Avoiding diplomatic or central banker obfuscation, when it released yesterday in London and Washington DC its anticipated shale gas report, the International Energy Agency did not mince words:
"The technology and the know-how already exist for unconventional gas to be produced in an environmentally acceptable way," stated the IEA Executive Director Maria van der Hoeven, in the press release accompanying the report.
Ms. van der Hoeven, however, continued: "But if the social and environmental impacts are not addressed properly, there is a very real possibility that public opposition to drilling for shale gas and other types of unconventional gas will halt unconventional gas revolution in its tracks. The industry must win public confidence by demonstrating exemplary performance; governments must ensure that appropriate policies and regulatory regimes are in place."
The full report entitled,"Golden Rules for a Golden Age of Gas," is available here:
http://www.worldenergyoutlook.org/media/weowebsite/2012/goldenrules/WEO2012_GoldenRulesReport.pdf. I was one of the many reviewers of the 143 page report and did participate in an IEA workshop to develop its content. The document has 3 parts: Addressing environmental risks; The Golden Rules Case and its counterpart; and Country and regional outlooks.
At an estimated increase cost of 7% on an $8 million (pages 55-56) well, the IEA proposes 22 Golden Rules (see pages 13-14 and again at pages 42-48)) to address environmental and social risks. These rules would address successfully the potential for air and groundwater pollution. The IEA especially highlights in several parts of the report the need minimizing greenhouse gas emissions "...at the point of production and throughout the entire natural gas supply chain."
The IEA further finds that the technology exists to address all environmental issues "...but a continuous drive from governments and industry to improve performance is required if public confidence is to be maintained or earned."
The Country and regional outlook section starts with the USA and also includes discussion of Canada, Mexico, China, Europe, and Australia. The IEA notes that, during 2010, the USA accounted for 76% of global unconventional gas production; Canada 13%; and the small remainder in Australia and China from mainly coalbed methane wells. The IEA states that China had drilled just 20 shale gas wells as of early 2012.
Actual unconventional gas production remains largely a North American reality, though massive amounts of unconventional gas reserves are found in many parts of the world.
Beyond the 22 Golden Rules to address environmental risks, most of the IEA report is a modeling exercise of 2 cases, with differing assumptions. While the modeling is fun for policy wonks, it is necessarily speculative and of limited utility.
Just how limited the utility of this kind of work is driven home by similar EIA forecasting of how much energy will come from various resources over the next 20 years. Very recently, EIA was predicting that coal's market share in the US would not fall to 39% until 2030. In fact, markets move so rapidly and sharply that coal's share will fall below 39% this year.
With that said, in the high unconventional gas production case, IEA findings include 1 million gas wells will be needed through 2035; gas will overtake coal as the world's number 2 fuel but still be behind oil; and natural gas prices will be lower than otherwise expected.
In the low unconventional gas production case, coal remains the number 2 fuel in the world, and gas grows little, gas prices are higher, and carbon emissions are a marginally higher.
The IEA modeling assumptions may not account for the large, recent decline in US carbon emissions due to gas substituting for coal. US energy related emissions, as of 2011, declined by 450 million tons, an amount equal to about 1.5% of total world emissions, and largely because of the shale gas boom. US emissions will fall another approximately 150 million tons in 2012, bringing the total decline to an impressive $600 million tons or nearly 2% of world emissions.
Indeed, in the here and now of the real world, US emission decline due to shale gas is about the only climate change bright spot in the entire world. Yet, shale gas is vilified by some who profess to be most concerned about climate change.
While natural gas and indeed no one answer can stabilize climate pollution concentrations, its vilification is perverse, given the big, immediate cuts in US emissions it has already delivered.
The IEA notes that, in both of its forecasting cases, carbon emissions and temperatures grow substantially and calls again for carbon capture and sequestration technology development.
The part of this report that is likely to have the most lasting impact is its discussion of environmental risks and existing technology and its 22 Golden Rules of Gas. Excellent operators would be thoroughly utilizing them today. And the IEA is clear that the future of unconventional gas has a lot to do with excellent operations becoming the norm.