Generating fewer emissions than coal and flexible enough to meet spikes in power demand, natural gas looks promising as part of the global energy mix. And with shale gas transforming the US energy outlook, interest in this fuel source has intensified. However, in replicating the American shale gas phenomenon, countries must surmount a number of physical, political, structural and social barriers.
As a power generation fuel, gas has several advantages. First, it generates fewer emissions than some sources. At the power plant, natural gas produces half as much carbon dioxide as coal-fired generation, according to the United States Environmental Protection Agency.
Gas can also play a role in an energy landscape made up of a range of sources of power, including technologies, such as wind and solar power, whose flows are unpredictable.
“If renewables are to have a chance to gain any market share, they’ll need to be planned for because they’re so intermittent,” says Adam Bedard, an energy expert at PA Consulting Group. “Gas offers a very good backstop to renewables.”
The advent of hydraulic fracturing techniques, enabling the release of gas from dense rock, has transformed the energy market
In balancing the supply from renewables, gas has another advantage over coal, since it can be powered up much more quickly.
Moreover, many see shale gas as offering significant promise. The advent of hydraulic fracturing techniques, enabling the release of gas from dense rock, has transformed the energy market, particularly in the US where “fracking” has provided an economic windfall and enhanced energy security.
“Eight years ago, the US had ten years of gas left and the question was where they were going to buy their gas from,” says Jon Clark, a partner in transaction advisory services at Ernst & Young. “Now they have 100 years of gas and it’s about where they are going to sell that gas.”
With their eyes on the US gas revolution and the large shale gas reserves around the world, other countries are starting to examine the viability of integrating it into their energy mix. However, a number of political, economic and social factors mean replicating the US story will not be easy.
First, the US has a well-developed industry that can drill quickly and efficiently. “In the UK, that’s one of the challenges,” says Mr Clark. “It doesn’t have the same onshore service industry and, to commercialise shale in the UK, you’ll need to drill hundreds of wells.”
Human resources are a consideration, too. “Part of the reason the shale revolution took off in the US is because it’s been the epicentre of a lot of coal and gas activity over the past 100 years,” says Mr Bedard. “So there was a considerable amount of qualified labour as well as technology.”
He identifies another hurdle, for some places, in the lack of extensive pipeline infrastructure. “That’s certainly a constraint in countries like Poland, China and Brazil,” he says. “But if there’s gas, that can be solved over a three-to-five-year timeline, so that’s a temporary hurdle.”
A more intractable problem is dealing with land ownership laws. In the US, owners of land and property also own the resources beneath the surface. “So if you want to come and drill a well on my property, I get to participate – that’s a big incentive that doesn’t exist in many other countries,” says Mr Bedard.
In Canada, mineral licensing means landowners can lease their land to drilling and mining companies. Yet in the UK, the principle of “split estate” means ownership of the land and property are separated from the mineral rights.
But while countries will face this and other hurdles in replicating the US shale gas phenomenon, the pressure to remove those hurdles is mounting as governments pursue low-carbon goals.
Natural gas, while still a fossil fuel, can make a contribution in this respect. “We’re never going to be 100 per cent reliable on renewables,” says Mr Clark. “So you’re always going to have other fuels in the energy mix.”
FRACKING
SHALE GAS AND THE ENVIRONMENT
In its make-up, shale gas is similar to other forms of gases. Where it differs is in its extraction – from dense shale rock. The process of extracting the gas from this rock through hydraulic fracturing, or “fracking”, is the focus of environmental concerns. However, some argue that, if properly managed, the environmental impact of fracking can be lower than for other fuel sources.
The challenge is one of opening up a rock with low porosity and permeability to allow the gas to flow. Adam Bedard, a former environmental engineer, compares it to a cup of water full of ice. “If you have big chunks and you put a straw in, it’s easy to suck all the water,” says Mr Bedard, a partner specialising in energy markets at PA Consulting Group. “But if you have tiny ice cubes, you can never quite get all the water out.”
Using pressurised fluid, hydraulic fracturing loosens the rock so the gas can be extracted. What worries some is that this means using high volumes of water and contaminating that water with chemicals. There are fears that these chemicals, which are often highly toxic, can pollute groundwater.
Yet a new report from the Grantham Research Institute on Climate Change and the Environment at the London School of Economics asserts that the technology already exists to minimise these impacts. It endorses the idea that the UK should use shale gas to help cut its carbon emissions.
Even so, Samuela Bassi, the report’s lead author, stresses the need for careful controls. “You can produce shale responsibly,” she says. “But you need to use the right technologies and have regulations in place.”
The longer-term question concerns the role of shale gas in emissions reduction. With gas-fired power stations producing about 50 per cent fewer emissions than coal power stations, gas offers short-term benefits. “But as more stringent targets kick in, you can’t run gas power stations on their own unless you run carbon-abating technologies,” says Ms Bassi.
By extracting it from the exhaust gases power stations emit and storing it underground, carbon capture and storage (CCS) technology prevents carbon dioxide from entering the atmosphere and accelerating climate change.
Ms Bassi says that the economic viability of CCS technology must, therefore, be ascertained before shale gas can contribute to a low-carbon economy. “To give certainty to investors, you need to be clear as to what the emissions targets are and which technologies you’ll be able to use,” she concludes.
Generating fewer emissions than coal and flexible enough to meet spikes in power demand, natural gas looks promising as part of the global energy mix. And with shale gas transforming the US energy outlook, interest in this fuel source has intensified. However, in replicating the American shale gas phenomenon, countries must surmount a number of physical, political, structural and social barriers.
