Energy crisis is postponed?
TEXT OF INTERVIEW
Bill Radke: There's a captivating headline in the British newspaper the Telegraph this morning -- "Energy crisis is postponed as new gas rescues the world." It's a report on last week's World Gas Conference in Buenos Aires. Writer Ambrose Evans-Pritchard says new advances in the extraction of natural gas from shale mean that the world will not run short of energy as soon as feared. Ambrose Evans-Pritchard joins us live from London. Good morning.
Ambrose Evans-Pritchard: Good morning. Well it's nice to have some good news for once.
Radke: It is. Tell us more about this technological advance.
Evans-Pritchard: Yeah, well we always underestimate the impact of scientists and engineers when they get thinking on something. And essentially what's happened is the combination of 3-D seismic imaging and some smashing or breaking up rocks, it's called, hydrofracturing or "fracking" in the trade. It's become so precise that they can free up what's called "tight gas" that's caught in these sedimentary rocks. And these rocks are really ubiquitous, or all over the world. There's a lot of it. Until now, people thought you couldn't really get it very easily, it's too expensive. But suddenly, in the last three years it's sort of catapulted. And at the Buenos Aires conference, you had the head of BP, you had the head of gas at Norway's Statoil, both coming out and saying it's just blowing their mind what's happening. It's completely changing the whole outlook for the gas industry for half a century. Massive reserves are coming on-stream that they didn't think would be available.
Radke: Ambrose your lead sentence is: "America is not going to bleed its wealth importing fuel." So tell us how is natural gas going to replace our imported oil?
Evans-Pritchard: Well, I mean, firstly you're not going to have to import gas, or not nearly on the scale that was expected. You were preparing to import liquefied natural gas -- when it's transported in ships -- on quite a large scale as your own resources depleted. And suddenly you're not importing it anymore. And that's caused the world market of L&G gas to be flooded. The price has fallen very sharply, it's trading at half the level of long-term contracts. It's really changed the global gas market, firstly. That's the key thing. And that'll affect your import bill a lot. But also there's a spillover effect between gas and oil. Gas and oil, they can decouple for awhile, but they don't decouple forever. And as gas becomes much, much cheaper, then oil eventually will sort of come down to some degree with it. Because you can switch power stations, you can do all kinds of things from one to the other.
Evans-Pritchard: So it'll affect the whole energy balance. And since energy has been the biggest single cause of your massive, great current account deficits, if you can bring that under control, then there's the possibility that you could become a surplus country, which is amazing. I mean, it could happen within a few years.
Radke: The Telegraph's Ambrose Evans-Pritchard. Thank you so much.
Evans-Pritchard: It was a pleasure.