INSIGHT: Fracking health scares do little damage

13 January 2012 16:59  [Source: ICIS news]

By Nigel Davis

Shale gas drilling rigLONDON (ICIS)--The hydraulic fracturing of shale deposits in the US is heralding a new, low-cost gas age and one which is expected to underpin a commodity petrochemicals and polyethylene boom.

But fracking also raises deep concerns of possible groundwater contamination and even mini-earthquakes. Weighing the benefits and the risks, in an otherwise high cost energy environment, further exploitation of oil and gas bearing shale deposits appears to be all but unstoppable. But, then, anything is possible.

Should drillers and gas users be concerned about the negative public image of fracking? It was rated at number four in the list of The Top Ten Unfounded Health Scares of 2011 complied late last year by the American Council on Science and Health (ACSH).

That places it among the arsenic in apple juice, HPV (human papillomavirus) vaccine, Gulf Coast fish and sunscreen scares that caught widespread public and media attention in 2011.

The 2010 documentary Gasland, which targeted the relatively new natural gas drilling boom, is seen as spurring much of the concern about fracking. One scene showed a Colorado landowner setting his tap water on fire. But other media had picked up on the potential risks of natural gas drilling, particularly drinking water contamination with chemicals such as benzene.

“To deny Americans the possibility of plentiful, cheap and safe natural gas because of hyper-precautionary fears about ‘toxic and carcinogenic’ chemicals from hydrofracking fluid seems terribly irresponsible,” the ACSH’s Dr Gilbert Ross said.

“While fears of environmental degradation are hypothetical, and water contamination from fracking is highly unlikely, there is no doubt that this process can sustain our energy requirements while dramatically reducing our reliance on foreign oil and domestic coal, goals that the anti-fracking movement presumably favours,” the ACSH added.

“Perhaps the anti-fracking activists should consider the damage that results from avoiding fracking – more pollution from, and reliance upon, foreign oil.”

The exploitation of significant supplies of gas in shale deposits has the potential to alter chemical industry dynamics globally, not only in the US, some believe.

As ethane becomes more readily available in North America – and prices are held down – so more producers turn to the feedstock. New plants are planned and existing facilities are being upgraded to crack more gas. The impact of the new capacities will be felt globally and not simply in the raising of the competitiveness of local producers.

“This trend could force Middle East chemical companies to think twice before increasing their petrochemical capacity but also may in time create an ethylene price war and profit margin pressure for the chemical companies with the most invested in this commodity,” consultants Booz&Co suggested this month.

“Indeed, the possibility of an impending price war is further punctuated by activities in China, where natural gas resources are substantial and ethylene factory capacity is increasing at a rate equal to that of the rest of the world combined,” they added.

The wave of low-cost ethane cracker capacity additions in the Middle East has crested and we are possibly heading towards a trough. Also, diversification of the industry across the GCC (Gulf Cooperation Council) countries and the shift towards liquids cracking is changing the nature of the business.

Two producers attending the Gulf Petrochemicals and Chemicals Association (GPCA) meeting in Dubai in December, for example, expressed an interest in participating in the shale gas boom in the US.

“Not long ago, the centre of the global chemical industry seemed destined to be moving to the Middle East from North America and Europe, propelled by the ready availability in the Arab world of relatively inexpensive oil as a feedstock,” Booz & Co says. “That idea has now been turned on its head.”

Cracking more ethane potentially puts downward price pressure on ethylene and in turn potentially leads to a glut of polyethylene. Product substitution is expected with downward pressure on demand growth for other polymers, most notably polypropylene (PP).

Most geologists consider fracking to be a “pretty safe activity”, Professor Mike Stephenson of the British Geological Survey (BGS) said at a media event in London this week.

The BGS has been investigating two minor earthquakes associated with fracking activity near the resort town of Blackpool in northwest England.

The contamination of ground water supplies by methane as a result of fracking “is extremely unlikely”, UK geologists also said.

They are advising the UK government on the safety of the fracking process while the only firm fracking shale deposits in the UK, Cuadrilla Resources, has submitted its own report on the minor earthquakes to the Department of Energy and Climate Change (DECC).

While it waits for a decision on its consultants’ report Cuadrilla’s rigs remain idle.

By: Nigel Davis
+44 20 8652 3214

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