A Shale Gas Revolution in Eastern Europe? Not yet

April 21, 2014 § 4 Comments

In Vikram Rao’s March 31st post entitled “Bear Trap” he examines the potential influence of the U.S. over geopolitics in Eastern Europe if the U.S. were to leverage its Strategic Petroleum Reserve or theoretical LNG exports. If reducing Eastern Europe’s dependence on Russian gas is the objective, then it is worth considering the possibility of developing American-style shale gas and oil production in Poland and Ukraine, particularly as doing so could represent an opportunity to export American equipment, technology and know-how while simultaneously pursuing geopolitical objectives.

Poland

Both Poland and Ukraine have significant recoverable shale resources: Poland has 148 trillion cubic feet of shale gas and 1.8 billion barrels of shale oil, while Ukraine has 128 trillion cubic feet of shale gas and 1.2 billion barrels of shale oil (for frame of reference, this gives each country about 11-15% of U.S. shale gas reserves, and about 2-4% of U.S. shale oil reserves). Domestic shale gas would provide Ukraine with 65 years’ worth and Poland with over 250 years’ worth of gas at their current rates of consumption. This is a significant amount given that two-thirds’ of Ukraine’s consumed gas and about half of Poland’s consumed gas is imported from Russia.

At the recent American Association of Petroleum Geologists annual conference, I had the opportunity to discuss shale drilling and fracking (i.e. hydraulic fracturing) in Eastern Europe with members of the Polish Geological Institute. To date, about 60 wells have been drilled in Poland, about 20 of which have been fracked. All of these wells have been exploration wells, meaning that no gas is currently being produced commercially from shale reservoirs.

Though Poland has had some success exploring along the Baltic coast, results to date have mostly been disappointing. Companies attempting to hydraulically fracture shale reservoirs in Poland have not had the same success as they have had in the U.S. The most obvious reason why not is that the geology in Poland is simply more complicated; reservoirs are typically 3-5 km (~2-3 miles) deep rather than the 1-3 km depth of U.S. shale beds such as the Permian basin in west Texas and the Marcellus in Pennsylvania. The Polish basins are not only deeper, but they are also thinner, with pay zones often no more than 10 meters thick, as compared to the 50 meters or more that is often be found in U.S. shale basins.

As with most of Europe but unlike North America, mineral rights in Poland and Ukraine are by default owned by the state rather than the land owner. In Europe when farmland is drilled and gas is produced, instead of farmers getting royalty payments and local municipalities getting increased budgets, regional or federal bureaucrats would manage the royalty income from the energy companies. Such a structure is less conducive to farmers and communities inviting in drilling and production operations as happens in parts of the U.S. Though this appears to be an impediment to scaled shale gas production, there are other incentives that could mitigate the lack of mineral rights. For one, politicians in Poland are primarily interested in job creation (in this way they have a lot in common with our local politicians), and much influence in Eastern Europe is local in nature – a land owner whose land is drilled on will no doubt be able to secure good jobs for his extended family and friends given all of the construction, transportation, and service work required to drill and produce gas from the land. Though the state owns mineral rights, land lease agreements would still be required to drill and travel on private land, and so payments can be arranged through these agreements in lieu of America-style mineral leases. Also, a member of the Polish Geological Institute advised me not to underestimate the seriousness with which Poles take energy security and the collective desire to find a way to produce their own gas in order to reduce reliance on Russia. Here in the U.S. we talk about energy security as an abstract concept, but in Eastern Europe energy security is personal.

What seems to currently be lacking most in Eastern European shale gas exploration drilling is the intuition around how to best drill and complete the wells. So far, replicating American wells has not worked, but then again it took many years to improve U.S. shale drilling and fracking to the point of economic viability, and the process is far from perfected. Optimizing well drilling and completion of shale reservoirs is a process of trial and error that has not had a chance to play out yet in Eastern Europe.

Even if a drilling company cracks the code of Eastern European shale, Russia will still be able to influence whether commercially viable quantities are ever produced. Russia can easily drop gas prices below the economic break-even point for domestic producers and, if need be, is probably patient enough to do so for as long as it takes for the international oil companies to lose interest. It is also conceivable (or in a more cynical perspective, likely) that Russia could make life hard for any energy or oilfield services company involved in the production of European shale gas who also has ongoing business in Russia’s vast oil & gas sector, though this will certainly not deter small players who have no active business in Russia.

Given a concerted effort by Poland or Ukraine, it is only a matter of time, effort, money and thought before the drilling and oilfield services companies figure out the right combination of geological analysis, drilling, and well completion techniques required to economically produce gas from Eastern European shale. But that is a lot of “ifs”, and so there is no guarantee that Poland or Ukraine will ever produce geopolitically meaningful quantities of domestic gas.

Daniel Kauffman, President of TerraCel Energy

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An Energy System that Works

May 21, 2012 § 1 Comment

by Dahl Winters, RTI International

This was inspired in part by an RTEC Breakfast Forum on Distributed Energy

We have long been discussing how to supply our country’s future energy needs in the cleanest, cheapest way given the regulatory hurdles, policy changes, lack of sufficient economic incentives, and inertia in changing the way energy is produced and used. Our global industrial complex is more massive and complicated than at any previous point in human history, with every country, state, and municipality having its own patchwork of differing regulations and economic drivers, and more people now than ever needing to use energy. Given this, where do we even start in addressing this problem? It would help if we had an example of a system we could emulate, but this problem is so massive and complex that it has never before been solved. Or has it? 

This article maintains that a solution exists to our country’s energy problem, in the form of a system we could learn to emulate. Simply put, we need not look farther than the well-regulated, functioning distributed energy system sitting in the chair reading this article.

The Body and the Global Industrial Complex

The global industrial complex can be described as a super-organism which takes in energy and resources, builds things with them, generates waste in the process, and reproduces itself to ensure it can continue doing all these things and more. Naturally, such a system begs comparison with the body, which is a smaller scale version of the above but just as complex.

The most notable point of this comparison is that all the different cell types in the body get the energy and resources they need to perform their activities. This is more than can be said for the global industrial complex, which has left 1.3 billion people without access to basic electricity and even more people without access to clean water and a reliable food supply. The body is able to meet the needs of all its cells by operating a robust, reliable distributed energy system that is ultimately carbon-neutral. Impressively it is able to do this with a balance between free enterprise amongst its cells, and regulation.

How the Body’s Energy System Works

1.       Distributed Energy

Most of us are familiar with the petroleum industry, which produces the fuel necessary for transportation, heating, and even electricity. Instead of drilling for oil and gas, we chew up food to place in our stomach, our body’s refinery. Crude food is converted into refined sugars, proteins, and fats, which get distributed through the pipelines of the body – the blood vessels – to every cell, in similar fashion to natural gas getting piped to every house in a community. There, through a cellular version of the combined heat-and-power recuperated microturbine system called mitochondria, the cell is able to obtain all its energy needs.

The body favors distributed energy since it would be too easy for an event the equivalent of a natural disaster or terrorist attack to take out a few centralized power plants and shut down power to millions of cells. Distributed energy offers robustness and resiliency from these types of events by giving every cell the freedom to make its own power.

2.       Renewable Energy

Food is crucial for the body to run. Of all the sources of conventional energy available, notably it is solar energy that powers the whole food web and fuels the cells of the body. The sun is also the source of all the energy in fossil fuels and biomass; wind energy and hydropower ultimately come from solar heating of the atmosphere and oceans. Indeed all sources of conventional energy besides nuclear, renewable or not, are solar-based.

Solar energy may be considered expensive, but it is cheaper than nuclear according to Dr. John Blackburn, Professor Emeritus of Economics and former chancellor at Duke University.  Given the importance of renewable solar energy to almost all organisms on Earth, it is surprising that the global super-organism does not make more use of it. It is even more surprising considering that one hour’s worth of sun on the Earth’s surface is enough to satisfy the entire world’s energy needs for a year.

3.       Energy Storage

We don’t eat all the time, yet still there is a constant level of refined products that get shipped to our cells where energy is continuously made. The key is energy storage in the form of specialized fat cells. Regardless of what food comes in, it gets converted to fat for storage. Of course, if this is not used in timely fashion adipose tissue is created, and we get fat!  Regardless of whether the electricity gets generated by solar, wind, natural gas, or other sources, it ought to get stored somewhere for downtime use. However, in comparison to energy supply, energy storage has historically not received as much attention from those involved in research and development. As a result, today’s batteries are expensive in comparison to the relatively cheap energy they are meant to store. That will soon change, with the further commercialization of advanced batteries such as the sodium-ion batteries.

4.       Carbon Neutrality

The body, like the global industrial complex, exhausts CO2 from all its energy production activities. For carbon neutrality, green plants are necessary to convert the CO2 back into a useful molecule, glucose, which can power the body further. The analogous condition would be if we were to build our own “plants” that capture CO2 and turn it back into methane, in order to power those microturbines  even further. Electrified copper has long been shown to act as a catalyst that reduces CO2 to methane or methanol, and recently (April 11, 2012) MIT researchers have developed copper-gold nanoparticles with enhanced stability. 

The Importance of Regulation to Growth

In the current political climate where regulation is almost a dirty word, it’s important to establish the necessary role of regulation in maintaining – and even growing – the global industrial complex. Let us begin with a cell. Every cell needs to take in resources in order to perform its activities. Likewise, every person has social activities, hobbies, a lifestyle to upkeep that requires a healthy economy. Most cells also need to reproduce; a person might also like to have sufficient resources to raise a family. These activities require resources, and the more a person can get, the more a person can do.

A free-living bacterial cell will take in all the resources it can and produce all the waste it wants to, with disregard for all its neighbors. Indeed, bacteria in a jar full of food will quickly use up all the available resources and inundate other bacteria with waste products in the process that, collectively, the system will die off. However, this does not happen in the body for one important reason – regulation.

Regulations are written into every cell’s nuclear material like a master regulatory document that specifies how the cell is to handle its resource inputs and outputs. Take away this regulation, and disease can result as cells pollute one another with waste products. Cancer can result as a few businesses experience unfettered growth at the expense of the rest of society.   Regulation is so important to the body that the body has its very own enforcement branch. Its immune system cells go around and stop anyone with the wrong ID (bacteria, viruses, cancer cells) that, if left to roam, would carry on activities to the detriment of others.

With a sufficient level of regulation to keep cells from impeding each other’s activities, all the cells in the body can be free to thrive and grow. Not just the high-status brain cells or the working muscle cells, but all the cells regardless of their type or status. Economic growth is thus not only possible with regulation, but regulation is essential to economic growth.  However, too much regulation causes growth to get stifled, as what occurs with autoimmune diseases where the immune system targets the body’s own cells. If a healthy body can find a balance between free enterprise and regulation, the global body should be able to as well.

Reaching the Energy Future

This article has posited that the body is a working example of the energy future we are trying to reach. Yes, it took nearly 5 billion years for the body to evolve, but it took only 200 years for the global super-organism built upon 7 billion bodies to evolve. It took only 10 years for that global super-organism to put one of these bodies on the Moon, using the power of human ingenuity to solve engineering problems never before encountered. Solving our energy problems in a reasonable timeframe should not be that complicated an undertaking since we do not have to newly figure out how to build a rocket. We are already our own working examples. We already have the blueprints for building our energy future. We just need to think creatively and then act.   In many ways the critical first step is effective utilization of distributed energy systems.

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