Energy revolution or a financial fire?
Low-cost energy against prolonged pollution: in the United States dilemma about shale gas and shale oil are not tortured or business or government. Less than a decade, these new resources, as they say, put America back on track for economic growth, create new jobs and to restore competition. And if this "revolution" was a speculative bubble that will burst soon?
If you believe the headlines of the American press, predictive economic spurt caused by the "revolution" of shale gas and oil, the country will soon got fed up of the "black gold". The report «Perspectives energetiques mondiales 2012" (Global Energy Outlook 2012) The International Energy Agency (IAE) has announced that in 2017 the United States will be replaced by Saudi Arabia in the first place in the world in oil production and will enjoy the "apparent energy independence." According to the Institute of Atomic Energy, the planned increase in the production of hydrocarbons from eighty four million barrels per day in 2011 to ninety-seven in 2035, will consist of "all of the liquefied natural gas and unconventional sources" (mainly of shale gas and oil), while while traditional production begins to decline from … 2013.
The extracted through hydraulic fracturing (injection molding a mixture of water, sand and chemicals to break down the rock and gas sublimation), thanks to the technique of horizontal drilling (which gives more time for the processing of geological layers), these resources can only be used at the expense of serious pollution environment. But their operation in the United States has caused the creation of hundreds of thousands of jobs and provides the advantage of an abundance of inexpensive energy. According to a report in 2013 "Energy Prospects: A Look into 2040", published by a group of ExxonMobil, the Americans, since 2025, will become net exporters of hydrocarbons due to shale gas in strong growth in global demand for gas.
And if the "shale revolution" rather than just strengthen the global economy began to recover, only speculative bubble inflates, also ready to burst soon? The weakness of renewed economic growth, as well as the experience of recent years should caution against excessive expectations. The Spanish economy, for example, has recently flourished (fourth place in the euro area in 2008), collapsed after without any warning bursting of the bubble in the property market to which it was firmly attached. The political class learned a little lesson from the crisis in 2008, and now made the same mistakes, but now in the field of fossil energy sources.
The investigation of the "New York Times" of June 2011 has revealed a few cracks in the media-building entrepreneurial "shale success" and opened a doubt different observers — geologists, lawyers, market analysts — in relation to advertising moves oil companies suspected that they "knowingly and unlawfully even overestimate the effectiveness of their deposits and the amount of their stock." "Extracting gas from subterranean shale" — the newspaper — "may be more difficult and more expensive than the company reported — this is indicated by hundreds of e-mails and documents exchanged by experts on the topic, as well as analysis of data from many thousands of mines.
In early 2012, two American adviser raised alarms in «Petroleum Review», Journal of the main British oil industry. Wondering about the "safety and soundness of shale gas in the United States," they note that the forecasts of oil in line with the new rules Securities and Exchange Commission (SEC), the Federal Agency for Supervision of Financial Markets. Adopted in 2009, the new rules allow companies to estimate the volume of their reserves as they please, without control by an independent authority.
For entrepreneurs revaluation reserves of shale gas can significantly reduce the risks associated with their operation. But hydraulic fracturing of gas-bearing strata not only has a devastating impact on the environment, it also creates a purely economic problem, since because of it shale gas is very short-lived. In the journal «Nature» former scientific advisor to the British government, David King emphasizes that the development of oil shale mine falls from 90% to 60% after one year of operation ..
This sharp drop in production, obviously, makes it impossible to hope for a profit. Immediately after the establishment of the mine owners should create others to sustain the level of production and service debt. When the environment is favorable, this allows you to run forward misleading for several years. Thus, combined with weak economic activity, production of shale gas in the mine — depending on the time of generation, from abundant to sluggish — has caused a noticeable drop in the price of natural gas in the United States, with 7 or $ 8 per one million BTU (British Thermal Unit — British thermal unit) to less than $ 3 in 2012.
Experts on Finance did not allow themselves to cheat, "Slate's economy — the economy of destruction," warns journalist Wolf Richter «Business Insider». The development of shale consumes resources at an astonishing rate, leaving a mountain of debt, when production is falling apart. To avoid falling profits, companies have pumped into the reservoir, more and more, draining the mine one by one. Unfortunately, sooner or later, such a scheme will be rested against the wall.
Geologist who worked in «Amoco» (prior to its merger with BP), Mr. Arthur Berman, admits that he was surprised by the pace "incredibly fast" exhaustion layers. Figuratively calling the city Eagle Ford, Texas, "the mother of shale oil," he says, "the annual production decline of more than 42%." In order to ensure a stable income, the oil will be forced to drill "almost a thousand additional mines annually in the same place. These costs range from 10 to 12 billion dollars a year … If you add up everything you can to reach the amount allocated for the bank bailout in 2008. Where did they take so much money? ".
The gas bubble has already begun its impact on some of the most powerful oil companies on the planet. In June 2012, the CEO of ExxonMobil, Mr. Rex Tillerson, complained of a bad financial situation, explaining that the fall in the price of natural gas in the United States — it's good for consumers, but things anathema to a company whose revenues have declined. While their shareholders ExxonMobil has pledged not to lose a single centime, Mr. Tillerson spoke before the Council on Foreign Relations (CFR), one of the most influential think tanks in the country, think tanks, speaking almost in tears: "We all suffer the full collapse. We do not make money. All indicators are in the red zone. "
Almost at the same time, the British oil and gas company BG Group has been forced to "reduce the value of its assets in U.S. oil and gas industry to $ 1.3 billion," which means "delicate drop its interim earnings." November 1, 2012, after the oil company «Royal Dutch Shell» gone through three trimesters with poor results, with the total annual decline of 24%, Dow Jones News Service reported this fatal news, worrying because of the "damage" caused by (previously ) unbridled success of shale gas on all exchanges.
From panacea to panic
Although «Chesapeake Energy» is a pioneer in the development of oil shale, the U.S. company failed to avoid the gas bubble. Pressed down by the weight of debt, the company was forced to sell some of its assets — deposits of gas and oil pipelines, totaling $ 6.9 billion — to satisfy his creditors. "The company is reducing its assets, while its CEO made her one of the leaders of the shale revolution" — sorry Washington Post.
As the heroes of this "revolution" could fall so low? Analyst John Dizard observed in the «Financial Times» on May 6, 2012, as shale gas producers spent "several times its own capital for land acquisition, drilling and mine development of their programs." In order to finance the gold rush, it was necessary to borrow huge sums "in complex and difficult circumstances," because Wall Street did not make exceptions to its normal rules. According to Dizarda, the gas bubble, but most likely will continue to swell, due to the dependence of America on those doomed to destruction of economic resources. "Given the ephemeral mines yield of shale gas drilling will continue. Prices, in the end, will be set at a high level, even very high, not only to cover past debts, but the real value of the products. "
However, we can not exclude the fact that many major oil companies at the same time face a similar financial disaster. If that happens, says Mr. Berman, "can happen two or three bankruptcy or a very loud transaction, which is why everyone will be able to withdraw their money, and capital evaporate. It would be the worst of all scenarios. "
In other words, the argument that shale gas will be able to protect the United States or the world of "peak oil" — the level at which the combination of geological and economic constraints will make the processing of oil is too complex and expensive — is the only fairy tales. Many of the recently published independent research reports confirm that the gas "revolution" will not set new deadlines in this regard.
In a report published in the journal «Energy Policy», King's team concludes that the oil industry is overestimated by a third world reserves of fossil energy sources. It is still available layers do not exceed, in their view, eight hundred and fifty billion barrels, while official estimates say three hundred thousand billion. According to the authors, "if a large amount of minerals will remain in the depths of the Earth, the amount of potential oil production at the rates to which our global economy is used, is limited and tends to decrease in the near future."
Although valuable gases that are removed from the subsoil layers by fracturing, reduce the existing reserves continues rate estimated 4.5 and 6.7%. King and his colleagues are therefore totally reject the thesis that the exploitation of shale gas could solve the energy crisis. In turn, the financial analyst Gail Tverberg reminder that the world production of traditional fossil energy sources has ceased to grow in 2005. This stagnation in which he sees one of the main causes of the crisis of 2008 and 2009, was a kind of forerunner of the recession, which could lead to further escalation of the current economic recession — with shale gas or not. Further, in a report published after the report IAE, «New Economics Foundation» (NEF) predicts the emergence of "peak oil" in 2014 or 2015, when the price of processing "exceed the price that the world economy will be able to withstand, without significant damage to their assets" .
These studies have drawn attention to any media or political circles, jaded advertising rhetoric energy lobby. A pity, because their conclusion is easy to understand: do not help anyone to improve their welfare, shale gas inflates the artificial bubble that temporarily hides the deep structural instability. When the bubble bursts, it will provoke a crisis of supply and rising prices, painful impact on the global economy.
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