Not on talking terms

The tussle between two ministries over exploration licences shows technology hasn't bridged gaps within government

The oil industry, the law of unintended consequences, the interplay between competing interest groups and the role of technology and scenario planning are the subjects of this article.

Shale gas and tight oil has revolutionised the US energy sector. The combination of hydraulic fracturing and horizontal drilling has unlocked huge reserves of hydrocarbons, so much so that the US is now on the verge of becoming an exporter of gas. Environmentalists have been concerned about the impact of this revolution on the quality of aquifers, and some groups have suggested that excessive drilling might exacerbate the incidence of earthquakes. But there has been no conclusive evidence to support these concerns.

No one, however, had anticipated that the real risk to the environment might come from an increase in gas flaring. That, now, is a rising worry. It has been reported that in the state of North Dakota, gas flaring has increased by 50 per cent, and that the regulator in Texas issued 1,963 permits to flare gas in 2012, up from 306 in 2010. The World Bank has estimated that the volume of gas flared in the US has tripled in the last five years, and that the US is now the 5th highest "flarer" of gas in the world next to Russia, Nigeria, Iran and Iraq. All this has happened because of the low price of gas. A few years ago, the price of gas in the US ranged between $6 to 8/million British thermal unit (mmbtu). This made it profitable for companies to shift their exploration efforts to unlocking shale molecules. Their success has now pushed prices to below $ 4/mmbtu and profitability has been eroded. More importantly, however, companies are no longer investing in gas pipelines and tankage. As a result, there is an inadequacy of distribution facilities, and surplus gas is being flared.

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