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May 06, 2011

Gazprom is Concerned about the Effect of Shale Gas on American Housewives

"Every American housewife is aware of shale gas, but not every housewife is aware of the environmental consequences of the use of shale gas. I don't know who would take the risk of endangering drinking water reservoirs." – Alexander Medvedev, Director-General of Gazprom Export, interview with the Daily Telegraph, 12 February 2010.

Although retrieving natural gas from shale formations using hydraulic fracturing (fracking) does NOT create a serious risk to drinking water (details here), shale gas is a huge threat to Russian ambitions in general and Gazprom in particular. In 2008 Gazprom produced 17% of the world's natural gas supply according to their own reports. They accounted for 10% of Russia's gross domestic product that year. They operate the world's largest natural gas pipeline network. You may remember how Gazprom flexed Russian muscle by cutting off gas supplies to the Ukraine during January of 2009 and, in doing so, reduced transshipments to parts of Europe. You may also remember concern over Europe's dependence on Russian natural gas.

Since then the price of natural gas, which used to track the price of oil on an energy equivalent basis, has fallen by half (you know what's happened to oil prices after the recession-linked decline). Thanks to the huge new reserves of natural gas now retrievable at low cost from massive shale formations using horizontal drilling and fracking, it looks like the price of natural gas will stay relatively low for decades to come despite the fact that its use to replace oil and coal is likely to skyrocket. So much for Gazprom's dream of world domination unless they can join forces with other competitive energy suppliers to convince the world not to use new techniques to unlock shale oil.

The US, where these techniques were developed, is the first to exploit shale gas widely and is rapidly expanding its production. Back in 2003 Alan Greenspan said:

"Today's tight natural gas markets have been a long time in coming, and futures prices suggest that we are not apt to return to earlier periods of relative abundance and low prices anytime soon… Access to world natural gas supplies will require a major expansion of LNG [Liquified Natural Gas] terminal import capacity."

Greenspan was wrong about lots of things. Some LNG import facilities were built (none are in use); now natural gas is so cheap and abundant here that the US may soon be an exporter. At least one import terminal now has the approval it needs to become an export terminal.

Although the first great success with shale gas has been here in the US, there are many similar shale formations which are also likely to be highly productive in Europe in particular and the world in general. This prospect leaves Europe a means for freeing itself from a scary dependence on Russia – and for saving money. France, however, has banned fracking for now – perhaps because, with the majority of their electricity coming from nuclear power, they are not under immediate pressure to find new or carbon-reduced sources.

All of the above comes from "The Shale Gas Shock", a well-documented report on natural gas written by Matt Ridley and just published by the Global Warming Policy Foundation (which doesn't necessarily endorse the opinions in the report). It is frankly pro shale gas and the technologies used to extract it (as am I), but its sources are well-documented. For example, the report quotes a prediction from the US Energy Information Administration saying that electricity from a new natural gas plant (opening in 2016) is likely to cost $63/megawatt-hour compared to $95 for a new coal plant (without carbon capture), $97 for onshore wind turbines ($243 offshore), $114 for new nuclear, and $211 for solar photovoltaic.

Somewhat more inflammatory is a comparison of the landscape impact of natural gas rigs and wind turbines:

"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."

What's missing from this otherwise apt comparison is the fact that, after 25 years, the wind will still be blowing but the gas in that area will be gone (unless even newer recovery methods are invented).

If you're concerned about the fluids used in fracking, other environmental impacts of natural gas extraction, or just want good view of the possibilities, the report is well worth reading.

Related Posts:

Legislators Putting Benzene, Toluene, Xylene and Ethylbenzene in Their Cars

Natural Gas Disrupts the Energy Industry

The Pickens Plan Bill: The Wrong Way to Get the Right Result

What's the Transportation Fuel of the Future ?

Subsequent information:

Good and Bad News about the Safety of Natural Gas Fracking

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