Truth about shale gas is out there for critical thinkers
I’ve just read a fascinating series of posts about shale gas extraction published on rbnenergy.com. Planned as a five part series, parts 1-4 have been published so far. The titles of each post start with the phrase “The Truth is Out There”. Here is the list of posts published so far:
- The Truth is Out There – Unconventional Production Economics – Part 1 – Drilling
- The Truth is Out There – Shale Production Economics – Part 2 – Drilling & Completion Costs
- The Truth is Out There – Shale Production Economics Part 3 – Estimating Well Production
- The Truth is Out There – Shale Gas Production Economics Spreadsheet Model and Inputs
The final installment is not yet available; here is its description:
In the next episode in the series we will run through the model outputs and discuss the various production economics evaluations that can be calculated with the model.
I found out about this series of posts from the following tweet:
The Truth is Out There – Shale Gas Production Economics @anguswarren http://t.co/NJtqa19Lqf
— Nick Grealy (@ShaleGasExpert) September 22, 2013
For some reason, as I started tweeting key excerpts and concepts that I was learning from the series, @ShaleGasExpert began taking offense. Perhaps he did not like it when I pointed out that the astronomical rates of return that have been obtained by some of the market participants in some of the most productive regions in the shale plays is similar to the payoffs for early investors in Bernie Madoff-created hedge funds. Here is one of his responses to me.
@Atomicrod Rod, I don’t diss the nuclear industry, so why pick on me. Do something useful and go bother coal.
— Nick Grealy (@ShaleGasExpert) September 22, 2013
When I served as a financial analyst at Navy headquarters, I learned a little bit about spreadsheet models, sensitivity analysis, error bars, and the importance of making good assumptions in order to obtain reasonably predictive results. Read with a critical eye, the “The Truth is Out There” series helps explain why shale gas extraction is such a magnet for risk capital and why the industry has become a Wall Street darling.
With a typical production pattern of a high rate of production in the first year or two after drilling the well, shale gas wells have the potential for a lucrative payout. That is especially true if the fast production can be timed to occur when market prices are high.
Sophisticated drilling companies also have a wonderful opportunity to dump the expenses associated with operating and capping ever less productive wells onto a less sophisticated investor population that does not really understand how the standard investment disclosure of “prior performance is no indication of future performance” is almost guaranteed to apply in a costly way to shale gas wells.
Please go and read the series for yourself, but before you do, consider the implications for our future that are embodied in the below quote from part 1.
To begin our discussion let’s attempt to be somewhat precise about what we mean by conventional and unconventional resource plays. At the most simplistic level, conventional production is easier and unconventional production is harder. Conventional production is the way most oil and gas was produced decades ago. Unconventional is by far the fastest growing segment of U.S. oil and gas production today.
Can anyone doubt the fact that a growing dependence on a fuel source that is coming from harder-to-develop resources means that the fuel is destined to become increasingly expensive for consumers?
Borrowing a line from Richard M. Nixon, let me make one thing perfectly clear; I am not opposed to intelligently using natural gas. It is a wonderful natural resource with an incredible array of useful applications. I am, opposed, however, to the notion that natural gas is so widely abundant that we can afford to waste it by directly burning it in large scale electrical power systems that could just as easily be fueled with less flexible fuel sources that have fewer alternative uses.
The Shale gas ‘revolution’ is going to blow up in the faces of a whole lot of people.
Right now, in my country (the Netherlands), political skirmishing has been waged for more than a year over the question of whether we should ‘open up access to our domestic shale resources’. It is amazing to see how much political energy is being put into this question. And what for? My country has an estimate shale gas reserve of 5 years of natural gas usage. A pittance. And to get that gas, we would have to pincushion almost the entire country with drilling rigs, spaced one or two miles apart. And we are a densely built up country as it is. Madness.
It boggles my mind, that we the Dutch tolerate this massive wastage of time and energy over so small and expensive a resource. Never mind the ecological cost of extracting and burning shale gas.
It boggles my mind that my country has effectively shut-out the nuclear option, by quietly letting the anti-nuke, pro-fossil politicians not only install a law guaranteeing unlimited priority access to intermittent renewables, but also sign into law the definition of what is ‘sustainable energy’ without including nuclear in any form into that definition (thereby directly contravening the opinion of our major domestic academic nuclear power institute, which has been campaigning for the embrace of domestically developed ‘Green Nuclear Power’.
And what does this leave us? Bickering and skirmishing endlessly about domestic shale gas, which represents at most 5 years of gas supply and which will do nothing to help us transition to low-GHG power sources.
It would be funny if it wasn’t sad.
I’ve amused myself with the idea of participating in an anti-shale gas demonstration, carrying a ‘nuclear power yes please’ sign. But somehow I don’t think I’d be welcomed with open arms… most of them seem to be the same that protest against almost anything.
Yes, funny if it wasn’t sad.
Don’t give up so easily. I recall participating in an “Earth Day” event by helping to man a booth supporting nuclear power as a carbon-free form of electricity generation.
Yes, you’ll definitely run into some crazies, but other people will be civil and will engage in polite conversation. The funny thing about the Earth Day booth was that people kept coming up and — having not read our signs very carefully — started talking to us as if we were against nuclear power, which I suppose is the default position on this issue at an Earth Day celebration. At that point a conversation would begin.
I’ve had some surprisingly positive conversations where I would have thought to find fixed opposing views, so maybe I’m too negative about these people. While I share their opposition against shale gas, they remind me very strongly of the hard core antinuclear activists that obstruct anything to do with nuclear power.
Maybe I should try to reach out a bit further and see what happens. But not on my own, at least till I find my footing a bit, and I’m the only one in my circle of friends and acquaintances that is strongly pro.
Not taking sides on this issue, The situation with natural gas in Nederland is complex. It is not simply a fuel. It is a pillar of the economy. About 40% of its production is exported, which generates many, many billions of euros. Nederland is the 2nd largest exporter in the EU with the largest reserves. The EU sees as an economic, and more importantly, a security issue, minimizing imports/dependence from Russia or Iran for resources – oil, gas, uranium, ores, etc.
The nat gas used for power gen in Nd is not directly interchangeable with atomic power. In any event it would require 45-55 billion dollars simply for construction plus a lead time that exceeds the exhaustion of the existing gas fields.
In addition 1/3 of all power is generated by cogeneration from city to industrial to residential scales which cannot be achieved technically with existing gigawatt-scale nukes. Micro-nukes not-ready-for-prime-time and again could not supply power/heat/chill for most immediate uses.
How much better would the NL economy be if 90% of the production could be exported, or alternatively, the resource could be stretched out for more than twice the time?
Cities which use district heating might be able to use something like the LEADIR reactor to replace gas-fired boilers. Steam can provide both space heat and, via absorption chillers, summer cooling and other refrigeration. Dropping high-pressure steam to distribution-pressure steam can generate electricity. All this would require not one liter of natural gas. The displaced gas could be exported or (more sensibly) used as vehicle fuel in place of more costly petroleum.
Why not?
LEADIR = paper reactor
All the pieces are real. TRISO fuel is real. Lead coolant is real (the Russians sell reactors which use it).
About all you’d really need to do is make the isotopically-separated lead, and I’d bet all that takes is a gas-centrifuge cascade fed with something like tetramethyl lead.
Depleted lead is nice, but this reactor can easily work on natural, unenriched lead. It’s thermal neutron capture cross section is lower than hydrogen (as in H2O in light water reactors, the most common type of reactor today).
June 5, 1953
Important decisions about the future development of atomic power must frequently be made by people who do not necessarily have an intimate knowledge of the technical aspects of reactors. These people are, nonetheless, interested in what a reactor plant will do, how much it will cost, how long it will take to build and how long and how well it will operate. When they attempt to learn these things, they become aware of confusion existing in the reactor business. There appears to be unresolved conflict on almost every issue that arises.
I believe that this confusion stems from a failure to distinguish between the academic and the practical. These apparent conflicts can usually be explained only when the various aspects of the issue are resolved into their academic and practical components. To aid in this resolution, it is possible to define in a general way those characteristics which distinguish the one from the other.
An academic reactor or reactor plant almost always has the following basic characteristics: (1) It is simple. (2) It is small. (3) It is cheap. (4) It is light. (5) It can be built very quickly. (6) It is very flexible in purpose (“omnibus reactor”). (7) Very little development is required. It will use mostly “off-the-shelf” components. (8) The reactor is in the study phases. It is not being built now.
On the other hand, a practical reactor plant can be distinguished by the following characteristics: (1) It is being built now. (2) It is behind schedule. (3) It is requiring an immense amount of development on apparently trivial items. Corrosion, in particular, is a problem. (4) It is very expensive. (5) It takes a long time to build because of the engineering development problems. (6) It is large. (7) It is heavy. (8) It is complicated.
The tools of the academic-reactor designer are a piece of paper and a pencil with an eraser. If a mistake is made, it can always be erased and changed. If the practical-reactor designer errs, he wears the mistake around his neck; it cannot be erased. Everyone can see it.
The academic-reactor designer is a dilettante. He has not had to assume any real responsibility in connection with his projects. He is free to luxuriate in the elegant ideas, the practical shortcomings of which can be relegated to the category of “mere technical details.” The practical-reactor designer must live with these same technical details. Although recalcitrant and awkward, they must be solved and cannot be put off until tomorrow. Their solutions require manpower, time and money.
Unfortunately for those who must make far-reaching decisions without the benefit of an intimate knowledge of reactor technology and unfortunately for the interested public, it is much easier to get the academic side of an issue than the practical side. For a large part those involved with the academic reactors have more inclination and time to present their ideas in reports and orally to those who will listen. Since they are innocently unaware of the real but hidden difficulties of their plans, [t]hey speak with great facility and confidence. Those involved with practical reactors, humbled by their experiences, speak less and worry more.
Yet it is incumbent on those in high places to make wise decisions, and it is reasonable and important that the public be correctly informed. It is consequently incumbent on all of us to state the facts as forthrightly as possible. Although it is probably impossible to have reactor ideas labelled as “practical” or “academic” by the authors, it is worthwhile for both the authors and the audience to bear in mind this distinction and to be guided thereby.
Yours faithfully,
H. G. Rickover
Naval Reactors Branch
Division of Reactor Development
U.S. Atomic Energy Commission
For those who don’t want to read the comment above, here is the “Cliff’s Notes” version: Designing and building a working reactor is harder than it looks.
Yeah, we get it, but seriously, who today designs a reactor with “a piece of paper and a pencil with an eraser”? The days when nuclear engineers wore pocket protectors is long gone.
If the purpose of this comment is to point out the weaknesses of “academic reactors,” then perhaps I should point out that the comment critical of these concepts is also completely academic. Perhaps some people prefer to live in 1953?
Every reactor that was ever built was once a “paper reactor.” None of them existed before December 1942.
Building a reactor isn’t that hard. It was done in numerous different successful designs with technology over a half a century old. Building, say, modern cars or Iphones is much more technologically complicated. But we don’t hear about that because of the positive environment for such complicated technologies. Innovation is actively encouraged and allowed. Not so with nuclear power. Innovation is actively discouraged, and in many cases not allowed, even when it improves safety. A good example is the regulatory requirement of a containment; a filtered confinement would be safer (can’t overpressurize, can always inject water spray coolant, always get filtered releases) and cheaper. Gas cooled reactors are another good example. They are many times safer than light water reactors operating right now, but the regulatory and industrial regime is completely paralyzed and myopic on light water reactors. As a result, even billionaires can’t get these reactors built in the USA.
Before we go on with any nuclear build, the USA has to decide to actually want nuclear plants and actually want innovation in this field. That’s where it must start. A good start would be the complete abolishment of the USNRC, and a re-installment of the AEC, correcting a dramatic historic mistake.
Note: My claim (or paraphrase rather) was, “Designing and building a working reactor is harder than it looks.” And I stand by that claim.
Yes, we’ve made a lot of progress on the concepts, but getting them actually built and running still requires a substantial amount of work. Nevertheless, that doesn’t mean that one can’t intelligently discuss the concepts before they are built. That’s just plain silly. But such discussions should be accompanied by a huge grain of salt.
Yes, my position on this matter is very nuanced … as it should be!
The gas related companies and institutions here, which are very powerful, are afraid to lose market share and only want to do things the way they have been done for decades.
In fact, the original Dutch government plan was to quickly use up all the natural gas in the transition towards a nuclear powered economy. Due to irrationalism and generally poor state of debate on nuclear power, combined with an abundance of cheap gas, the nuclear powerplants never got built (only two small ones got built, one of which is still operating).
Right now there’s an odd situation where there’s been an overbuild of gas fired capacity. Already there’s too much capacity and a massive coal fired powerplant in the north, the Eemshaven, isn’t even finished yet. Building more powerplants in this market is tough, even more so due to nuclear plants needing more planning time than a simple, low physical and emotional footprint, gas fired open cycle plant.
The general stupidity that rules here is that no nuclear plants must be built because they’re too dangerous, make too much waste, cost too much, and aren’t even necessary because in a few decades we’ll be powering the country with wind farms and solar panels. All of these assumptions are of course incorrect, but debate is so dumb I am ashamed of my country in this facet.
And the amount of cheap coal electricity you imported from Germany last year is 23% of the whole electricity production of the country (at 21.8 TWh for 96.7 produced, ENTSO-E data).
It could be said there’s some renewable too, but frequently if Germany didn’t have the option of selling to Holland, they would have to shut down fossil plants instead.
Remember, France converted ~70% of their electricity generation to nuclear in just sixteen years, 1976 – 1992. Unless your gas fields are going to run out in the next two decades, conversion to nuclear is technically doable. The only obstacle is likely to be a lack of will and all that entails. As to the cost, most countries seem to be planning to squander much more than that on wind and solar which will wear out in less than a generation and never provide reliable power.
Nuclear electricity generators are long term assets which will benefit four generations.
France used government money and paid a tiny fraction of the current costs (look at the rathole they have got into with the EPR).
You also missed my point about the nat gas strongly overlaps the area that France’s reactors don’t cover.
And why is the EPR costing so much, compared to historical units of reasonably similar size and capability?
The evidence suggests that it’s not the technology, but regulatory paranoia and outright anti-nuclearism. The scientists and engineers could solve the problems, but the pols and activists won’t let them.
The major cost overruns at Olkiluoto and Flamanville EPR are a bit of a mystery. One thing is clear though, it isn’t just anti nuclear activism that is increasing the cost, it’s also the direct building environment that exists in the nuclear industry in Europe and North America. Basically the focus is on endless levels of compliance with endless norms and quality control. This is strange as quality control was not a factor in Fukushima, it was not a factor in Chernobyl, and it was not a factor in Windscale. The three worst nuclear accidents. It was a factor in three mile island, but three mile island was not a major nuclear accident (very small release). In stead the evidence points to design shortcomings and design errors as being the dominant root cause of the Fukushima, Chernobyl and Windscale. Not enough design basis against flooding at Fukushima, positive feedback (runaway) and lack of containment at Chernobyl, and forgetting to design the reactor and supporting systems to accomodate the high temperatures of graphite damage annealing. All major design errors that will not be dealt with with expensive quality control.
Check out some images of the AP1000 construction in the USA such as at Vogtle. You will see three workers, one standing about, the other writing something down, and only one of them actually doing any work. That means you have 3x the worker cost to do the same job in other industries. And that’s just on the site itself. The same is going on with suppliers, in the back office, etc. That is a major reason why the coal plant is cheaper.
@Cyril R. :
Yes, they are very expensive layers of quality control. However there was also some real construction work failures at both Olkiluoto and Flamanville, which are no mystery. The French Nuclear Safety Authority identified a lot of mistakes in the construction : http://www.french-nuclear-safety.fr/index.php/English-version/Supervision-of-the-epr-reactor/ASN-s-supervision-of-the-Flamanville-3-reactor-construction-EPR-latest-news
In addition, the vapor generators, and probably some of the other nuclear equipment, were a bit slow to build too, but they would never have led by themselves to the kind of over-costs we ended up with.
So most of the over-cost is linked to poor quality of construction by mostly one specific French construction work company. But note that when EDF asked another one to do one of the final component of Flamanville (polar crane supports), they did no better. The norm for the concrete quality was a German one, that obviously they did not master, but also had not realized they’d better familiarize with before starting the work.
Delivering bad quality concrete ended up horribly expensive, since every defective component was at the end destroyed, and fully rebuild. Not only was that double the cost, but also double the delay. Additionally the welding also was frequently of bad quality because of failing to hire competent welders and training them properly.
But now that the main construction work is finished at Flamanville, and that they can build for the final part on top of the experience acquired at Taishan, there’s not much more to worry about for that one.
There’s however for Olkiluoto additionally the problem of getting the instrumentation&control system approved, which proves very hard despite having received already approval in France and UK.
I hit the enter by mistake.
In addition the load-following and more particular peaking requirements met by natural gas would not be technically or economically replaced with atomic generators
In addition, due to its very small size and dense population the regulated EPZs (5 km radius Evac Zone, 10 km radius Iodine Zone, 20 km radius shelter zone) are hard to accomplish with more then a few reactors (naturally, for reliability reactors need to be dispersed widely so that a local natural or man-made situation does not knock out the grid.
To displace more of the generation mix than just nat gas would multiply the challenges.
@ yls
So, judging from your comments on this thread, I guess you advocate we, the Dutch, (I assume you are also Dutch) simply extracting the five years of shale gas we have, throw a party, and then after we finish our natural gas just put out heads between our legs and kiss our behinds goodbye? Or do you suggest we continue to increase our dependance on GazzPutin? Or perhaps you are of the persuasion that we should move back to medieval civilisation? From what I’ve read so far, your reluctance to embrace the nuclear option leaves me puzzled as to your underlying assumptions.
All technologies have risks and costs. Nuclear offers excellent potential, if political barriers can be removed. Bashing nuclear without saying what alternative is supposed to be better than it is the signature characteristic of mindless anti-nukery. Are you such an anti-nuke, by chance?
Regards,
Joris
@yls. By the way, I hope your realise that if climate change is not stopped ASAP, sealevels are destined to rise high enough to require evacuation of fully 50% of the Dutch land surface. The social and economic damage of this will manifest in the future and are more or less discounted by economists, but our great, great grandchildren will spit on our graves for discounting their interests like this. Especially if we do so while claiming to be ‘environmentally conscious’ and ‘refusing to burden future generations’ like many anti-nukes are fond of pretending.
Now, I know from my personal experience that some anti-nukes believe that evacuating half the country within a few centuries due to relentless sealevel rise, brought about by man-made radiative imbalance of the earths climate due to a short-lived, intense fossil fuel binge such as what we are experiencing today, is actually preferable to facing the risk of the escape of minor amounts of radionuclides as a result of the slight chance of worst-case nuclear accidents. Are you one of them?
Regards,
Joris