Chilling story of world gas shortage could be all hot air

Robert Lea
25 Jun 2009

THE world, and Britain in particular, is running out of gas. The world and Britain is having to rely on imports from states with giant reserves but which are politically volatile or happy to manipulate the market - countries like Russia, Iran and Qatar.

Shipments of LNG, the liquefied natural gas technology that is supposed to change the world's energy market, aren't stopping here and if they are, they are for top dollar.

All this has contrived to push up the price of gas to historic highs. It means that UK homes are paying more than £1000 a year for their household energy. It means Shell and BP report annual profits measured in the tens of billions of pounds. It means UK energy suppliers such as British Gas, E.On, npower, EDF, Southern Electric are counting their profits in the billions.

But what if this is in fact one of the greatest cons of all time?

Peak oil theorists have been scaring the world for years, arguing that we will soon be at a stage of consuming more crude than we can produce. It was a key explanation as to why oil soared to $147 a barrel last year.

However, that superspike has since been rubbished by many as the most outrageous speculative bubble since the great tulipmania of 1647 when Dutch blooms were trading at 10 times a working man's annual wages.

The story that Britain will soon become a net importer of gas as our North Sea reserves run out has been one of the single biggest factors behind our never-before-seen rising household bills. And it has fuelled the UK's headlong commitment to alternative energies such as heavily-subsidised wind-farm build, which will ensure our electricity prices remain high for years to come.

On a worldwide basis, the much quoted statistic is that there are 61 years left of natural gas. But that is lengthening, not shortening.

The recently published BP Statistical Review of World Energy reveals that even after a 35% increase in natural gas production over the last decade, the growth in proven global natural gas reserves is up 20% over the same time period (up 4.5% in the last year alone) and is outpacing consumption.

Much of that is Iran and Qatar. But even in the world's largest economy, US natural gas reserves are up an almost unprecedented near-50% since 1998.

Much of this is down to "shale gas", large reserves of natural gas in impermeable rock which prior to new technologies could not be extracted commercially and which is likely to be geologically replicated all around the world.

All this goes barely reported in Britain says Nick Grealy, a kind of energy-industry Guido Fawkes blogger who runs the nohotair.com website.

"This is paradigm-shattering and conventional wisdom-disarraying stuff," he says. "It will also be entirely disruptive of energy expertise and energy 'risk' industry models here in the UK. Energy consultants especially need to sit down in a darkened room and think of the implications.

"Just three years ago, the conventional wisdom was that US natural-gas production was facing permanent decline.

"Today, two unprecedented events are happening there. Firstly natural gas is so cheap that it is actually replacing coal, and secondly the glut is considered so permanent that long-term structural changes to substitute natural gas for petrol are being promoted. As far as Britain is concerned, there are no clouds on the horizon. Around 70% of gas imports last year came from Norway, hardly a threat to Britain since Viking times." Why, wonders Grealy, have we all bought the gas shortage story trotted out by scaremongers-in-chief such as Oxford academic Dieter "we are six years away from an energy crisis" Helm and David McKay, the Cambridge physics don and author of Without the Hot Air, who are regularly trotted out on Radio 4's Today programme?

"We want to open the curtains and ask: is natural gas the new bridge fuel between coal and oil on the one hand and a renewable future?" says Grealy. 

"And if it is: where does that leave the UK energy experts and their views on big-ticket items like nuclear or carbon capture?"

Shale shock

Shale gas is natural gas in difficult-to-extract impermeable rock that has now become commercially viable through new technologies of hydraulic fracturing and horizontal drilling.

Also known as "tight gas" or an "unconventional", plays like Barnett Shale under Texas (where else?) are being talked of as potentially transforming the US economy. These hitherto unheralded reserves are not geologically unique.

The giant Slochteren natural gas field under the Netherlands, the largest on mainland Europe, may be productive for at least 50 more years because it contains "enormous" so far untapped resources like shale gas, according to its operator Exxon Mobil. StatoilHydro of Norway and Chesapeake Energy of the US (a shale gas partner of BP) are examining more than a dozen shale gas sites outside the US including in Hungary and Poland.

It also means a reappraisal of what else might be under the southern North Sea and there's even talk of prospects under Surrey and Hampshire.