The shale revolution cometh

Map of 48 major shale gas basins in 32 countries (EIA).

Synchronicity of events often leads to revolutions in business. The recent startling importance of shale gas as an energy source, coming at a time when the Arctic melt has opened up new sea routes between the Pacific and Atlantic- and when global LNG demand is rising- promises to change everything. Geopolitically, environmentally, economically- and for shipping. 

Shale is sedimentary rock within which natural gas can be trapped, and piped or shipped anywhere. Large shale gas deposits exist in the US, China, Poland, Australia, Canada, Russia, France and elsewhere. (Indian estimates of shale gas deposits seem suspiciously high, at anything between 600 and 2000 trillion cubic metres, but decent reserves apparently do exist.) And, although shale gas extraction has been going on for some time, political and environmental developments have pushed the hunt for shale gas right up to the front of the queue. Energy guzzling US, for example, can well become- thanks to its vast reserves- a net exporter of energy in the not too distant future. Even if that does not happen, the US sits on huge reserves that equal 20 years’ worth of consumption- and Obama wants to make the country energy independent. Shale gas made up 23 % of total U.S. natural gas production in 2010 and could constitute 49 % of U.S. total natural gas production in 2035, says the country’s Energy Information Administration (EIA). Shipping may well find in the future that US energy imports simply do not exist, and that gas exports from the US are being discouraged for geopolitical reasons to do with self-sufficiency; shipping’s tankers may have to look for other markets.

Arctic melt- new sea routes (BBC)

Synchronous with the shale gas story is the tale of the melting of the Arctic and the rise, post Fukushima, of LNG demand from Japan. The ‘Ob River’, a 150,000 cubic meter LNG tanker, became the first ship of its type to use the Arctic Sea Route between Europe and Japan last month. Escorted by Russian icebreakers, it made the voyage across the Barents Sea and north of Russia in just under a month. It saved 20 days on the trip- 40 per cent of the distance. Ditto for fuel, obviously. Given these numbers, the number of ships, including LNG ships, sailing across the Northern Routes is set to explode, especially since the Arctic is getting more navigable every year. 

Sure, there are problems with shale. For a start, some studies say that the quantum of reserves are grossly overstated, and that significant amounts of what is actually there is not recoverable, given technological issues and cost. Other concerns are environmental; although natural gas is cleaner than conventional fossil fuels, shale gas extraction often means huge amounts of freshwater use, greenhouse gas emissions, groundwater contamination, hydraulic fracturing and induced seismicity.

But this is what I strongly predict will happen- shale gas exploration will accelerate- even explode- provided deposits are economically exploitable. That is the way all such stories go, so why should it be different now? Maybe technology can mute some concerns, but the world will not have environmental sustainability on top of its agenda this time, either; it never has. Sad but true. Look at the Arctic melt and the environmental time bomb we are sitting on there, energy exploration, mineral reserves, new sea routes and all.  Look at the reasons for the melt in the first place; even those warning signs foreshadowing disaster are ignored today.

That aside, the impact on shipping of this revolution will be huge as energy markets undergo a metamorphosis and as routes through melting ice become commonplace. Within shipping, the pendulum will swing towards the West, which will not only provide newer technologies for gas extraction because of its head-start and expertise, but also produce much of the product. 

And carry it too, probably, if frigid waters are involved. Asian shipowners and crews have traditionally little experience in navigating in ice. Their disarrayed training and employment systems will have to undergo a metamorphosis if they want to cater to new professional demands that will undoubtedly be made of them. 

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Arctic Rape

We just don't learn.

My cynicism with the U.S.' Bureau of Ocean and Energy Management and Regulatory Enforcement (BOEMRE) was validated last week when Shell Offshore- owned by Royal Dutch Shell- was granted 'conditional approval' to drill in the Arctic's Beaufort Sea next year. Another brick in the wall of Arctic devastation has been laid; humanity will pay much more than the $3.5 billion Shell paid for those Arctic leases by the time this environmental rape is done with.

Ironically, Royal Dutch Shell is fighting to control a "substantial" spill off a ruptured pipeline in the Gannet field in North Sea- the worst since 2000- as I write this. The British The Department of Energy and Climate Change (DECC) puts the figures at " several hundred tonnes," but we know, after the Deep Water Horizon explosion, that announced figures mean very little and are often intended to obfuscate, not clarify. Interestingly, Shell says- with suspicious accuracy- that only 216 tonnes of oil has been spilled so far. These numbers- and the story- is being modified almost daily, so do not hold me to them.

The Deepwater Horizon environmental disaster will look- in retrospect- like a drop of oil in the ocean compared to an Arctic incident of even a fraction of similar magnitude. Drilling hundreds of miles away from  the nearest Coast Guard base, with ice and inclement weather to boot, Shell's expansive 'three tier' contingency plans in the frigid waters of the Arctic -that it says are sufficient to contain a major spill- will obviously be as worthless as junk bonds. For a start, there is no proven technology for cleaning up oil in icy water; skimming boats do not work. If a blowout happens when ice is freezing over, say some scientists, the earliest that relief wells can be drilled may be next summer, which means months of oil leaking into pristine waters unchecked. 

Listen to retired Coast Guard Admiral Thad Allen, who led the US response to the Gulf spill, saying earlier this year that the US was ill-equipped to deal with a major oil disaster in Alaska, given harsh weather, little infrastructure and unpredictable ice. Environmentalists have used words like 'inexcusable' and phrases like "disaster waiting to happen" and "dangerous and disappointing" after the BOEMRE clearance given to Shell was announced.  Chuck Clusen, director of Alaska projects for the Natural Resources Defence Council, says the approval is "either the height of irresponsibility or the height of ignorance — but either way it should be stopped.”

Shell's contingency plans for Arctic drilling- based on which I presume the approvals have been granted, make the delusional claim that the company will recover 90 percent of any oil that will spill after a Horizon type catastrophe. Ridiculous, given that only five percent (yes, five) of oil could be recovered in the Gulf after the Horizon blowout, and the waters there were temperate and infrastructure available much closer. Shell's delusional plans make no allowances for the fact that the disaster site may be inaccessible for weeks, if an incident happens at the wrong place at the wrong time.

It appears that the ban on drilling that the Obama administration announced in the aftermath of the Horizon catastrophe was obviously temporary eyewash; now that public outrage has subsided, the only game in town-crony capitalism-can safely resume its march again.  

But why blame only the US or single out just Shell? The fact is that the oligarchs- often huge multinational companies- rule the world today with their henchmen government-accomplices across the world. From Africa to Russia to the US to India, mineral resources are plundered and looted with scant regard for the environment or the livelihoods of indigenous peoples. These companies co-opt politicians and administrations in much the same way as the old European colonial East India Companies did, giving each collaborator a personal stake in the loot-Directorships of companies post retirement included.

Today's East India Companies are less honest about their rape and plunder, though. They cloak their ravenous greed with meaningless environmental assessment and contingency plans made for hypocritical approval processes, but their intention is rape.  The only other difference between the old colonialists and the new ones is that the new ones have hundreds of employees and consultants- and entire puppet governments- on hand to manage events when the inevitable disaster occurs. As in the Deep Water Horizon case, when even journalists were barred by the Obama government from taking photographs of tarred beaches and dying marine life . These oligarchs know fully well that a disaster is a statistical probability- even certainty- and that the fallout will not be containable when it occurs. Therefore, they decide that they will manage the outrage and keep the natives from getting too restless instead, when disaster does strike. Their strategy, in short, is a) rape b) manage outrage. They have no strategy for the protection of the environment.

It helps to do all this when the natives themselves are addicted to oil.

The impending destruction of the Arctic is just another step on a long road to hell. The devastation of the pristine and frigid end of the earth may well turn out- as we all know- to be the last straw that makes the planet itself become hostile to us. The new colonialists are trying to convince us that the Arctic is the last frontier, but that is a lie. It is actually the last bastion. 

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Snake Eyes

(‘Snake eyes’- two pips on the dice- is the lowest score a gambler can roll in a game of craps. A loser’s roll, obviously)

If the IMO, like its parent the UN, represents the will of the international community, then I have to say that where there is no will there is no way.

On the first of this month, the IMO’s Marine Environmental Protection Committee met, deliberated and failed to reach any consensus on proposals to cut emissions from new ships. Shipping is not covered by the Kyoto Protocol and is said to be responsible for 3 percent of global CO2 emissions. The meet threw up, once again, the huge chasm between the developing and developed countries that seems to be the norm on environmental issues these days.

Around the same time, the BBC reported that Russia is planning to float the first of eight floating nuclear power stations in 2012: Part ship, part platform, these vessels will be positioned in the Arctic circle to take care of the energy needs of a country that is increasingly targeting the exploitation of natural resources in the frigid Arctic. “The territory includes an underwater mountain range called the Lomonosov ridge, an area which some Russian scientists claim could hold 75 billion barrels of oil. This is more than the country's current proven reserves,” the Beeb says. Each Arctic nuclear station can stay twelve years onsite (what? no dry-docking?) without maintenance, and supports power needs for exploration and for 45000 people, the Russians claim.

Other recent events- the Norwegian/Russian deal on the Arctic, Russia accelerating the promotion of the northern route as an alternate (with Russian icebreaker assistance) to the eastern passage to China or Japan, the discovery of new gas and oil reserves off Greenland and the continuing mad race by some Western nations to exploit the Arctic- confirm my suspicions that activity around the North Pole will escalate exponentially, and very soon.


That, with its inevitable consequences on climate change, is bad enough. What is worse is that I see no regulatory body on the horizon that will moderate this change, make operations safer or mitigate environmental risks. Worst of all, I do not think we even know what we are letting ourselves in for in the Arctic. We sure as hell don’t know enough about the weather, or the impact of extreme conditions on men and machinery, or the devastation that would surely ensue if there is, say, a Deep Water Horizon incident out there. Besides the fact that there are extremely limited facilities for refuge in emergency, the race for the Arctic assumes, fallaciously as usual, that proper regulation and procedures will be in place. As things stand, they will not. We are ‘lassoing’ the ice using tugs and moving it away from platforms out there right now: we do not even know what impact this will have on the delicate polar ecology and whether the lasso will turn out to be a noose around our necks later.

It is clear to me that a) the maritime industries, with their abysmal record of self regulation, are hardly going to start properly regulating their operations in the North voluntarily anytime soon; b) The IMO, with its equally abysmal record of reacting to events (using the permanent out it has, like the UN, with its hand-wringing claims that it only represents collective will of member states and is thus hamstrung) , its snail-like speed of action and its general inability to actually solve problems, is the wrong horse for this course; c) The rift between the developing and developed world will widen- shipbuilding and ownership in the latter is growing, and fears that regulation on shipping will become a one sided affair impacting largely the developed countries are not unfounded and d) the oil industry, as the Deep Water Horizon incident has shown, controls governments, including those of some of the most powerful nations in the world today. Their gung-ho operations will continue as usual with the thin veneer of regulation that pretends to be workable.

Unfortunately, it is hugely naive to expect that shipping, or the oil industry- with the public perception of a dirty business run by shady operators- will see the opening of the Arctic as an excellent opportunity to clean up its act and turn perception on its head. To be fair, though, these are far from the only industries that pay lip service to environmental issues while continuing down risky, unethical –or illegal- courses, cutting safety corners and exposing the environment to potential catastrophe. But that is neither here nor there. What we need is this: We need an international body to regulate these international businesses, we need the regulations to be placed before we put even one more sailboat in the Arctic, and we need this body to be proactive and control safety and environmental issues as its only priority. The IMO is, right now, the only game in town, but it is a rigged game played by unwilling players with loaded dice. The game’s final score, to me, is inevitable. Snake eyes.

As for those Russian plans, I cannot help but recall Chernobyl, parts of which were kept running for sixteen years after the worst nuclear accident in history devastated the immediate area when four hundred times Hiroshima’s radioactive material was released into the atmosphere. Radiation levels rose across almost entire Europe. Thousands of children and adolescents have been reported with thyroid cancer in Ukraine and Russia since then. The full environmental impact of this disaster- a quarter of a century later- is still not known.

That was a nuclear power plant too.

Maybe it will take a Chernobyl in the Arctic before sense prevails; maybe we can step back from the abyss once again. Maybe we should get some workable rules in place. If we cannot, we should stop playing the game.
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