oil refinery. Getty Images

The energy market is moving on two very different tracks. Oil prices are stubbornly high and gas prices are low, especially in the US, and look set to fall further across the world. The question is when, if ever, will these two tracks meet?

Let’s start with why the oil price at $114 a barrel for Brent remains so high. There is no physical shortage and demand growth worldwide is minimal. The answer lies in fear of what might happen next. The threat of an open conflict between Israel and Iran may have receded but there are enough uncertainties in the market to keep people nervous. Libya is out of control because of the limited international support for the new government following last year’s military intervention by France and Britain. There is continued nervousness about events in Algeria after the terrorist attack last month and concern about the negative effect on investment of the renewed outbreaks of violence in Iraq. 

When I first wrote about shale gas in the FT, back in 2011, one very senior oil industry executive told me that I was badly wrong and that shale would never have an impact beyond perhaps a couple of small areas in the US. A year later he did have the good grace to apologise.

Now shale gas is everywhere – from Ukraine, to China to South Africa (those are just the places where major investments were announced last week). There are still those who deny the importance of shale development, but like those who deny climate change they are beginning to look increasingly out of touch. 

In the real world, disputes over natural gas production often pit billion-dollar companies against individual landowners. In films, it is the industry’s opponents that command the big battalions.

Promised Land , a fictional account of a gas company’s nefarious tactics, stars and is co-written by Hollywood A-lister Matt Damon, and the supporting cast includes the reliably excellent Frances McDormand and John Krasinski.