Shale Gas Revolution Shakes Foundation Of Green Energy Policy

  • Date: 25/09/10

Cheap, low-emission shale gas, with double the global reserves of conventional sources, will discourage investment in nuclear reactors and carbon storage that would fight climate change, a British study shows. “In a world where there is the serious possibility of cheap, relatively clean gas, who will commit large sums of money to expensive pieces of equipment to lower carbon emissions?” Paul Stevens, senior research fellow at Chatham House, a London- based institute for the study of international affairs, wrote in the report published today.

Global shale gas reserves are estimated to be 456 trillion cubic meters (16,110 trillion cubic feet) compared with 187 trillion cubic meters for conventional gas, the London-based World Energy Council said in a 2010 report. More than 60 percent of shale gas deposits, or plays, are in North America and Russia.

Shale gas is considered unconventional because it is found in sedimentary rock, not in reservoirs. Tapping it requires more wells, advanced horizontal drilling and chemicals that can pollute ground water.

A confluence of drilling history, tax credits, emission goals, technology, and incentives for landowners to allow wells has reduced U.S. shale gas production costs to less than half of conventional gas in some places, Stevens wrote. That is shaking investor confidence in conventional gas.

Cheaper Than Conventional

The cost of producing shale gas is $3 or less per million British thermal units in the Texas plays of Barnett and Haynesville, Stevens wrote. Conventional gas drilling is about $10 per million Btu, said Chris Rowland, executive director of a research unit of Ecofin Ltd., a London-based investment management company.

“If gas is available at $5 per million Btu, the all-in price for gas-fired plants would fall to around 50 euros ($67) per megawatt-hour without carbon capture and storage, or 70 euros with it,” Rowland said. That compares with 160 euros for a coal plant with CCS, perhaps falling to 130 euros in 10 years, and 85 euros for a nuclear plant, Rowland said.

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