Posts Tagged ‘Shale gas’

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Why Russia finances anti-fracking protests in Europe

January 13, 2018

The logic is rather simple.

  1. Russia has very large natural gas reserves.
  2. Russia has even larger shale reserves but these have, deliberately, not been developed yet.
  3. Russia has a very large investment in the transport of natural gas to Europe.
  4. Gazprom policy is to maximise returns on natural gas before developing shale reserves.
  5. The return to Gazprom is maximised if Europe does not develop its own shale reserves and instead increases its dependence on Russian gas.

It is not at all surprising then that the anti-fracking movement in Europe is both funded and covertly directed by Russia. The biggest success for the Russian campaign was in 2014 when many European countries succumbed to the Russian-backed, “environmental” lobbies and banned fracking. And Gazprom’s exports to Europe continue to increase steadily. Since 2014 annual exports have grown from about 145 to 190 billion cubic meters.

National Review: In 2014, after multiple European countries banned fracking following protests, NATO secretary general Fogh Anders Rasmussen warned that “Russia, as part of their sophisticated information and disinformation operations, engaged actively with so-called non-governmental organizations — environmental organizations working against shale gas — to maintain dependence on imported Russian gas.” 

In 2015 alone, the intelligence community found that RT, Russia’s state-run media outlet, produced over 60 anti-fracking stories. “There are a lot of studies that say fracking is dangerous,” one RT segment began, “So why do you think some countries and companies think it’s worth the risk?” RT conveniently left out the fact that over 60 percent of Russian exports are oil and natural gas, and that countries that “risk” fracking would no longer be dependent on the Kremlin. In addition to peddling anti-fracking propaganda in the U.S., Russia is allegedly using an offshore shell company to directly fund American environmental groups. On June 29, Republican representatives Lamar Smith and Randy Weber wrote a letter to U.S. Treasury Secretary Steve Mnuchin demanding an investigation into the shell company:

According to the reports, entities connected to the Russian government are using a shell company registered in Bermuda, Klein Ltd. (Klein), to funnel tens of millions of dollars to a U.S.-based 501(c)(3) private foundation, the Sea Change Foundation (Sea Change). This money appears to move in the form of anonymous donations. Sea Change then passes the money originating in Russia to various U.S. 501(c)(3) organizations such as the Sierra Club, League of Conservation Voters Education Fund, and others. These funds are dispersed as grants that will be used to execute a political agenda driven by Russian entities. The purpose of this circuitous exchange of foreign funds is to shield the source of the money.

Before it was revealed publicly, members of the Sierra Club, et al., were likely clueless that Putin and the Russians had been funding their anti-fracking initiatives. 

Russian gas exports to Europe are at record levels.

Bloomberg: 

Russia is working to keep natural gas exports to Europe near record levels in 2018 after the continent’s biggest supplier, Gazprom said its deliveries this year signal it is achieving on its ambitions to expand. The state-controlled gas giant plans to ship a minimum of 180 billion cubic meters next year, Deputy Chief Executive Officer Alexander Medvedev said in an interview in St. Petersburg. That volume would be the second highest ever after at least 190 billion cubic meters expected this year, which is a record. 

Gazprom meets more than a third of Europe’s demand for natural gas, Russia’s biggest and most lucrative market worth some $37 billion in revenue this year. Tighter trade links with the Kremlin-backed company contrast with increasing tensions on the military and political front.

source Gazprom

 

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US shale gas arrives in Scotland today

September 27, 2016

The SNP’s idiotic environmental policies means that Scotland has to import shale gas from the US even though there is plenty available locally. North Sea revenues for Scotland have collapsed and Scottish energy policy is a self-inflicted wound. In Europe generally, it is misguided, meaningless, environmental constraints on energy policies which have been a major contributor to holding back the economic recovery.

The low oil price in 2016 has effectively postponed any new independence referendum for a few years to come. Without North Sea revenues Scotland – if it wants to be an independent EU country – would be the “poor man of Europe” for 2 decades.

Image result for Scotland north sea revenue collapse

graphic: market oracle

BBC: 

The first shipment of US shale gas is arriving in Scotland amid a fierce debate about the future of fracking in the UK.

A tanker carrying 27,500m3 of ethane from US shale fields is due to dock at Grangemouth, the refinery and petrochemicals plant owned by Ineos.

The company said the gas would replace dwindling North Sea supplies and secure the future of the plant’s workforce.

 

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Saudi Arabia seeks bank loans for first time in a decade

March 9, 2016

I am still of the opinion that the oil price war that Saudi Arabia has been waging against shale oil, Russia and Iran, was misguided and due primarily to a geopolitical machismo that was grossly overestimated. It was misguided because shale fracking is not a technology that is going to go away. In the short term some of the more expensive shale wells may close, but they can very soon start up again. But more importantly, shale gas and oil are available all over the world. They just haven’t been developed yet. And those that don’t have access to shale – like Japan – will have access to gas from methane hydrates within a decade. And there is more gas available from methane hydrate than from shale which, in turn, is more gas than all the natural gas resources known.

In the long run I expect the Saudis to be the losers. Their budget deficit climbed to approach $100 billion last year and now, for the first time in a decade, they are looking to borrow.

Reuters: 

Saudi Arabia is seeking a bank loan of between $6 billion and $8 billion, sources familiar with the matter told Reuters, in what would be the first significant foreign borrowing by the kingdom’s government for over a decade.

Riyadh has asked lenders to submit proposals to extend it a five-year U.S. dollar loan of that size, with an option to increase it, the sources said, to help plug a record budget deficit caused by low oil prices.

The sources declined to be named because the matter is not public. …

The kingdom’s budget deficit reached nearly $100 billion last year. The government is currently bridging the gap by drawing down its massive store of foreign assets and issuing domestic bonds. But the assets will only last a few more years at their current rate of decline, while the bond issues have started to strain liquidity in the banking system. …….. 

…… Analysts say sovereign borrowing by the six wealthy Gulf Arab oil exporters could total $20 billion or more in 2016 – a big shift from years past, when the region had a surfeit of funds and was lending to the rest of the world.

All of the six states have either launched borrowing programs in response to low oil prices or are laying plans to do so. With money becoming scarcer at home, Gulf companies are also expected to borrow more from abroad.

In mid-February, Standard & Poor’s cut Saudi Arabia’s long-term sovereign credit rating by two notches to A-minus. The world’s other two major rating agencies still have much higher assessments of Riyadh, but last week Moody’s Investors Service put Saudi Arabia on review for a possible downgrade. ……. 

The pricing of the loan is likely to be benchmarked against international loans taken out by the governments of Qatar and Oman in the last few months, according to bankers. Because of banks’ concern about the Gulf region’s ability to cope with an era of cheap oil, those two loans took considerable time to arrange and the pricing was raised during that period.

Oman’s $1 billion loan was ultimately priced at 120 basis points over the London interbank offered rate (Libor), while Qatar’s $5.5 billion loan was priced at 110 bps over, with both concluded in January.

 

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Time to invest in fossil fuels as China discovers vast new reserves

April 21, 2015

There is a campaign in the western “do-gooding” and deluded “green” community (exemplified by The Guardian) to pressurise investors to disinvest from fossil fuels. Fortunately there is no shortage of investors in Asia who would be only too happy to see the European financial institutions and pension funds selling off their shares in oil, shale and coal producing and using companies. There are few better investments than snapping up artificially depressed energy shares. I am watching closely to pick up any bargains that might appear if this campaign has any impact. So far it has had little effect.

In the 1970s and 1980s the alarmist view was that coal, oil and gas would run out catastrophically. Now that peak-oil and peak-gas have been pushed out into the indeterminate future and further new shale reserves are found, the alarmism has shifted to the use of these resources being catastrophic! The campaign itself is rather idiotic (“leave it in the ground”) and counter-productive, since any success can only shift ownership of energy companies eastwards. Supposedly – but misguidedly – it is about climate but the campaign has no measurable or relevant objectives. (Note that no “climate policy”  ever has a climate parameter as an objective and which can be measured.) It will certainly not reduce the consumption of fossil fuels at all – which will instead continue to grow as developing countries develop. In fact the competitiveness of the fossil fuel using countries will be further emphasised as the “do-gooding” countries entrap themselves into a very high-cost electricity production regime based on intermittent solar and wind energy. (It is worth noting that Germany which has installed more renewable energy than any other European country now has an electricity cost which is the highest in Europe and more than twice that of the US. And yet Germany burned more coal last year than they have ever done! The German Energiwende has been a fiasco for all other than those who have milked the subsidies available)

There is – again fortunately – no prospect of India, China and other developing countries in Asia and Africa reducing their use of all the fossil fuels they have available. If I could I would be investing directly in coal and oil and natural gas and shale gas in India and China and Indonesia. At present I must satisfy myself with some indirect investment.

History will be contemptuous of the irrational demonisation of fossil fuels by the alarmists and the “do-gooders” during the late 20th and early 21st century.

Xinhua reports:

China continued to be increasingly successful at discovering crude oil and natural gas reserves last year, new data from the Ministry of Land and Resources indicated on Thursday.

The country discovered nearly 1.06 billion tonnes of new crude oil deposits in 2014, up from 1.1 billion tonnes the previous year, marking a stable increase and the eighth consecutive year in which the amount discovered surpassed 1 billion tonnes. More than 1.1 trillion cubic meters of new natural gas reserves were also discovered in 2014, a record high.

Of the new discoveries, 187 million tonnes of oil and 474.9 billion cubic meters of natural gas can be exploited with current technology, according to the ministry.

New shale gas reserves discovered amount to 106.75 billion cubic meters, with 26.69 billion exploitable.

This is the first time that proven reserves of shale gas have been publicized since the Chinese government approved the listing of shale gas as an independent mineral resource in 2011.

Discoveries of coal-bed methane, an unconventional gas, amounted to 60.2 billion cubic meters, up 155.3 percent year on year.

shale basins China (The Diplomat)

shale basins China (The Diplomat)

The Indian sub-continent too has large shale reserves waiting to be exploited. The shale basins extend into Pakistan and Bangladesh and offers Pakistan the possibility of actually becoming self-sufficient for energy.

shale gas basins India

shale gas basins India

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Shale gas in Europe worries Putin

October 25, 2014

It might seem counter-intuitive for Russia to be against the advent and development of shale gas in Europe since they themselves have huge quantities of oil and gas bearing shale in Siberia. But Russia has a very large investment in conventional natural gas production and pipelines (through Gazprom) which must be protected and nurtured. Putin needs to ensure revenues and that exports of conventional natural gas gives them a reasonable return on the investment before moving onto shale gas. About 30% of Europe’s gas comes from Russia. Russia needs Europe to go slow with its own shale gas production and to continue buying Russian gas at reasonably high prices for as long as possible. So much so that Russia has even been supporting anti-fracking groups in Europe. (It is a little ironic when the European anti-fracking alarmists take well disguised Russian funds and play into Russian hands).

The MotleyFool: Now there are accusations that Russia is working hard to keep Europe dependent on its gas supplies. According to Nato chief Anders Fogh Rasmussen, Russia is doing this by funding anti-fracking groups. That’s something that some of the larger groups deny, but it would be hard to suss out where all of their donations come from in the anti-fracking movement.

There are good reasons for Russia to undertake such a covert operation. For starters, Gazprom would suffer greatly if its European business started to slip away. Second, by keeping Europe hooked on Gazprom gas, Russia maintains a strong bargaining position in world politics.

That, however, just gives the United States more reason to come to the aid of its European allies. Right now, the export of U.S. natural gas is severely limited. With the combination of horizontal drilling and hydraulic fracturing (fracking) in the U.S., however, the flow of gas has outstripped demand and pushed U.S. domestic gas prices to record low levels.

While being able to sell natural gas to Europe would be a huge win for Europe politically and U.S. gas drillers financially, it would also be a big win for pipeline operators like Kinder Morgan (NYSE: KMI  ) . Moving natural gas from where it’s drilled to where it’s used made up roughly 50% of Kinder Morgan’s business last year. The business isn’t about natural gas prices, either; it’s about providing a service. CEO Richard Kinder describes it this way: “We operate like a giant toll road.” So, if natural gas starts going overseas, Kinder Morgan will be involved in the process and make money doing it.

The possibility of surplus shale gas from the US entering Europe and depressing sales of Russian natural gas is a nightmare economic scenario for Vladimir Putin. Even the recent drop in oil prices has seriously unbalanced the Russian budget which needs an oil price of over $100 to be in balance.

Putin takes part in final session of 11th Valdai International Discussion Club meeting

Putin at the 11th Valdai International Discussion Club meeting in Sochi

Putin is clearly worried. Russian President Vladimir Putin took part at the plenary session of the Valdai International Discussion Club in Sochi. He talked up the risks with US shale gas to Europe and talking up the benefits of Russian gas.

Tass: Putin: Europe’s transition to American shale gas will be suicidal for EU economies

Russian President Vladimir Putin believes that transition to shale gas will be suicidal for the EU economies. In his speech at the Valdai discussion club on Friday, Putin said that Russia’s trade turnover with the European Union stood at 260 billion dollars in the first half of 2014 even despite sanctions. He assumed, however, that the trade volumes could fall if Russia stopped all gas and oil supplies to Europe.

“We assume that it can happen at the will of our partners in Europe. But it’s hard to imagine,” Putin said, explaining that alternatives to Russian gas and oil supplies were worse.

It is either the crisis-hit Middle East where the “Islamic State” militants have stepped their operations or deliveries of shale gas and shale oil from the United States.

“We can imagine that /deliveries/ of shale oil and shale gas from the United States are possible. But how much it will cost?” Putin asked.

“This is going to be a direct way to reducing their own competitive ability because it is going to be more expensive than our pipe gas or oil delivered from deposits in Russia,” the Russian president went on to say.

“They are simply going to kill their competitive ability. What kind of a colony Europe should be to agree to this option. But I believe that common sense will prevail. The same is true of Asia,” Putin said in conclusion.

For very many reasons the very best thing that Europe (and Asia) could do would be to expedite the production of their own shale gas. It would bring down energy prices, stimulate growth, increase jobs, increase independence from Russia, increase exports, increase competitiveness against the US and consolidate energy intensive industries which are moving out. But this would have to overcome the opposition of the alarmist, European green parties who have a remarkable facility for being counter-productive.

Opposing the development of shale gas in Europe gives Russia the edge on the geopolitical playing field.

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US shale oil boom visible from space

October 21, 2014

The drop in oil prices continues though somewhat slowed down by Chinese import demand:

WSJ: U.S. and global crude benchmarks ended lower Monday amid choppy trading and concerns that member nations of the Organization of the Petroleum Exporting Countries will maintain high production levels in a bid to compete for market share despite growing global crude supplies.

The current drop in oil prices is put down to a glut on the market caused by the boom in shale oil production in the US and the slow-down in the global economy.

The boom in shale oil production is even visible from space.

Satellite Images Reveal How the U.S. Oil Boom Is Creating New Cities

bakken shale field shows up from space Image NASA/io9

io9: This image from NASA reveals a massive cluster of lights in what was — until recently — desolate prairie. This is the Bakken Shale, an oil-rich rock formation stretching across parts of North Dakota, Montana and Canada. The lights are from the illuminated derricks, local boomtowns and gas flares of the oil fields.

Misguided alarmists who have demonised fossil fuels don’t like this. But I find the picture and the visibility of the shale production greatly encouraging. Carbon dioxide has no significant deleterious impact on climate and the availability of fossil energy is what will ensure continued human development.

The Bakken Shale field is a vast resource across Montana, North Dakota, Sasketchewan and Manitoba and a significant contributor to the game changing advent of shale oil and shale gas.

The Bakken Shale ranks as one of the largest oil developments in the U.S. in the past 40 years. The play has single-handedly driven North Dakota’s oil production to levels four times higher than previous peaks in the 1980s. As of 2012, ND is second to Texas in terms of oil production and boasts the lowest unemployment rate in the country at ~3%.

The Bakken Shale Play is located in Eastern Montana and Western North Dakota, as well as parts of Saskatchewan and Manitoba in the Williston Basin. Oil was initially discovered in the Bakken play in 1951, but was not commercial on a large scale until the past ten years.

… The Bakken is estimated to hold as much as 400 billion barrels of oil equivalent in place.

US shale fields map EIA

 

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Can consumer countries fuel global growth with sharply reduced oil prices?

October 20, 2014

Oil prices have “crashed”.

Currently prices are at less than $80 per barrel compared to over $110 in June and the peak of $147 just before the financial bubble burst in 2008. It seems that it is due to the oil glut brought about by the shale oil revolution in the US together with a downturn in global growth. The $147 peak was, I think, more of a trial balloon by the oil producers to test where the resistance lay and the producers concluded that a level of a little over $100 would maximise profits and was sustainable. But I suspect that this $100 level itself has contributed to delaying and prolonging the recovery. Not only because of the increased direct costs to the oil consumer but also due to its knock-on effects which have unnecessarily raised the cost to all electricity consumers. The prolongation of the path to recovery in Europe is certainly – if only partly – due to the very high energy prices that prevail. But right now it is the abundance of shale oil and gas which seems dominant.

Bloomberg: But the bigger factor appears to be surging global oil production, which outpaced demand last year and is shaping up to do so again in 2014. To try to keep prices high, Saudi Arabia, the world’s biggest petroleum exporter, has reduced its oil production from 10 million barrels a day—a record high—in September 2013 to 9.6 million as of Sept. 30. That hasn’t done much to raise prices, mostly because other OPEC countries are pumping more crude as the Saudis try to slow down. Sharply higher production increases from Libya and Angola, along with surprisingly steady flows out of war-torn Iraq, have pushed OPEC’s total output to almost 31 million barrels a day, its highest level this year and 352,000 barrels a day higher than last September. Combined with the continued increase in U.S. oil production, the world has more than enough oil to satisfy current demand.

crude oil price history 2000-2014

crude oil price history 2000-2014

But this crash in oil prices is probably a “good thing”.

The additional revenues from increasing oil price to the few in the oil producing countries have not been sufficient to counter the hit to the many in the consuming countries. Much of the additional revenue has gone not to fuelling growth but in blowing up new real-estate bubbles.

The additional spending power in consumer countries with reducing oil price is spread among the many (at the lower end of the wealth scale) whereas the reduction in producer oil revenues is generally spread among an affluent few. My contention is that the additional revenues with high oil price in – for example –  the Middle East does not need to be spent on real things which could fuel growth. Revenues in Saudi Arabia and Qatar and other countries have fuelled bubbles and jihad instead of just growth. A great deal went instead into very high margin, weapons systems and to the imaginary values of real estate. In Russia the oil revenue did contribute to some growth but there was still a large proportion spent on imaginary values of various bubbles (which by definition cannot contribute to growth). My simple calculation tells me that 1000 people buying washing machines in China contribute more to global growth than one person spending the same amount on an apartment (his second or third home) in London. A $10 drop in oil price is said to shift 0.5% GDP growth from producer countries to consumer countries. But the pattern of consumption where the “few” fuel the bubbles of imaginary value while the “many” consume mundane goods and services means that the real effect on growth is greater than a net zero. It is shifting an ineffective 0.5% to a more efficient consumption for growth. The net effect is probably a growth in global GDP of 0.2 – 0.3%. Similarly the purchase of large-volume, low-margin goods and services provides more growth and jobs than spending the same amount on low-volume, high margin goods and services. Spending $1000 on an 80% margin Gucci handbag provides less direct growth and fewer direct jobs than buying ten $100, 10% margin travel bags.

Historically – though it is a relatively crude generalisation – low oil price has usually given – or coincided with – consumer-led growth and stability.

crude oil price history 1970-2014

crude oil price history 1970-2014

Some oil producers are more vulnerable than others to the fall in expected revenues. Russia’s budget needs an oil price of over $100 to be balanced. Venezuela spends nearly all of its revenues as it is generated and has nothing put by. The war-torn areas of the Middle East also have nothing put by. Saudi Arabia and the Gulf States have put by vast reserves though some of it is in “bubble” values. A pricking of some of the bubbles they have inflated is probably no bad thing. It is also no bad thing if they have to fall back on reserves and have less excess cash to fund jihadists from Afghanistan to Libya.

Most Asian countries are oil importers and gain from a low oil price.

Clarion Ledger: The picture is reversed in Asia, where most countries are major importers and some subsidize the price of fuels.

China is the second-largest oil consumer and on track to become the largest net importer of oil. Falling prices will provide China’s economy some relief, according to Huang Bingjie, professor from the School of Economics and Management at China University of Petroleum. But lower oil prices won’t fully offset the far wider effects of a slowing economy.

India imports three-quarters of its oil and analysts say falling oil prices will ease the country’s chronic current account deficit. Samiran Chakraborty, head of research in India for Standard Chartered Bank, also says the cost of India’s fuel subsidies would fall by $2.5 billion during its current fiscal year if oil prices stay low.

Japan imports nearly all of the oil it uses. Following the accident at the Fukushima Dai-Ichi nuclear power plant in 2011, Japan has turned more to oil and natural gas, which is priced based on oil, to generate electric power.

The picture is a little more mixed in the Americas and Europe:

Low prices could eventually threaten the boom in oil production in such countries as the U.S., Canada, and Brazil because that oil is expensive to produce. Investors have dumped shares of energy companies in recent weeks, helping to drag global stock markets lower.

For now, lower crude oil and fuel prices are a boon for consumers. In the U.S., still the world’s biggest oil user, consumer spending accounts for two-thirds of the U.S. economy, and lower energy prices give consumers more money to spend on things other than fuel.

The same is true in Europe. Christian Schulz, senior economist at Berenberg Bank, says that a 10 percent fall in oil prices would lead to a 0.1 percent increase in economic output. That’s meaningful because the 18-country currency union didn’t grow at all in the second quarter.

There could be another market crash coming though it is not likely to be as deep as the 2008 crash. But to get back onto a solid, sustainable growth path again it does need the oil consumer countries to grow. And that probably needs a steady oil price at less than $70 per barrel. The oil producer countries will have to revamp their economies to live with the loss of their monopoly as the production of oil from shale spreads.

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Drinking water contamination caused by weak water wells and not by fracking

September 16, 2014

It is fashionable for environmentalists to blame fracking for all manner of evils as a matter of faith. They have proclaimed that fracking causes earthquakes, water table contamination, emission of dangerous gases, damage to house price levels and even damage to crops. Such claims are usually based on no evidence whatsoever but presented as gospel.

A new paper published in PNAS reports on real experimental measurements (not just a computer model) using noble gases to trace methane leakage into drinking water in 130 water wells in Pennsylvania and Texas. They find that drinking water contamination was caused by weak walls and well construction faults and not by fracking.

TH Darrah et al, Noble gases identify the mechanisms of fugitive gas contamination in drinking-water wells overlying the Marcellus and Barnett Shales, PNAS September 15, 2014, doi:10.1073/pnas.1322107111

Significance

Hydrocarbon production from unconventional sources is growing rapidly, accompanied by concerns about drinking-water contamination and other environmental risks. Using noble gas and hydrocarbon tracers, we distinguish natural sources of methane from anthropogenic contamination and evaluate the mechanisms that cause elevated hydrocarbon concentrations in drinking water near natural-gas wells. We document fugitive gases in eight clusters of domestic water wells overlying the Marcellus and Barnett Shales, including declining water quality through time over the Barnett. Gas geochemistry data implicate leaks through annulus cement (four cases), production casings (three cases), and underground well failure (one case) rather than gas migration induced by hydraulic fracturing deep underground. Determining the mechanisms of contamination will improve the safety and economics of shale-gas extraction.

A key source of groundwater contamination (labeled 5, center right) caused by faulty well casings. Credit: Image courtesy of Thomas Darrah, The Ohio State University

Press Release:

….  neither horizontal drilling nor hydraulic fracturing of shale deposits seems to have caused any of the natural gas contamination.

“There is no question that in many instances elevated levels of natural gas are naturally occurring, but in a subset of cases, there is also clear evidence that there were human causes for the contamination,” said study leader Thomas Darrah, assistant professor of earth sciences at Ohio State. “However our data suggests that where contamination occurs, it was caused by poor casing and cementing in the wells,” Darrah said.

In hydraulic fracturing, water is pumped underground to break up shale at a depth far below the water table, he explained. The long vertical pipes that carry the resulting gas upward are encircled in cement to keep the natural gas from leaking out along the well. The study suggests that natural gas that has leaked into aquifers is the result of failures in the cement used in the well.

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The end of the road for the large Alstom gas turbines?

July 7, 2014

(corrected February 2015)

The large (>50MW) Alstom gas turbines (GT11N2, GT13E2, GT24 and GT26) represent a line of technology which derives mainly from the BBC range of products (developed further as ABB) and acquired by Alstom in 1999. At that time Alstom’s licence with GE came to an end. But as GEC-Alsthom, Alstom had also inherited the gas turbine technology which came out of GEC in the UK. In the current Alstom range not much remains of the GEC tradition. At the smaller end Alstom also once had the gas turbine technology of the Ruston engines from Lincoln and acquired the ABB range of small machines (which themselves carried forward the developments as ASEA and some of the Sulzer range). But the entire range of industrial (<50MW) gas turbines was divested to Siemens in 2003 (and they are doing very well there).

Now as GE takes over Alstom’s power business (which has still to get final regulatory approval but looks to be a done deal), the days of the Alstom range of large gas turbines are strictly numbered. GE (and Siemens) have their own machines competing directly with the GT24 (60Hz) and GT26 (50Hz) and I do not expect that any more of these machines will ever be sold again. The sequential combustion design concept that these machines employ is so far from the GE approach that it seems impossible for any versions of these machines to continue. Alstom (as ABB) had adopted sequential combustion in the late 1990’s firstly to differentiate themselves from GE and Siemens and to get over their lack of access to advanced, high-temperature materials coming out of military jet engine programmes. Sequential combustion was first used/tested by BBC in the 1960’s 1948* though at much lower temperatures and ABB was trying to create a virtue out of a disadvantage – which the GT24 and GT26 did eventually do, but not without great problems and great cost.

GE may well have some benefit from some of the component solutions that Alstom has been forced to develop – at great expense – to get over the challenges posed by sequential combustion. Similarly some of the low-NOx solutions developed by Alstom could possibly be of use for GE. There may be some tricks for GE to pick-up regarding compressors. Certainly GE will continue with the very lucrative service market in maintaining the Alstom fleet and this will continue for perhaps 10 or 12 years at most. So while GE will benefit from the service revenue and by the reach of Alstom’s global sales organisation, the GT24 and GT26 – as products – have very little benefit to offer. It will not be possible for GE to absorb all the manpower currently employed with Alstom’s gas turbines. Not all those currently involved with the design and manufacture of the GT24 and GT26 will be needed for – or be able to switch over to – the design and manufacture of the GE range. GE’s global procurement network and its qualification of sub-suppliers is probably much more advanced than Alstom’s. I don’t expect that GE’s global sourcing will be much enhanced by the acquisition of Alstom’s Power business. Some job losses at Alstom locations are inevitable and I suspect these will be mainly in Switzerland while jobs in France will be somewhat protected by GE’s promises to the French government. At Belfort, Alstom produced GE machines under licence till 1999 and no doubt this will become GE’s centre for large gas turbines in Europe.

The GT11N2 gas turbine will probably die a natural death. It has not been a really competitive machine for over a decade and even though it has gone through many upgrades and cost reduction exercises, It has some unique advantages with low-Btu fuels but I do not think it offers GE any great advantages and they already have competing machines. The GT11N2 may have survived a little longer within the more restricted Siemens stable but even here it would have eventually withered.

The GT13E2 is possibly the only machine that may survive for a while under GE. It has some unique advantages with low-Btu fuels and could have a geographical market niche in Russia and the former CIS countries. But if it does survive it will do so only as a niche product. Again it would probably have had a longer life under Siemens but my guess is that it will not be sold for more than another 2 or 3 years.

The next market boom for large gas turbines – by my analysis – will come in the second half of 2015. This will be due partly to the 7-8 year “normal” business cycle and partly due to, and reinforced by, the advent of shale gas. And when that boom comes, the Alstom machines will be absent and there will be one less gas turbine technology available in the world. GE, Siemens and MHI will be the only three technologies left and they will be the main beneficiaries. But just three technologies are not enough. A growing market together with a dearth of technology suppliers will probably ensure the entry of another player into the field of large gas turbines.

(Actually Siemens and MHI get the best return at the lowest cost. They gain increased market space as Alstom’s machines disappear at no cost to themselves. GE gains no new products, gets the same increased market space and gets increased service revenue for Alstom machines. But GE has a large cost of acquisition and a great deal of hassle – and cost – to come as they restructure and integrate the Alstom business).

I would guess that this fourth player could well be Shanghai Electric with their newly acquired 40% stake in Ansaldo Energia. This has been something of a coup for Shanghai Electric. Doosan were also eyeing Ansaldo as a way of entering the gas turbine playing field (the entry barriers are too high for a scratch player). Both Doosan and Siemens had made bids for Ansaldo Energia but Siemens’ bid was essentially a defensive and a spoiling bid and they eventually withdrew. Doosan were the sole remaining bidder but it seems that Shanghai have pipped them at the post for this strategic acquisition.

* Correction – Sequential combustion was first used by BBC at Beznau in 1948, operating on distillate and with a TIT of 575ºC.

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Huge shale deposits confirmed in the South of England

May 23, 2014
Map of the Weald Basin

Shale deposits in South of England and Wales (BBC)

The British Geological Survey (BGS) has now confirmed the huge deposits of oil bearing shale in the South of England . Ironically this comes just days after the BBC also reported on the idiot report by the self-styled Global Sustainability Institute that the UK would run out of oil, coal and gas in 5 years!!!

BBC (23rd May): The BBC’s John Moylan said that although the BGS study will say that there are several billion barrels of oil in place, is not clear how much would be economically recoverable. ….. By way of comparison, the equivalent of around 45 billion barrels of oil has been extracted from the North Sea over the past 40 years.

Last year, a BGS study of the North of England suggested there could be as much as 1,300 trillion cubic feet of gas contained in shale rocks. ….

Andrew Austin, chief executive of the onshore energy IGAS, said it had long been known that southern England had extensive resources.

He told the BBC: “We’ve known that there’s a big potential for oil and gas explorations across the country but particularly in terms of oil in the Weald Basin which is the area that stretches roughly from Winchester across towards Gatwick, up to the M25 and down to the coast at Chichester.

“There’s been a long history of oil and gas exploration in this area. We as a company produce oil and gas from around 20 sites across that area. Around 40 million barrels have been recovered from that area to date.”

In the US, fracking for oil and gas has created an energy boom and led to speculation that the country could overtake Saudi Arabia as the world’s biggest producer by 2020, or even sooner.

Gas prices in the US have fallen sharply as a result, and other countries are now hoping that shale oil and gas could also lead to lower domestic energy prices.

And just a few days ago the BBC chose to present this nonsense.

BBC (16th May): In just over five years Britain will have run out of oil, coal and gas, researchers have warned. …… There should be a “Europe-wide drive” towards wind, tidal, solar and other sources of renewable power, the institute’s Prof Victor Anderson said. ….

……. Professor Anderson said: “Coal, oil and gas resources in Europe are running down and we need alternatives.

“The UK urgently needs to be part of a Europe-wide drive to expand renewable energy sources such as wave, wind, tidal, and solar power.”

However, Jim Skea, Research Councils fellow in UK Energy Strategy. cast doubt on the findings of the report.

He told BBC News: “This sounds very unlikely. What’s more, it’s irrelevant – the UK has a stable supply of imported energy, even if it is a good idea to increase our own supplies.”

The government recently announced it was cutting subsidies for large-scale solar energy and the Conservatives have said there will be no funding for new onshore wind farms if they win the next election.

Ministers are hoping that enough shale gas – extracted by fracking – will be obtained to make a difference, the BBC’s environment analyst Roger Harrabin says.

Professor Victor Anderson is an alarmist economist who used to work for the World Wildlife Fund. But to develop a catastrophe theory and predict that the UK will run out coal, oil and gas in 5 years is just stupidity.

Prior to taking up his current position Professor Anderson had worked as Senior Policy Officer for One Planet Economy at WWF-UK, a Lecturer at Goldsmith’s College, London University, an Economist at the Sustainable Development Commission, a Senior Parliamentary Researcher at Plaid Cymru Group of MPs, Board Member at London Development Agency and an elected Assembly Member at the Greater London Authority. He is also currently a Member of the Planetary Boundaries Initiative Advisory Group.

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