shale sale now on, page-40

thanks to Ravi for this post (in its entirety):

"Shale Gas Shock", by Matt Ridley, I will post some interesting parts, the first being very important for BKP;

The predictability of shale gas
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39. The shale gas industry argues that, on the whole, dry wells do not now happen because
gas occurs throughout the continuous shale stratum, rather than being concentrated in `traps?
as conventional gas is.
Once the geology is better understood, production is predictable and similar for each well so long as the drilling is accurate and the fracking is successful. The more wells are drilled, the better the properties of the shale become known ? effectively `de-risking? the field. This is unlike conventional gas drilling and means that gas companies can choose
where to drill based on how close to pipelines and markets the site is, rather than gambling on lucky strikes in remote locations.
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Shale gas price
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60. Until recently the conventional wisdom held that shale gas would be expensive compared
with gas from conventional sources and would be uneconomic at prices below $8.50 per
MMBTU.
However, according to IHS CERA, shale gas is now being produced more cheaply
than most conventional gas.
The predictability of shale gas wells combined with the growing experience in how to reduce the time and cost of drilling and fracking wells, means that
currently many firms are claiming to be able to produce shale gas at a marginal cost of less
than $4 per MMBTU (4.5 cents per kilowatt-hour) ? not least because they are close to retail
markets. In addition, multi-stage fracking has increased the effectiveness of the fracking
process. If this proves sustainable, it effectively makes gas easily competitive with coal, usually
the cheapest energy fuel.
61. According to the Institute of Energy Research, the cost of electricity from new plants
designed to open in 2016 from different sources will be approximately as follows
(In dollars per mwh)
--------------------
Solar thermal ..............................................312
Offshore Wind ............................................243
Solar photovoltaic ........................................211
Coal with CCS ............................................136
Nuclear ......................................................114
Biomass ......................................................112
Wind ..........................................................97
Coal ..........................................................95
Gas with CCS ..............................................89
Hydro ........................................................86
Gas, combined cycle ..................................63

62. These numbers include costs of capital, fuel, operation and maintenance, and transmission
and take into account capacity factor ? how much of the time the plant can be on line. Of
course, actual costs will vary greatly in practice according to location, design, subsidies and
price regulation. None the less, it is clear that gas can, given a level playing field, beat all
other technologies on price. As contracts that link gas to oil prices expire, and the price of gas
decouples from that of oil, gas?s advantage may actually grow.
Finding: shale gas is inexpensive and its price advantage
may widen.
Energy efficiency
63. Gas is the most efficient fuel for generating electricity. New combined-cycle gas turbines
can achieve almost 60% heat-to-electricity conversion (5,785 btu/kWh), whereas even the
newest coal fired turbines cannot yet reach 50% (6,824 btu/kWh)47. With waste heat capture
for district heating (co-generation), thermal efficiency can approach 80%. Only a perception
that gas is expensive, volatile in price, politically unreliable or likely to grow scarce has stood
in the way of a global `dash for gas? in power generation. If gas supplies prove to be
diversified, domestic, abundant and long-lasting, then these perceptions will fade.
64. Moreover, gas-fired turbines are equally efficient at many different scales down to 50MW,
whereas efficient coal or nuclear plants are much larger. And they reach peak efficiency within
minutes, so can be powered up and down to meet demand spikes, or to back up intermittent
renewable-energy output. This efficiency leads to gas being potentially the cheapest and most
flexible fuel for generating electricity.
65. In addition, gas has various advantages over other ways of generating electricity:
66. Gas versus coal. Given the higher efficiency of gas turbines and the lower carbon
content of gas, burning gas produces only 37% of carbon dioxide as burning coal for the
same electricity output48. In addition, unlike burnt coal, burnt shale gas includes no sulphur
dioxides, no mercury and fewer nitrogen oxides. It requires no surface mining and
mountaintop removal, no tunnelling and ground subsidence and results in many fewer human
fatalities. Gas is piped to customers rather than transported by congested road or rail.
Therefore, while coal is cheap, it has many environmental externalities, not all of which are
fully priced in. `Clean coal? with carbon dioxide emissions removed would probably be ? at 9
cents per kilowatt hour ? roughly twice as costly as gas for electricity generation, yet have only
a slim carbon emission advantage. Gas, because it burns cleaner, is also more amenable to
carbon capture than coal.

67. Gas versus oil. Oil is very useful as a transport fuel but is generally too expensive as a
fuel for electricity generation, outside the Middle East. The exhaustion of many onshore oil
fields has driven oil exploration into deep offshore waters and towards expensive tar sands
and tar shales. In the United States, the effect of shale gas has been to decouple the price of
gas from that of oil, with gas prices now much lower per unit of energy, further pricing oil out
of the electricity generating industry. The same decoupling will happen in the rest of the world
as long term linked oil-and-gas contracts gradually expire. Oil is effectively priced out of
baseload electricity generation for the foreseeable future.

68. Gas versus nuclear. Gas-fired electricity is cheap to build and costly to fuel; nuclear is
the opposite. In practice, thanks to safety requirements, planning delays and design difficulties,
nuclear power plants are generally proving far more expensive than expected and the price
per kilowatt-hour of nuclear electricity is nearly double that of gas, though of course this may
change. Besides, nuclear power, like coal, is most efficient when big. Gas-fired electricity is
efficient even at relatively small scales. This means that small units of gas-fired power stations
can be added to serve local urban markets, whereas nuclear comes in large units often far
from markets.

69. Gas versus wind. A gas drilling rig, like a wind turbine, is an intrusion into a rural
area. However, it need not be on a hilltop like a windmill and can be hidden in a rolling
landscape. With each wellhead capable of producing gas from up to 12 wells, or about 50
billion cubic feet over 25 years, the output of one drilling pad is equivalent to the average
output of about 47 giant 2.5MW wind turbines (which also last about 25 years), and is
continuous rather than unpredictable and intermittent. Yet the footprint of a shale gas drilling
derrick (about 6 acres) is only a little larger than the forest clearance necessary for a single
wind turbine (4 acres), requires vastly less concrete per kilowatt-hour, stands one-third as tall
and is present for just 30 days instead of 25 years. Additionally, gas drilling rigs have not
been known to kill birds of prey or have any other impacts on wildlife, whereas wind farms kill
tens of thousands of birds of prey annually.

70. Gas versus solar. Unlike solar power, shale gas works even at night and on cloudy
days. It can be stored cheaply in underground salt caverns, whereas storage of solar electricity
is impossibly expensive. It produces electricity at about one-third the cost of solar power and it
is found closer to large customer concentrations than the deserts where solar power is most
efficient. None the less, abundant gas may prove to be the friend rather than the rival of solar
power, because unlike coal and nuclear power it can be powered up and down quickly and
efficiently. Using coal or nuclear to back-up intermittent renewable energy results in wasteful
production of carbon dioxide, negating virtually all carbon-savings that the renewable resource
promises. If the costs of solar power do fall rapidly, it is conceivable that one day an electricity
system based on solar power by day and gas by night may well prove economically viable.

71. Gas versus biomass. Gas requires and attracts no subsidy, whereas the diversion of
agricultural products into making fuel for power stations drives up world food prices by taking
land away from growing food crops, exacerbating hunger, and does so while using far more
water per unit of energy than gas. It also creates ash and has to be transported to power
stations by road, neither of which is true of gas.

72. Unlike nuclear and renewable, gas-fired electricity requires no subsidy. As Nick Grealy put
it to the House of Commons Energy and Climate Change committee:
With respect, from what I see of the activities of your Committee, you are used to a
large amount of people coming here and saying, "We need a subsidy for CCS, we
need a subsidy for wind, we need a subsidy for nuclear" and so on. The shale gas
industry wants to give you money. --Nick Grealy, testimony to House of Commons
Energy and Climate Change Committee, 201150.
Finding: electricity generated using gas is cheaper, cleaner,
more environmentally beneficial and more humane than
electricity from coal, oil, nuclear, wind, solar and biomass.

New markets for gas in transport
73. Richly productive new shale gas fields like the Marcellus Shale lead to falling gas prices
and to gas producers keen to entice new customers to use their product. Hence it is probable ?
if the optimists are right about supply ? that gas will gradually find new markets. Besides partly
displacing coal, nuclear and renewables in power generation, it may also expand into
transport.

74. There are already nearly 15 million natural gas fuelled vehicles in the world. Natural gas
fuelled vehicles are already widely used in some cities such as Washington DC, Kuala Lumpur
and New Delhi as a pollution control measure. Now that natural gas tanks for cars have
become much smaller, the only obstacle to car drivers also switching to cheap and low emission gas is a lack of infrastructure in the form of refuelling stations ? admittedly a formidable hurdle.
Gas-powered vehicles produce almost no particulates, 60% less volatile
organics, 50% less nitrogen oxides and 90% less carbon monoxide, which means less smog, ozone and brown haze.