One thing shale gas hasn't been short of are adjectives: game changing, disruptive, paradigm shifting and revolutionary are only four.
It's only natural to be cautious, but it's counter-productive to be cynical. Publications like Petroleum Economist naturally hold to the side of caution. It means a lot when they see the global implications of shale in both a systemic and planetary sense.
The oil industry and free markets may yet accomplish what politicians at Copenhagen couldn't – by making the world a gassier place.
There are robust environmental, strategic and economic reasons to reduce oil consumption. Assuming it's replaced by a less carbon-intensive alternative, it would reduce carbon-dioxide pollution. For importers, lowering oil consumption usually means reducing reliance on other countries; the US, where plenty of energy savings are to be had, is forthright in its desire to reduce its dependency on foreign oil suppliers to improve its energy security. Doing so would also strengthen its economy.
The PE leader follows what has been happening over the past six months with stunning speed. Oil & Gas is so 20th century.Today it's either Energy companies or Gas and Oil, reflecting the change from an era where gas was either afterthought or inconvenient by-product to the main menu item. Obviously the shale "seismic transition" has a lot to do with that, but it's not only about supply. Oil demand, in common with gas and power markets , despite the fervent hopes of Peak Oil conspiracy/catastrophe theorists, is falling, something NHO has pointed out from day one.
An oil-demand peak in the OECD is a compelling theory for two reasons. First, it is likely that a strong, sustained price signal encouraging conservation and alternative energy will prevail. Second, a realistic alternative – unconventional gas – has been established (ironically thanks to persistently high oil prices), presenting consumers with an attractive opportunity to cut carbon emissions and oil imports.
But there's always got be someone to whinge, and in keeping with stereotype, it has to be a Pom.
John Dizard, occasional FT contributor, appears to be one of life's natural conservatives: any change at all is a change for the worse. Tuesday is awful, quite simply because it's not Monday.
The shale gas religion crosses the usual political boundaries. The environmentalist wing believes that shale gas can displace dirty, coal-fired generation. Liberals believe it will help power the clean energy policy. National security conservatives believe shale gas can end dependence on Middle Eastern or Venezuelan oil. Economic conservatives believe it can close the current account deficit, and drive an economic recovery, at least until even more nuclear power can come on line.
There are environmentalists, rural landowners and health advocates who worry that shale drilling could contaminate water supplies. Most of them, though, want to have more careful regulation, rather than prohibition, of shale gas exploitation.
The point seems to be that if so many people are in favour of it, it must be wrong. Skepticism, caution and cussedness are all just fine. The issue here seems to be that simply because gas has become the new conventional wisdom, it's right to attack it. It's an interesting point, and someone has to do it. It doesn't necessarily make it right.
I think it might not be a bad idea to examine the faith-based assumption that the US has a virtually unlimited supply of natural gas from shale formations that can be extracted at a low price for the indefinite future. Perhaps the few people who think shale gas will be produced at a higher cost, and more slowly, than generally believed should be heard out, rather than be executed or sentenced to work in the salt mines.
No one is proposing transports to the east for shale-gas deniers. Just market solutions. The market will choose winners, and markets are not necessarily democracies or popularity contests. But to support his theory Dizard puts forward one analyst who doesn't hold with shale. Maybe he's right, but to be polite the odds are against him.
Ben Dell of Bernstein Research in New York who has, so to speak, done some of the deepest drilling into the shale gas industry numbers, believes that the full cost of finding, developing, and operating shale gas wells , and paying an average return on capital to investors, requires a spot gas price of $7.50 to $8 a thousand cu ft.
As Mr Dell points out, the horizontal drilling rigs that are needed to drill shale gas wells are in relatively short supply. "We think there will be a 15 per cent to 20 per cent increase in costs from last year to this year. That includes the costs of drilling and fracking [hydraulic fracturing of rock layers holding gas]."
No word on Arthur Berman, who must be labouring in the salt mines somewhere, possibly converting them to gas storage.
Dizard seems to have more of a problem with shale's prices than the actual concept. Let's say for example that he's right and shale requires a $8MMBTU gas price.
So what? Coal Carbon Capture and Storage and Nuclear are still far more expensive. Oil is about the same. So are we talking about whether shale gas will solve the carbon issue or are we just haggling over the price?