The Unconventional Outlook from the Foggy Streets of London

The Unconventional Outlook from the Foggy Streets of London

by | published October 17th, 2013

TJ is one of those functionaries in the British Foreign Office (FO) who tend to keep their heads down and out of the line of fire.  He has been my liaison for several years now.

Usually, he only opens his mouth to answer questions or give me the latest revision in my schedule.

So it was a bit unusual to hear him to express his opinions so vividly yesterday. Clearly, he was frustrated.

Then again, these are unusual times in Whitehall – the collective term for the British government taken from the street that snakes among official offices between Trafalgar Square and Parliament.

TJ met Marina and I on the other side of customs at Heathrow Airport where our official car and driver were waiting.

But only a few minutes from Terminal 1, TJ began to fill me in on the political mine field that was developing around unconventional oil and gas in the UK.

What he told me was a bit troubling…

The View on Fracking in Whitehall

Of course, some of what TJ was saying I already knew.

The administration of Prime Minister David Cameron had recently approved fracking in the UK, as the potential for shale gas became more obvious over the past 18 months.

But since then, there has been no consensus on how to move next, while the environmental and political attacks have been relentless and fierce.

In this case, Cameron has to contend with leading a coalition government that has been sinking in the public opinion polls, while the Labour Party opposition is already poised for the next election fight.

As an FO officer, TJ is usually concerned about developments elsewhere. His special emphasis is North Africa and the Middle East. We first met there over oil policy almost five years ago.

However, the domestic British political environment he spoke of is impeding a range of broader opportunities. And the foreign agenda that usually comprises what TJ does for a living is coming under pressure from the growing domestic disagreements over unconventional drilling in the UK.

In fact as it stands, no projects are anticipated for at least a year.

Unfortunately, this firestorm of opposition to fracking is also casting a pall over everything I am likely to be doing over course of the next week.

On the Frontlines of the Global Shale Revolution

As you know, I’m in London to give a critical briefing to the assembled ambassadorial, ministerial, and corporate leaders next Tuesday on U.S. energy developments that in part revolve around fracking.  The briefing is centered on unconventional oil/gas and the rise of North American liquefied natural gas (LNG) exports into the global market.

However, the meetings that start today will center on two other highly promising parallel interests.

One involves the need to coordinate the technology, expertise, and equipment in what is rapidly becoming an international shale revolution. This coordination will initially require heavy usage of Canadian and American experience. North American operators are already some eight years ahead of the rest of the world when it comes to these types of basins.

It might not sound like much, but in this business it’s a generation.

One of the dimensions that will emerge in my meetings over the next week is an initial determination of which of these U.S. companies are likely to be in demand in Europe and Asia as the shale era expands.

This is certainly going to have a direct impact on how we are going to play this accelerating need for American knowhow in the future.

But it is also moving in another direction. There are currently just three dominant providers: Halliburton (NYSE: HAL), who owns the patent on the most used fracking approach; global oil services leader Schlumberger (NYSE: SLB); and Baker Hughes (NYSE: BHI). Baker Hughes is notable since it has made the first field moves into China, where the world’s largest shale gas reserves are located.

Each of these three companies provide “one stop shopping,” offering a complete package to foreign drillers.

However, more of the companies coming onto the shale scene in other countries would prefer to set up their own arrangements.

And the fact that my meetings in London will include Chinese, Polish, German, Argentinian, and other national representatives in addition to the Brits, stands as a clear indication of the massive new markets emerging for a wide range of service providers already in “the oil and gas patch” back home.

The Changing Face of Finance

The other subject for these sessions, finance, is even more striking.

These meetings will focus on the significant changes in how both conventional and unconventional field projects are going to be financed in the future.

As I have noted before, London is now the place of choice when it comes raising funds for oil and gas projects globally. Years ago it displaced New York, Frankfurt, and even Dubai. Companies and financiers come from all over the map now to London to strike deals.

Here as well, though, the terrain is changing. New models are being fashioned to deal with the ever changing credit and liquidity concerns arising internationally. In these sessions, I have some detailed suggestions to make. It is why I have been invited.

As is our custom, all of these discussions will take place under Chatham House rules.

The approach was developed early in the last century to allow frank conversations among nations. The rules provide that the conclusions and themes in these meetings can be made public, but no particular position can be associated with any specifically named participant.

The anonymity is not only useful. In most cases, it is essential. Of course, I intend to fill you in on everything that the rules allow. The individuals providing the keys can certainly remain nameless.

Because what I learn from these meetings will allow us to make some serious money on the companies and projects involved in the next stage of international oil and gas.

That is, if the paralysis descending on Whitehall can be avoided.

What I can tell you so far is that one aspect of this trip is very clear: I need to be particularly careful.  It has taken some time to bring all these folks together.

Now we need to get something from the effort.

I promise I’ll have more on these developments in the next issue of OEI.

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  1. October 17th, 2013 at 13:35 | #1

    Dear Dr. Mores, I get the impression that you have not grasped the seriousness of fossil fuel as a contributor to global warming and climate change. That’s sad, for it is the source of the opposition to fracking and the transport of Canadian tar sands across the USA via the Keystone XL Pipeline. “Make a bundle” seems to be a big part of your value system. Ignorance or denial is, I take it, bliss.
    James P Louviere, Texas, USA

  2. Ian Shearer
    October 17th, 2013 at 14:04 | #2

    Foggy? I call into question the truth of anything you post Kent. The Sun shone this morning, the view was unimpeded by mist or fog here in London. Your inside contact is certainly correct to point out that the Luddites are always first into the newspapers with their opposition to anything new in UK that might make a profit, such as fracking. However we have 200 years experience of dealing with them. Officially we cave in to their arguments, in reality we ignore them and continue on the chosen path. This is why London is the financial capital of the world – it is also the world’s biggest money laundry. The UK government professes to be against money-laundering but the evidence says otherwise. So I am sorry Kent if your view was obsured by vapour this morning – it must have been steam from one of our laundries.

    Editor’s Note: Kent didn’t mean foggy in a literal sense. He was talking about the situation not being clear.

  3. October 17th, 2013 at 14:44 | #3

    Dr. Moors –

    Are you hinting that any problems (environmental, for instance) that crop up in the UK could throw a monkey wrench into the machinery here in the U.S.? Holy moley, I would hope not!

  4. Carl Townsend
    October 17th, 2013 at 16:22 | #4

    Dear Sir – I have worked in the FED Gov & oil fields 55 yrs ago, then 20 yrs ago for 20 yrs. I have a BSCE & MS in ENV SCI. Hor drilling & fracing I over a half-century old. 50 yrs ago, the EPA & some States produced studies on the env impacts of this technique each 5 yrs. Every one of these studies stated that these techniques 95 % of the time was not harmful to the env. And, AFTER the UIC regs [I helped write them]were published & enforced, only about 2 % of oil wells were harmful to the env. Then when Obama became prxy, the reports changed to otherwise. EPA is a political agency & MUST say what their boss orders them to say. I worked w/the EPA, TX & LA engineers & they believe these new techniques are very safe indeed. 95 % of all leaks come from pre-UIC REGS wells. If the regs are followed, it is nearly impossible to have leaks of any kind at the surface. And these techniques require EXTREME pressures, & this would make leaks extremely easy for an inspector to find & a well shut down. Shut down wells cost in excess of $35,000/day so oil firms avoid this strongly. But I was an EPA inspector, not a top mgr. I would say my opinion & experience was typical of other env engineers. Natural Gas is extremely CHEAP, so it is often cost efficient to release a few thousand feet of this colorless gas rather than control it quickly. And if the wind is strong, it is hard to prove this is done. I have heard of this done many, many times. I consider myself a ‘practical environmentalist’ not a “RABID” one, as so many of the LOUD ones are today. It is impossible to reap the VAST amounts of oil & Natural Gas we get w/out some pollution. I have determined that this env cost is reasonable at this time.

  5. holly jebb
    October 17th, 2013 at 16:36 | #5

    Please keep in mind the impact of “fracking” on the land…the water…the planet’s people want to keep their fresh water clean and their land safe for wildlife and plant growth. If you cannot “clean up” fracking, then you MUST find another way to make money. Get into CLEAN energy…energy that gives something to everyone (clean water, clean air, healthy land) rather than putting $$ into the pockets of a few elite. There are MILLIONS in this country who feel as I do. I am all for making money, but not at if the cost is the destruction of the planet.

  6. Robert in Canada
    October 17th, 2013 at 17:35 | #6

    @James P Louviere

    There hasn’t been any warming over the past 15 years, in spite of the dire warnings 15 years ago. (The science was settled! Ha ha ha.)

    There wasn’t any global cooling in the 1970’s (enviro-nuts were saying the same things back then as they are now, except they were saying CO2 was causing another ice-age).

    So global cooling turned out to be a scam, now global warming has turned out to be a scam.

    Enviro-nuts will have to come up with a new scary story to keep getting millions of dollars donated by gullible people.

  7. John Kolb
    October 17th, 2013 at 19:40 | #7

    Holly, James…there is no free lunch. ELF “pollution”, wild life deaths, mining to obtain rare earths for batteries, and models that have a horrible record at predicting temps all would suggest your preferred paths may not be as wonderful as your belief structure suggests. I’m all for diversification, but please take a look at your biases.

  8. js
    October 17th, 2013 at 23:27 | #8

    @Carl Townsend you have a very interesting analysis. i would like to understand your take on oil and energy investing more. please email me at

  9. Will
    October 18th, 2013 at 01:41 | #9

    Perhaps the industry needs to do more to assuage the fears of the public whipped up by mainstram media and early problems in the industry.

    What also needs to happen is for fracking fluids to be gelatinous and glue like to minimize flow into water courses and underground aquifers, but also to cement the rock strata to minimize the risk of further quakes as tension in rock beds is released.

    In other words the industry has to be less secretive and the larger benefits made more fiercely. All in my very humble opinion of course.


  10. Will
    October 18th, 2013 at 01:59 | #10

    I might also add that perhaps a few million research pounds might be more usefully used in developing Thorium Metallic Salt Reactors, whose energy output for pound input is the best in any element of the energy industry, and with ZERO risk of meltdown as any loss of input heat stops the reaction process and causes a safe shutdown.

    Oh yes, but of course, the government would have to explain then that we could have had it 40yrs ago but for the Plutonium defence industry and their particular needs… La plus ça changes, la plus ça même choses!


  11. Stu Gardier
    October 22nd, 2013 at 12:07 | #11

    Perhaps you haven’t ben told that the antactic ice caps have grown 60% this yesr, tornadoes in the US are down significantly, and that our air has been getting cleaner for the past 15 years, which coincidentally is about when we started fracking. Oh , and before I go, could you please explain how 1. Greenland got its name and 2. How did it happen that Engle=and was able to grow grapes~ 600 yeasr ago. You sir, need to do some simple research, and stop looking for ways to send us back to the dark ages.

  12. John Tilley
    October 22nd, 2013 at 12:08 | #12

    i was interested in W’s reference to Thorium Metallic Salt Reactors. It is a great shame that the UK is not seriously looking into this alternative rather than the provision of several Atomic Energy reactors finsnced by China, no less!

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