‘Central banks, governments can’t print barrels of oil…’

Recent discoveries of shale gas have given the world much hope. But not everybody is optimistic.

“Shale gas is expensive to produce and the current price of gas is not high enough to warrant profitable shale gas production…The hydraulic fracturing process used to extract the gas is extremely polluting and devastating for the environment.Although the energy industry is excited about shale gas production, I am afraid that nobody has really thought about the environmental damage or the geological impact,” says Puru Saxena, the founder and CEO of Puru Saxena Wealth Management. Based out of Hong Kong, Saxena is also the editor and publisher of Money Matters, a monthly economic newsletter. In this interview he speaks to DNA.

In the last few months, the Indian media has been abuzz about various shale gas deals. What exactly is the business like?
Shale gas is natural gas which is extracted from shale or rock.This gas is trapped within this rock which lies very deep under the earth’s crust.The energy industry uses a technology known as hydraulic fracturing, which cracks the shale (rock) and allows the gas to escape from the shale.In the process of hydraulic fracturing, a sludge of water, chemicals and sand are blasted at very high pressures and this creates cracks in the shale, which releases the gas.This gas is then captured through a drill pipe and collected on land, before being transported.

How is it different from natural gas?
Chemically, both are the same; only their origin in different.

What can shale gas be used for?
Bothshale gas and natural gas are used for the same purposes: heating, electricity generation, transportation and industrial usage.At present, the cost of producing shale gas runs around US$7 per mcf which is higher than conventional natural gas.

A lot of companies discovering shale gas seem to be of the view that these discoveries will be a big game changer. Do you subscribe to that view?
In our view, shale gas is not a game changer.First and foremost, shale gas suffers from very high depletion rates.

Why is that?
Typically, the flow rate (a measure of the volume of gas extracted) declines by 50-60% after the first year’s production and the energy industry does not want to deal with this fact.Secondly, shale gas is expensive to produce and the current price of gas is not high enough to warrant profitable shale gas production. Last but not least, the hydraulic fracturing process used to extract the gas is extremely polluting and devastating for the environment.

Although the energy industry is excited about shale gas production, I am afraid that nobody has really thought about the environmental damage or the geological impact.Remember, hydraulic fracturing involves cracking the below-surface shale rock by using intense pressure and at this stage, we do not know whether this will cause any geological instability.

More of the interview at “DNA”