ENERGY: by Jeffry Babb News Weekly
US shale gas will change the world
, July 21, 2012
Energy self-sufficiency has been the holy grail of United States energy policy for decades and, according to experts, the US will soon be a net energy exporter. Indeed, it may have already happened.
The reason for this is that the process popularly known as “fracking” — more properly, hydraulic fracturing — is liberating natural gas and oil in such abundance that the US will soon be a net exporter of natural gas.
Two gas terminals in the southern US state of Louisiana are being converted from accepting natural gas to exporting natural gas — at a cost of $6 billion each.
Natural gas in the US used to sell for $15 per thousand cubic feet. Today, it costs $2.
The most immediate effect has been to cut the cost of heating to homes. The US federal government estimates that home heating bills in 2012 will be 25 per cent below what they were in 2008.
Natural gas has also had a huge impact on the cost of electricity. One expert estimates the cost of generating electricity is half what it was a few years ago.
According to petroleum giant Exxon, “an increasing amount of electricity will be generated by natural gas, which will pass coal as the world’s second-largest fuel source, behind crude oil, by 2025”.
Geologists had always known there was gas trapped deep underground in shale formations, but they didn’t know how to get it out. As well as gas, the fluids that are associated with the shale gas make some of the gas “wet”. These liquids are highly prized, because they can be converted into high-value products such as petrol.
Natural gas also serves as a feedstock for petrochemicals and fertilisers, which means these industries are suddenly competitive in the global market. For the first time in many years, catalytic crackers are being constructed to take advantage of these bargain-basement raw materials.
The construction bonanza is putting tradesmen back to work in places like Pennsylvania, site of the first modern oil boom, where people despaired that jobs had gone to China forever.
In fact, jobs are starting to come back from China to take advantage of the benefits of civilised government, the rule of law, skilled workers and low energy prices.
Americans are making things again.
The normally staid Citigroup commented in its “Energy 2020” study that fracking portends nothing less than the “potential re-industrialisation of the US economy”. Other experts predict that by 2020, if not sooner, the US will be self-sufficient in petroleum products. Citigroup estimates that the new energy boom will lift real US GDP by 2.0 to 3.3 per cent.
For the benefits of shale gas, we can thank George Mitchell, a Texas wildcatter who was determined to get it to the surface.
New York-based commentator Abby W. Schachter has reported how the process got underway: “Mitchell and his team discovered that by combining a traditional vertical well with horizontal fracturing of the rock, engineers could extract gas that had been trapped in the Barnett Shale in North Texas.
“After 10 years of trial and error, Mitchell sold his Barnett ‘play’ for $3.5 billion in 2002, by which time his gas field had become one of the most productive in the country. The fracking revolution had begun.” (Commentary, June 2012).
Fracking is controversial. The process allegedly causes earthquakes, and the gas is said to pollute groundwater, though this is disputed. The fracking fluid is said to be toxic, though the drillers claim commercial confidentiality over its make-up.
[Editor’s note: It is News Weekly’s policy that Australia’s prime agricultural land should be quarantined from energy extraction processes that involve fracking].
The silliest claim is that the natural gas produces greenhouse gases. Scientists say the greenhouse gases produced by natural gas are five to six times less than the gases produced by coal.
The US has been reliant on unreliable regions for its energy for many years. The anti-war protesters used to say, “What if they gave a war and nobody came?” If the Middle East is no longer a primary locus of US foreign policy, what would happen to Japan, India — and Australia — if the Iranians fired missiles across the Strait of Hormuz and the US Navy didn’t come?
Strategic thinkers in Asia and beyond are already beginning to consider these scenarios.
And what about Israel? If the US cannot be relied upon as a guarantor of peace in the Middle East, where does that leave Israel?
Israel’s PM Benjamin Netanyahu was the only leader to say that the fall of Egypt’s Hosni Mubarak was a disaster, and he was right. The US State Department’s call for a Middle East “re-set” following the ludicrously misnamed “Arab Spring” is now being exposed for the strategic nonsense it always was.
If the US has no fundamental interests at stake in the Middle East, we won’t be seeing US boots on the ground prosecuting unpopular wars again for a very long time.