THE CARBON WAR

58
The Winning of The Carbon War
Caroline’s main motivation for protesting at Balcombe. Or I could major on
the increasingly clear downsides of fracking for drinking water quality. Or
I could talk about the ruinous economics of the US shale. Or maybe try to
squeeze them all in.
It is the economics that is the fastest-emerging story. Bloomberg has
reported that independent oil and gas companies will this year be spending
$1.50 drilling for every dollar of income from oil and gas sales. This is the
case despite the high-price oil ameliorating the low-price gas in the mix of
hydrocarbons that the companies sell. Even the Oil and Gas Journal, a stalwart
industry defender, has noticed that there might be a problem. They report $35
billion of write-offs in shale investments by 15 of the main drillers, observing
in an editorial that this raises “financial questions”.
How very astute of them. People worried about their pensions being
wasted would have been quite as justified in protesting at Balcombe as Greens
worried about climate change. Maybe that is the point I should make. After all,
much of the rich south of England votes Conservative, and many Conservatives
do not seem able to worry about climate change.
Journalists writing the Financial Times’s Lex Column are now among
those scanning ahead for victims of the potential shale train wreck in the States.
“Are US LNG export terminals the next expensive flop in energy?”, they ask. LNG
stands for liquefied natural gas. Gas has to be liquefied for export by tanker.
Members of Congress are clamouring for faster approval of permits for LNG
terminals so that US natural gas can be sold into global markets. Yet the first
such terminal will not become operational until 2015, at a cost of around $10
billion. Builders of later terminals, still in planning, will have plenty of time in
which to risk stranding their multi-billion dollar investments.
Art Berman, an insider veteran of the US shale saga, a member of the
Transatlantic Energy Security Dialogue, is perhaps the most forthright of the
critics in America. Production from shale is not a revolution, he says, it’s a
retirement party. The truth of the matter is that the industry has to make such
a big deal out of shale because it’s all that it has left. Where does it go once the
shale story is done?
But the industry hype just seems to forge on, seemingly oblivious to all
this evidence, and increasingly damning commentary on it by elements of the
financial and trade press. It is helped in this by geopolitical context. Russia
has seized the Crimea, and Russian-backed rebels are making moves on other
regions of Ukraine. The Republicans are desperate, as a consequence, to deploy
something they call the “oil-and-gas weapon”. US Congress experts have touted