the frack thread

vtsnowedin · Post by **vtsnowedin** » 13 Mar 2015, 08:00

This anti fracking campaign will accomplish one good thing. It will leave the UK's tight oil and gas in the ground for a decade or so while other cheaper supplies are used up. It will become much more valuable as the presently used sources decline. In a way it is a asset deposited at interest.
When the price gets high enough there will be no way to resist the demands for it's extraction. Hopefully extraction procedures will continue to be improved and it will come out of the ground safely in the end.

biffvernon · Post by **biffvernon** » 13 Mar 2015, 09:08

Here's something I just wrote with respect to a local oil well in my neck of the woods, but there are wider implications:

There seems to have been some confusion over the various oil and gas plays in Lincolnshire and elsewhere recently. I think it might help if everybody had a better understanding of the geology and then used that to draw political and economic conclusions.

The Kiln Lane site itself will never be fracked as there are no significant shale deposits there. But there are shale deposits to the south-west and to the east. Information gathered from the Kiln Lane bore will be helpful to the industry is their search for shale gas nearby.

Kiln Lane lies above a geological area called the Askern-Spital High. To the south-west lies a deep basin known as the Gainsborough Trough. Here is a thick layer of shale that has potential for fracking for gas called the Bowland-Hodder Formation. This is the same rock as is being prospected in Lancashire and also continues into North Yorkshire as the Cleveland Basin. The same rock underlies the Humber Basin to the east of Kiln Lane. This are has not been well studied in the past and the Kiln Lane bore may be particularly informative about the boundaries of this potentially productive area.

So as far as the geology is concerned there is no possibility of fracking at Kiln Lane. The bore is intended to reach the Millstone Grit, which the oil company hopes contains oil that would be extracted conventionally. This oil will have migrated from the shale source rocks from the lower Bowland-Hodder formation either of the Gainsborough Trough or the Humber Basin. The source is as yet uncertain, but the information gathered is likely to help the industry in their attempts to produce gas by fracking in neighbouring areas.

Now for my take on the economics; this may be more contestable than the geology. With crude prices as low as $50 a barrel small onshore conventional oilfields are likely to be profitable in Britain where the political risks are very low and transport cost negligible. Kiln Lane is next door to a refinery! These small English onshore oilfields have traditionally produced a modest but steady and safe income stream.

The economics of fracking are something else. At $50 there is no fracking operator in the world making a profit from the activity, not even in the USA where the geology is much simpler. Where the industry is making money it is not from profits on sales but from investment income in a post 2008 economic environment in which quantitative easing has allowed cheap borrowing of money that is shy of the sub-prime mortgage business. The US fracking industry is so highly leveraged that many are just waiting for the house of cards to tumble. Added to the financing issue is the fear of a carbon bubble bursting as the fossil fuel industry is forced to contract as carbon reduction policies are entrenched worldwide. Climate change legislation will create stranded assets wiping out the oil industry’s booked value. It has become widely accepted that some 80% of the already discovered fossil carbon will have to be left underground and unburnt if we are to have a sporting chance of even keeping global warming below 2°C of pre-industrial level. The divestment campaign in getting attention everywhere from small faith groups to Norway’s sovereign wealth fund.

In this politico-economic environment there is no future for a fracking industry. But that will not stop oil company executives trying to make some money in the short term. Their current strategy is to persuade investors who do not yet accept that the fossil fuel industry will soon be in rapid contraction, that they have a prospect worth investing in. In the Kiln Lane case we have a bore hole being drilled to produce an easy cash flow from conventional oil and, importantly, an opportunity to demonstrate that the company is serious about fracking in neighbouring geological formations for which they hold the exploration and production licence and which offer the prospect of untold riches in the future.

Their message is:
1. We are not fracking at Kiln Lane (true)
2. We will learn more about the potential for fracking in the Gainsborough Trough and Humber Basin (true)
3. Invest in us and you will share the profits of fracking in the future (false)

Whether or not the industry believes its own lie at point 3 is hard to determine. Either way, there is a whiff of the Ponzi scheme, whereby a few people make a lot of money out of an incoming investment stream that will never provide a return. If and when their plans fail they are likely to blame protesters and politicians rather that admit the fundamental flaw s of the scheme, namely that gas from fracking is too expensive to produce and climate change legislation will force a contraction of the whole industry.

Of course the industry is still quite capable of creating a great deal harm, locally with pollution and globally in its efforts to slow down the decarbonisation of the global economy. The anti-fracking protests have a valuable damage-limitation role to play.

vtsnowedin · Post by **vtsnowedin** » 13 Mar 2015, 09:28

biffvernon wrote:Here's something I just wrote with respect to a local oil well in my neck of the woods, but there are wider implications:
snip....

The economics of fracking are something else. At $50 there is no fracking operator in the world making a profit from the activity, not even in the USA where the geology is much simpler. Where the industry is making money it is not from profits on sales but from investment income in a post 2008 economic environment in which quantitative easing has allowed cheap borrowing of money that is shy of the sub-prime mortgage business. The US fracking industry is so highly leveraged that many are just waiting for the house of cards to tumble. Added to the financing issue is the fear of a carbon bubble bursting as the fossil fuel industry is forced to contract as carbon reduction policies are entrenched worldwide. Climate change legislation will create stranded assets wiping out the oil industry’s booked value.

Scams aside of which there are plenty I don't think we can expect oil to stay in the $50 range for long. This temporary downturn will delay and slow down the fracking industry not eliminate it. And then the idea that climate change legislation will achieve stranded assets is quite dubious. Carbon reduction policies are nice on paper but when it comes to the point that people start starving or freezing to meet some carbon reduction target governments will fall and those agreements will fall with them.

biffvernon · Post by **biffvernon** » 13 Mar 2015, 11:00

Yes, the idea that climate change legislation will achieve stranded assets is quite dubious. But if it doesn't then we are toast. There isn't much scope for a middle way.

raspberry-blower · Post by **raspberry-blower** » 14 Apr 2015, 20:46

Zero Hedge: Bakken Shale Oil Well Output Drops to Lowest Since 2009

Reality sinking in - it is quite possible that there will be a noticeable decline in US oil production in 2015

AutomaticEarth · Post by **AutomaticEarth** » 15 Jun 2015, 11:14

Looks like we could be going fracking......

http://www.bbc.co.uk/news/uk-england-la ... e-33132569

emordnilap · Post by **emordnilap** » 15 Jun 2015, 12:17

AutomaticEarth wrote:Looks like we could be going fracking......

http://www.bbc.co.uk/news/uk-england-la ... e-33132569

Get your popcorn in.

3rdRock · Post by **3rdRock** » 29 Jun 2015, 12:38

Some good news for a change.

http://www.bbc.co.uk/news/uk-england-la ... e-33313084

Council blocks Little Plumpton fracking application

An application to start fracking at a site in Lancashire has been rejected.

Energy firm Cuadrilla wanted to extract shale gas at the site between Preston and Blackpool.

The Little Plumpton bid had been recommended for approval by Lancashire County Council's planning officials, subject to working hours, noise control and highway matters.

But councillors rejected the advice and have voted 10-4 to refuse the application.

3rdRock · Post by **3rdRock** » 02 Jul 2015, 09:39

http://www.theguardian.com/environment/ ... eport-says

Fracking could hurt house prices, health and environment, official report says

Fracking operations to extract shale gas in Britain could cause nearby house prices to fall by up to 7% and create a risk of environmental damage, according to a government report that has been published in full for the first time.

Entitled Shale Gas Rural Economy Impacts, the Department for Environment, Food & Rural Affairs (Defra) document was released on Wednesday after a freedom of information battle.

Full report: https://www.gov.uk/government/uploads/s ... report.pdf

Yeah, screw our health and the impact on the environment, we wouldn't want to see a fall in house prices, would we?

Tarrel · Post by **Tarrel** » 02 Jul 2015, 11:52

Well, this is actually good news, as it will increase the "not in my back yard" lobby (albeit for the wrong reasons).

raspberry-blower · Post by **raspberry-blower** » 03 Jul 2015, 20:51

Zero Hedge: Shale Oil Drillers About to be "Zero Hedged" As Loss Protection Expires

In short, the last line of defense against terminal cash burn for the beleagured US shale complex is about to fall and when it does, it's going to take bank credit lines down with it.

This means October is the expiration date for heavily indebted US drillers and perhaps for HY credit as well, because once the defaults begin in earnest and HY spreads start to blow out, the BTFD-ing retail crowd will head for the exits, triggering a very non-diversifiable, unidirectional flow for bond fund managers who will then be forced to hold their noses and dive into the ever-thinner secondary corporate credit market.

It is precisely at that point when everyone's worst nightmares about shrinking dealer inventories and illiquid credit markets will suddenly be realized.

Ashes to ashes, dust to dust
If Greece doesn't flip the banking sector
The shale oil producers must..

biffvernon · Post by **biffvernon** » 04 Jul 2015, 07:47

Zero Hedge aren't alone in realising that the American fracking industry debts amount to a more serious problem than Greek debt.

http://www.economist.com/news/leaders/2 ... there-will

http://oilprice.com/Energy/Crude-Oil/Th ... e9058.html

PS_RalphW · Post by **PS_RalphW** » 24 Jul 2015, 08:06

A petition to the government to dump fracking

https://petition.parliament.uk/petitions/104617/

biffvernon · Post by **biffvernon** » 24 Jul 2015, 18:38

Nice to see the government petitions website works a lot better now since the re-launch.

PS_RalphW · Post by **PS_RalphW** » 10 Aug 2015, 10:06

Tories to fasttrack the over-riding of local democracy.

Nobody is going to be surprised. However, if prices stay this low I suspect there will be few takers, and any attempt to drill will meet such concentrated opposition as to be totally uneconomic

http://www.thesundaytimes.co.uk/sto/new ... 2015_08_08

BTW the government responded to the petition, which has reached 23,500.

I haven't bothered reading it.

To ensure we have secure, affordable, clean energy supplies for our families and businesses, we will need a diverse energy mix, including significant quantities of renewables, nuclear and gas.

The Government is committed to a low carbon and affordable future for energy while also ensuring bill payers are getting the best possible deal.

The Government supports renewable energy technologies and is working towards a transition to a low carbon economy. The UK has some of the best wind, wave and tidal resources in Europe. Renewable energy offers an attractive market for investors, one that already supports skills and jobs through the supply chain.

We are currently implementing a renewable energy deployment programme to ensure we generate at least 30% of our electricity from renewables by 2020. At the end of 2013, our share of electricity generation from renewable energy was 14.9%. In 2014 this figure rose to 19.2%, and a record of 22.3% was recorded in the first quarter of 2015. Since 2010 we have seen an average of £7 billion a year of investment in renewables and last year we reached a record high of almost £8 billion.

Around a third of UK energy demand is met by gas, the cleanest fossil fuel. A quarter of that is used to produce electricity, some is a vital ingredient for industry and nearly all the rest is used to heat our buildings and cook our food. So it’s vital that we seize the opportunity to explore the UK’s shale gas potential whilst maintaining the very highest safety and environmental standards, which we have established as world leaders in extracting oil and gas over the past 50 years. The Government is committed to developing this new source of energy as part of our work to ensure our energy security. Developing shale gas could create a whole new British industry, provide more jobs and make us less reliant on volatile imports from abroad.

Reports by the Royal Society and Royal Academy of Engineering, as well as Public Health England considered a wide range of evidence on hydraulic fracturing in the UK context. They concluded that risks can be well managed if the industry follows best practice, enforced through regulation. The UK has over 50 years’ experience regulating the onshore oil and gas industry, and measures are in place to ensure on-site safety, prevent environmental contamination, mitigate seismic activity and minimise emissions. A company looking to develop shale will still need to obtain all the necessary permissions, like planning and environmental permits. Our system is robust and we are proven world leaders in well regulated, safe and environmentally sound oil and gas developments.

To reinforce these regulations, the Infrastructure Act 2015 brought forward a range of further requirements if an operator is to carry out hydraulic fracturing, to provide the public with confidence that this industry is being taken forward in a balanced way. These include environmental impact assessments, groundwater monitoring, community payments and the exclusion of hydraulic fracturing in protected areas.

It is important that local communities who are hosting wells are able to share in the benefits of development. The industry has committed to provide £100,000 in community payments per fractured well and 1% of any subsequent production revenues. Companies may well offer payments over and above these amounts.

UK shale development is compatible with our goal to cut greenhouse gas emissions and does not detract from our support for renewables. As the UK’s Committee on Climate Change (CCC) said in 2013, the UK will “continue to use considerable, albeit declining, amounts of gas well into the 2030s” and “if anything, using well-regulated UK shale gas… could lead to lower overall greenhouse gas emissions than continuing to import gas”. The CCC is an independent, statutory body, whose purpose is to advise the UK Government and Devolved Administrations on emissions targets and report to Parliament on progress made in reducing greenhouse gas emissions and preparing for climate change. Shale gas can create a bridge while we develop renewable energy, improve energy efficiency and build new nuclear. To make absolutely sure, we have included in the Infrastructure Act a requirement to seek advice from the CCC on the implications of shale gas for our legally binding carbon targets.

This is not a renewables versus gas issue – to meet our challenging climate targets we will need significant quantities of renewables, nuclear and gas in our energy mix.