European shale: an overview?

Europe has 15 TCM of technically recoverable shale gas resources according to an assessment from the EIA in 2013, which remains the best overview, almost ten years later. This data-file simply aims to provide a helpful overview of the different countries’ rocks and above-ground challenges, tabulating the main formations, TOCs, depths, thicknesses, clay contents and exploration history.

Our first conclusion is how much the world has changed since the early days of European shale exploration, a decade ago, including ten years’ proof that US shale has not caused an entire continent to die a mysterious death. Indeed, US industry, has seemed to gain a mysterious new life. While Europe is now so short of energy that we may need to scale our industry back at a time when we would rather be re-shoring strategic supply chains).

While Europe is  now trying to import vast amounts of US shale gas to Europe as LNG (note here), another complementary option, we think is to re-visit the possibilities of European shale; especially in Eastern Europe, which has large, high-quality shale resources, high continued reliance on coal (Poland, Bulgaria) and a growing desire to avoid Russian reliance.

Ukraine has the best shale resources in all of Europe: 4.5% TOC, 1.15% maturity (gas window), low clay and moderate over-pressure. Shell tested these rocks and obtained results good enough to sign a $10bn development agreement that could ramp output up to 20bcm per year. At the time, Ukrainian politicians stated the country could ultimately run a “gas surplus”. This was 2013. Just before Russia’s first invasion. And this Continent-leading Dniepr-Donets shale resource lies in the East of the country, bounded by Kharkiv and Donetsk, near to the current fighting. Which may or may not be a coincidence.

It is difficult to know to what extent Russia fomented broader opposition to European shale. Some of the hysteria seems almost farcical in retrospect. In Romania, in 2013, as Chevron signed an exploration contract, one town saw the largest protest in its entire history (16% of the population), as 8,000 people took to the streets with signs reading “Don’t kill our children”.

(We humbly submit that if you are writing this on a placard, you might not understand what shale gas involves. The simple goal is to produce energy safely, with 50-60% lower carbon than coal (note here) at a marginal cost of $1.5-2/mcf (model here)).

Other countries with good potential, held back only by sentiment are Romania, Germany, UK, Bulgaria and Spain. We remain more cautious on the potential in Sweden and Denmark (the Alum has expelled its gas), Netherlands (population density), Poland (clay makes the rock harder to fracture) and France (continuing to rely on nuclear is its best low-carbon option).

The Top Public Companies for an Energy Transition

This data-file compiles all of our insights into publicly listed companies and their edge in the energy transition: commercialising economic technologies that advance the world towards ‘net zero’ CO2 by 2050.

Each insight is a differentiated conclusion, derived from a specific piece of research, data-analysis or modelling on the TSE web portal; summarized alongside links to our work. Next, the data-file ranks each insight according to its economic implications, technical readiness, its ability to accelerate the energy transition and the edge it confers on the company in question.

Each company can then be assessed by adding up the number of differentiated insights that feature in our work, and the average ‘score’ of each insight. The file is intended as a summary of our differentiated views on each company.

The screen is updated monthly. At the latest update, in May-2022, it contains 260 differentiated views on 140 public companies.

The Top 40 Private Companies for an Energy Transition

This data-file presents the ‘top 40’ private companies out of several hundred that have crossed our screens since the inception of Thunder Said Energy, looking back across all of our research.

For each company, we have used apples-to-apples criteria to score economics, technical readiness, technical edge, decarbonization credentials and our own depth of analysis.

The data-file also contains a short, two-line description follows for each company, plus links to our wider research, which will outline each opportunity in detail.

Marcellus shale: well by well production database?

This large data-file tracks activity, well-by-well, across c11,000 wells in the Pennsylvania Marcellus, month-by-month, from 2015-2021.

For each operator, we have tabulated production, well stock, activity levels, average well production, IP rates.

Activity levels have slowed by one-third over time, with a peak of 850 wells drilled in 2018, slowing to 570 wells in 2021.

What has enabled activity to slow down is the improvement in well productivity. Average IP rates across the basin have risen at a 16% pa CAGR, from around 5mmcfd in 2015 to 15mmcfd in the second half of 2021.

First tier operators are clearly visible in the data-file. They have come to dominate as the basin has consolidated, while they also achieve higher IP rates and have been able to do more with less.

Energy use by country: how does it change as income increases?

This data-file assesses 25 countries and regions’ energy consumption, as those countries have developed, over the past 50-years.

Specifically, we have cross-plotted GDP per capita versus total primary energy, total useful energy, total CO2 emissions and the relative shares of coal, oil, gas, nuclear, hydro, wind, solar and other energy.

Early industrialization is most energy intensive, as energy consumption rises 1:1 with GDP growth and mostly sourced from coal and oil.

Later industrialization is less energy intensive, with the ‘beta’ falling from to 0.6-0.8 and $10-30k pp pa GDP. And middle income countries start to prefer cleaner energy, especially natural gas (thus coal falls, chart below).

In developed countries, energy use per capita does seem to plateau, at around 25MWH pp pa, and this is also when decarbonization most steps up too.

Natural gas: the EU green taxonomy’s 270g/kWh CO2 target?

The EU taxonomy is a set of guidelines that label some investments as ‘green’. Its purpose, the European Commission states is to “help investors identify economic activities in line with our environmental and climate objectives”.

Under new rules in February-2022, natural gas will be considered green if it clearly replaces higher-carbon fuels (coal) and has a CO2 emissions limit below 270g of CO2 per kWh (and meets other byzantine requirements).

Our goal in this data-file is to avoid politics, and simply present some numbers, for what it would take to reach 270g/kWh CO2 intensity.

Our first conclusion is that most conventional gas projects will not meet this hurdle, even if they use highly efficient CCGTs and burn ‘clear gas’ where all the Scope 1&2 CO2 emissions have been offset by producers.

What is most likely to accelerate based on the taxonomy is the use of CHPs, and possibly also some fuel cells, which can achieve higher efficiencies and thus attain 200-270g/kWh CO2 intensities.

Also potentially helped are blends of conventional gas plus landfill gas (c25%), nature-based CO2 removals (20-25%), blue hydrogen (30%) and CCS (c33%). Generally these blends do not look too bad on costs, inflating a marginal cost around 8c/kWh for conventional gas power to around 9-10c/kWh.

Long-term LNG supplies: devastating shortages?

Our LNG supply model looks project-by-project, across 125 LNG facilities: including c40 mature plants, c12 under development, c20 in design and c25 under discussion.

Our base case supply estimates come from “risking” the supply associated with each of these projects (chart below). Use of LNG should rise at over 8% per year to drive the energy transition and displace coal, but there are only enough developments underway for a 4-5% CAGR, as COVID has deferred 70MTpa of start-ups.

The outlook depends on the path. The 2030 supply outlook can vary by c300MTpa, when comparing all reasonably possible supply (top chart) against the firm supply-growth that looks all but locked (bottom chart). Qatar and select US projects are the most exciting new supply sources.

The greatest opportunities in LNG are therefore to create new demand and to advance competitive projects when others are cannot. To see which projects we think will progress, please download the data-file.

European Natural Gas Demand Model

This model estimates European gas demand in the 2020s, as a function of a dozen input assumptions, which you can flex. They include: renewables’ growth, the rise of electric vehicles, the rise of heat pumps, the phase out of coal and nuclear, industrial activity, efficiency gains, LNG-transport fuel and hydrogen.

Our conclusion is that European gas demand would be likely grow at its fastest pace since the early-2000s, largely driven by the electricity sector, if there were sufficient supplies. However, as indigenous production wanes, there is a risk of persistent gas shortages, and prices will need to rise to the point of demand destruction.

The data-file also contains granular data, decomposing gas demand across 8 major categories, plus 13 industrial segments, going back to 1990 (albeit some of the latest data-points are lagged); as well as 15 different supply sources, with monthly data going back a decade (chart below).

Please download the model to run your own scenarios…

Global Energy Markets: 1750 to 2100

This model breaks down 2050 and 2100’s global energy market, based on a dozen core input assumptions.

You can ‘flex’ these assumptions, to see how it will affect future oil, coal and gas demand, as well as global carbon emissions.

Annual data are provided back to 1750 to contextualize the energy transition relative to prior transitions in history (chart below).

We are positive on renewables, but fossil fuels retain a central role, particularly natural gas, which could ‘treble’ in our base case.

A fully decarbonized energy market is possible by 2050, achieved via game-changing technologies that feature in our research.

Power plants: cold starts and ramp rates?

The purpose of this data-file is to aggregate the ramp-up rates of conventional power generation sources: both as they start up from “cold”, and then as they ramp up (in percent per minute, or MW per minute).

Hydro power and simple cycle gas turbines offer the best short-term performance, ramping immediately and rapidly. Next come combined cycle gas plants, then coal, then nuclear.

Nuclear is nuanced. It might take a day to cold-start up a nuclear plant. But the average facility is 1.1GW. So even a 1% ramp rate is equivalent to adding 10MW per minute, similar in size to the average utility-scale solar plant.

Copyright: Thunder Said Energy, 2022.