22nd September

‘Sheer lunacy’ to consider fracking in an Irish context

Tom White

After researching the shale gas industry in the US I have come to the conclusion that rather than asking ‘how do we regulate this industry’, we in Ireland should be asking ‘why are we soliciting an industry that is mired in debt?’  Because, if we're not careful, we could end up bailing out the shale gas industry here.

The shale gas industry in the US and elsewhere is facing cash flow issues with many companies spending twice as much as they are making: UK exploration company Cuadrilla has had to raise more cash than anticipated; and Chesapeake — the second largest natural gas producer in the US — is paying over 8% to refinance at a time when interest rates are at historic lows.

This is not a well industry (pardon the pun), and given the grave concerns about environmental damage; risks to public health and threats to a profitable agri-business, tourism and angling industries, it appears sheer lunacy to even consider fracking in an Irish context.

But then addicts — and we are addicted to fossil fuels — often make irrational decisions. Even if one argues there would be an economic benefit, it would be short-lived, as shale gas, being near the bottom of the resource pyramid, is not a revolution but a retirement plan for fossil fuel. The industry admits this, but prefers the term ‘bridge fuel’.

Expensive methodology
With conventional gas, one well alone could theoretically drain a large reservoir of one trillion cubic feet or more; however a number of wells are sunk to allow sufficient gas flow rates. With shale gas, the gas trapped in the shale layer has to be released through hydraulic fracturing. This entails drilling many more expensive (horizontal) wells — often up to 1,000 per TCF of gas.

The shale gas industry has really only existed since 2000. It was believed that shale was uniform, but over time it became apparent that there are ‘sweet spots’ and even those are variable. In some ‘plays’ 80% of shale wells are uneconomic.

Industry models predicted well lives of 30-40 years but these are now discredited as shale wells deplete rapidly. The average economic life of a Barnett Shale well is a mere seven years. Last August, the United States Geological Survey (USGS) published figures on predicted gas production per well in all US shale ‘plays’ which showed large variance with industry estimates.

Cost analysis
Analysing Tamboran's business model in light of the USGS findings and applying appropriate costs as per recent EU reports would entail drilling 1,100 wells to produce one TCF of gas at a cost of  €12.1 - 18.7bn ($US15.5 - 23.8bn).

Gas is trading at approximately $US10bn/TCF in Europe. To be profitable, Lough Allen gas would have to trade at around $US20bn - 30bn/TCF. At these prices renewables are competitive. The US experience has shown that even with lax regulation or even no regulation at all; financial incentives; extensive infrastructure; a skilled workforce and landowners willing to lease land, shale gas is not profitable.
What chance has this industry of producing a profit in Ireland?
A non-profitable industry will have difficulty adhering to regulations and might even leave the taxpayer to underwrite any environmental damage. It raises the risk of abandonment.

Imagine the consequences of starting a project like this and it failing halfway. Irish taxpayers are already bailing out the banks. They would be unable to bail out a gas industry and pay fines for pollution and clean up costs.

The country would also risk greatly reduced income from tourism, and losing hard-won market share in the agri-food business. Most importantly, shale gas would compete for funds for the new renewable energy infrastructure that even the shale gas industry says is where we want to be and which is vital to future economic prosperity.

Tom White is a telecommunications professional who returned to the area after working abroad, and counts economics, cycling, local history and genealogy among his interests

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