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Unconventional Gas Unconventional Gas The potential impact on UK Gas Prices Prepared for: Department of Energy and Climate Change Navigant Consulting (Europe) Ltd 25 Basinghall Street London EC2V 5HA 020 7469 1111 Authored by: Paul Rathbone Richard Bass www.navigant.com This document is confidential and proprietary in its entirety. © 2012 Navigant Consulting (Europe) Ltd. We would like to thank the following colleagues for their contributions and support to the preparation of this document: Ed Osterwald Gordon Pickering Rick Smead Genevieve Stawski Rowan Watson Ian Shrubb Department of Energy and Climate Change Unconventional Gas and the Potential Impact on UK Gas Prices Contents 1. Executive Summary ........................................................................................................... 1 2. Introduction ........................................................................................................................ 5 2.1 Scope ...................................................................................................................................................... 5 2.2 Units ...................................................................................................................................................... 5 2.3 Definitions ............................................................................................................................................ 6 2.4 Sources .................................................................................................................................................. 7 3. Resources ............................................................................................................................ 9 3.1 Background .......................................................................................................................................... 9 3.2 Different Types of Unconventional Gas ........................................................................................... 9 3.3 Geology ............................................................................................................................................... 10 3.4 Methodologies .................................................................................................................................... 11 3.5 Sources ................................................................................................................................................ 12 3.5.1 Rogner: An Assessment of World Hydrocarbon Resources (1997) .............................. 13 3.5.2 EIA: World Shale Gas Resources (2011) ........................................................................... 13 3.5.3 EC Joint Research Council (EC JRC): Unconventional Gas (2012) ................................ 13 3.5.4 Kuuskraa: Worldwide Gas Shales and Unconventional Gas: A Status Report (2009) ........................................................................................................ 14 3.5.5 Medlock, Jaffe and Hartley: Shale Gas and US National Security (2011) .................... 14 3.5.6 Mohr and Evans: Long Term Forecasting of Natural Gas Production (2011) ............. 14 3.5.7 World Energy Council (WEC) Survey of Energy Resources: Focus on Shale Gas (2010) ..................................................................................................................................... 15 3.5.8 International Energy Agency (IEA) (2011 and 2012) ...................................................... 15 3.5.9 Bundesanstalt für Geowissenschaft und Rohstoffe (BGR): Reserven, Ressourcen und Verfügbarkeit von Energierohstoffen (2011) ...................................... 15 3.5.10 Pöyry Consulting’s report for Ofgem, “The Impact of Unconventional Gas on Europe” (June 2011) ............................................................................................................ 15 3.6 Global Resource Literature Summary ............................................................................................. 15 3.6.1 Other Non‐Global Reports ................................................................................................. 16 3.7 Worldwide Resource Estimates – Original Gas in Place .............................................................. 17 3.8 Worldwide Resource Estimates – Technically Recoverable Resources ...................................... 18 3.9 What is “Significant”? ....................................................................................................................... 21 3.10 Conclusions ........................................................................................................................................ 21 4. Prospects ............................................................................................................................ 23 4.1 Economic Issues ................................................................................................................................. 23 4.1.1 Costs of Production ............................................................................................................. 24 4.1.2 European Production Costs ............................................................................................... 25 4.1.3 Scale of Investment.............................................................................................................. 28 4.2 Political Barriers ................................................................................................................................. 29 4.2.1 Land and Access Rights ...................................................................................................... 29 4.2.2 Water ..................................................................................................................................... 29 Department of Energy and Climate Change Unconventional Gas and the Potential Impact on UK Gas Prices 4.2.3 Other Environmental Issues .............................................................................................. 32 4.2.4 Regulated Prices .................................................................................................................. 32 4.2.5 Access to Infrastructure ...................................................................................................... 32 4.2.6 Public Confidence ................................................................................................................ 33 4.3 Conclusion .......................................................................................................................................... 33 5. Overview of Gas Supply and Demand ....................................................................... 34 5.1 Global Supply / Demand Scenarios ................................................................................................. 34 5.2 Gas Demand ....................................................................................................................................... 34 5.3 Gas Supply .......................................................................................................................................... 35 5.4 Major Trade Flows ............................................................................................................................. 36 5.5 Gas Demand Variations .................................................................................................................... 37 5.6 Gas Production Variations ............................................................................................................... 38 5.7 Trade .................................................................................................................................................... 38 5.8 Production of Unconventional Gas ................................................................................................. 40 5.9 Sensitivity of Gas Demand to Additional Supply ......................................................................... 40 5.9.1 Power Generation ................................................................................................................ 40 5.9.2 Industrial Demand .............................................................................................................. 42 5.9.3 Transportation ..................................................................................................................... 43 5.9.4 Domestic Consumption ...................................................................................................... 44 6. Review of European Prospects ..................................................................................... 45 6.1 Supply and Demand Overview ....................................................................................................... 45 6.2 United Kingdom ................................................................................................................................ 45 6.3 Western Europe ................................................................................................................................. 46 6.4 Central and Eastern Europe (CEE) .................................................................................................. 47 6.5 Conclusions ........................................................................................................................................ 47 7. Review of Global Prospects .........................................................................................
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