Well-intentioned environmental policies based on misconceptions about energy and the technologies that bring it to market can have counterintuitive consequences, says a nationally known geologist.

Scott W. Tinker, director of the Bureau of Economic Geology at the University of Texas, was speaking about environmental policies in Germany, which recently imposed a moratorium on hydraulic fracturing and the construction of new nuclear energy facilities.

The combination of those two policies has had unintended consequences for the environment in Europe. Germany’s base of renewable energy is limited, leaving the country little alternative to an increased consumption of coal. Germany’s consumption of dirty lignite coal has risen during the past two years as the country searches for alternative sources of energy. As a result of these policies, emissions of carbon dioxide have increased as a result.

“If you don’t like fracing and you don’t like nukes, you’ve got to like coal,” he said at a recent lunch sponsored by the World Affairs council and PwC. The topic of the lunch was “A Global View of Shale.”

Tinker led a panel discussion on the availability of shale across the globe and the potential effects on economic growth worldwide.

He called shale the most abundant sedimentary rock in the world. While common, its mineralogy is complex. It is the source rock for most of the world’s oil and gas supplies found in conventional reservoirs. Until recently, oil and gas companies lacked the technologies to develop it economically, Tinker said.

“We always knew there was oil and gas in shale. We just never thought we could produce it economically,” he said.

Shale is a very compact rock with tight pores, with holes measured in terms of a few molecules. As a result of its tight formation, oil does not flow out of it like it would from a conventional reservoir.

The ongoing improvements in horizontal drilling and advanced hydraulic fracturing techniques led to a series of technological advances that made the development of shale reservoirs economically feasible for the first time, he said.

Although the new techniques have the potential to bring new supplies to market, not every company that rushes into the shale boom will make money. Tinker said the world’s shales are a little like children: They have a common gene pool, but behave very differently. Furthermore, not every shale will contain hydrocarbons that can be economically developed.

Looking at shale formations around the world, Tinker said there are factors that make all of them different, each with their own unique set of geological challenges. The shales have a range of total organic content, depth and pressure. Each has its own set of challenges above ground and not all of them are equally susceptible to hydraulic fracturing.

Outside the U.S., the rights to the minerals are not held privately, which means the landowner often has no incentive to see hydrocarbons flowing out of the subsurface.

If shales could be developed on a regular basis outside the U.S., it could have a profound effect on world economies, another panelist said at the luncheon.

Adam Lyons, director of PwC and co-author of Shale Oil—The Next Energy Revolution, said the shale revolution has had some unexpected consequences on world economies. In other cases, those potential changes have not yet occurred.

Lyons modeled the world’s shale supplies and estimated that it could boost world oil production between 12% and 14%, an increase that would have a clear and downward effect on world oil prices.

In short, the extra supply would push prices down, lower cost of energy, lower cost of economic production for most of the world’s economies and ultimately put a few hundred dollars in everyone’s pocket.

Comments