I remember having an animated discussion with one of my teachers. “The words ’flammable’ and ‘inflammable’ clearly mean different things, I declared. How could they possibly mean the same thing? They are clearly antonyms”; I was that kind of child. Sadly, the English language is full of such faux amis. Let’s return to the present. How about ‘resource’ and ‘reserve’? The same or different? Synonyms or antonyms? I’m thinking here specifically in the context of oil and gas. Are our oil resources the same as our oil reserves? Actually the answer is that the two are quite, quite different. And the difference is important. I was reading a report produced by a nationalist ‘think’ tank, on the issue of offshore fracking and its impact on Scotland’s future wealth. According to the report trillions of barrels lie beneath our sea bed. Some of you may have read the report or the press coverage it generated. Far from being a ‘mature’ oil basin, with all that implies in terms of a declining oil and gas returns, the North Sea was, according to the report, on the brink of a fracktastic hydrocarbon bonanza. This is where the terms ‘resource’ and ‘reserve’ matter. A geological ‘resource’ is an assessment of the total amount of a hydrocarbon (oil and gas are hydrocarbons) that exists in a given area. A geological ‘reserve’ is how much of that resource can be recovered under current economic conditions and utilising current technology and methods. A resource doesn’t vary, it is the total amount. A reserve fluctuates depending upon things such as oil price, existing subsidies or tax breaks and technological advancements. As oil prices rise, previously uneconomic oil fields become economic. Wipe out the decommissioning tax breaks and the sums may not add up. Develop a new technology - like the ability to drill in ever deeper waters, or as with fracking to drill horizontally - and new fields could suddenly be in play. Let me give you an example that might help. You may be aware that there are significant amounts of gold in sea water. It is estimated that in every pint of seawater there is twenty two and three quarter billionths of an ounce of gold. Not much, I know, but given that there is one hundred and sixty four million billion pints in the North Sea that soon adds up. There is a significant gold resource in Scotland’s waters. Now, here is the killer, there is no gold reserve. Why, because it would cost more gold to recover the gold, than the gold recovered would be worth. The resource is substantial, the reserve is zero. Now lets apply this approach to the frackable deposits of the North Sea. It is true that beneath the North Sea lie the same deposits that are currently being considered as frackable on land. There is no faulting the geology in the report. However, here’s the thing, the technology to frack at sea is still on the drawing board. Further the challenge of the disposal of the chemical rich - some argue, toxic - fluids which facilitate the recovery of the gas remain a costly challenge on land, let alone at sea. Wrap into this equation the fact that investors are far more likely to invest in cheaper, land-based fracking (which has done so much to revolutionise the US energy market) before they even consider the maritime resource and you begin to realise that Scotland may well have a significant resource but it is some way off from a recoverable reserve. Scotland has not insignificant deposits on land which could be fracked, but the SNP Government is keeping quiet on that one. Fracking on land has its supporters, but it certainly has its detractors too. No point in frightening the voters ahead of referendum. Talk all you want about fracking at sea, distant and difficult as it may be, but hush, hush when it comes to onshore fracking and its potential. My old mother had a term for such exaggerated claims: ‘pish’. Perhaps it is worth ending on a more thoughtful note: the stone age didn’t end because we ran out of stones. The oil age won’t end because we run out of oil…
Posted on: Tue, 09 Sep 2014 12:27:02 +0000
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