Shale Gas and Earthquake:Truth or Conspiracy?

Chinas devotion to the shale gas might be cooled down by the following news. The U.S. Geological Survey found that the hydro fracturing method， which is going to be the main method of China to extract the shale gas in the future， might lead to seismic di- saster.

Even though it has not been confirmed， it can still be considered to be an alarm for China. “If China is going to exploit the shale gas massively in the future， the study into the earthquake must follow up.”

New “Prophecy” of “Doomsayer”

The ideas and practices of exploiting shale gas are always accompanied by various disputes since they were born. They are bubbles， a government-schemed conspiracy and could cause intensive pollution. Now， a new crime was linked to the shale gas exploitation – it might cause earthquakes.

This saying was brought forward by a tycoon in the U.S. investment circle， who is also known as a “doomsayer”.

His name is Jeremy Grantham， co-founder of the famous investment fund GMO. At the start of February 2014， he expressed his opinions towards the heat of exploiting shale gas in his letter to investors， in which he stated that the exploitation of shale gas is obviously connected to the earthquakes from the perspective of statistics.

Different from his usually reserved attitude towards the economic situation and stock market， Granthams certainty in this matter soon drew the attention from the market and media. Since he had successfully forecasted the “dot-com bubble” in the late 1990s and the subprime debt crisis in 2008， Grantham has certain influences in the investment circle of the U.S. The fund GMO is now managing the assets of US$117 billion.

Grantham expressed his belief in the cause-and-effect relation between the 3-Richter-scale or higher earthquakes in the U.S. and the hydro fracturing method.

Thanks to the breakthroughs in the hydro fracturing method， the U.S. can embrace the time of massive exploitation of shale gas. This method requires the horizontal drilling to the shale bed and make use of the water， sand and some chemicals carried in the tunnels to smash the rocks and release the natural gas or oil inside them.

In the past few years， the reform of shale gas in the U.S. almost restructured the energy field of this country. In 2011， the exports volume of gasoline， diesel and other kinds of energy even surpassed the imports volume. The success of the shale gas reform made grand influences over the global energy supply and several related industries. This also caused the chain reaction as the wave of exploiting shale gas is going to be spread to the entire world.endprint

Now， the new viewpoint that connects the shale gas with earthquakes put the emerging industry into question. Prior to that， those who question the shale gas exploitation mainly focus on the consumption of fresh water and the pollution of underground water.

“Certain to Be Contrived”

Actually， it was not the first time that the shale gas exploitation is considered a cause of earthquakes.

Long before Granthams report， the U.S. Geological Survey made surveys into this matter. In the Annual Meeting of U.S. Ecology in April 2013， the organization published a report， saying that the frequent earthquakes in the U.S. Middle West in the past dozen of years were certainly caused by “artificial factors”.

According to this organizations data， earthquakes occurred frequently in the area from Alabama in the Middle West to the northern Rocky Mountains from 2001. In 2009， this area saw the occurrence of 30-Richter-scale or higher earthquakes 50 times. In 2010， the number of earthquakes increased to 87 and then reached the shocking 134 times in 2011， six times as often as the same period in the last century.

The report stated that the oil and natural gas exploitation is the main“contributor” to the increasing occurrence of earthquakes in this area. Of them， the hydro fracturing method used to extract the shale gas and the waste water disposal well following this method are worth enough attention.

Not only in the U.S.， Holland， as reported by Wall Street Journal， also went through several earthquakes in recent years even though it is not within the seismic belt. The governmental research found that this is related with the natural gas production in Groningen. In 2013， this area saw the occurrence of 93 earthquakes and the most powerful one was at 3.2 Richter scale. In Canada， the increasing exploitation of shale gas also “pushed” the number of low-scale earthquakes by 20-30 times. The researchers have begun to study into the connection between the increasing number of earthquakes and the shale gas exploitation.

Won-Young Kim， a seismic expert with Columbia University found in a survey of an area named Youngstown in Ohio that more than 100 small earthquakes happened in this area in the past 12 months. But since the towns history dating back to 1776， not even one earthquake had happened before until the Pennsylvanians began to inject liquid into the gas well with hydro fracturing method. Last March， the administrative department of oil and natural gas in Ohio said that they could almost confirm the cause-and-effect relation between the dozens of earthquakes in southeast of Ohio with the injection of waste water into underground for exploiting natural gas.endprint

Kim said that several cases of earthquakes he studied into can be directly attributed to the hydro fracturing method. According to him， the high-pressure water stream is used to fracture the underground rocks to unleash the natural gas. Usually， this method can rarely touch the fault zone and so the earthquake cannot be triggered with hydro fracturing. But in the U.S.， Canada and UK， the high-pressure water really hit the fault zones.

Geoffrey Abers， another seismic expert with Columbia University， also said that the possibility of hydro fracturing method to cause disastrous earthquake was higher than expected.

China to Be Concerned

All these mentioned are not irrelevant to China.

After the rise of shale gas in the U.S.， China also shows great interest in this field and has made a lot of preparatory work to kick off this industry. According to The 2011-2015 Planning of Development of Shale Gas issued by the National Development and Reform Commission， China is devoted to the project of increasing the output of shale gas from zero to 100 billion cubic meters. It has thrown two rounds of bidding for the exploitation of shale gas， which had attracted companies like China National Petroleum Corporation （CNPC） and China Petroleum & Chemical Corp （Sinopec）.

But the hydro fracturing method， which might cause earthquakes as revealed by the U.S. Geological Survey， is the main technology for China in the exploitation of shale gas.

However， instead of the debate about the connection between shale gas exploitation and earthquakes in the U.S.， Chinese researchers unanimously share the same opinions of this matter. Prof. Xue Haitao from Unconventional Oil & Gas and New Energy Institute at China University of Petroleum， said that the focal depth of the earthquake is usually 10 kilometers below the ground while the depth accommodating the shale gas exploitation is around 3 kilometers. Therefore， it is hard to say that the earthquakes are directly related to the exploitation of shale gas.

An anonymous expert from the Oil & Gas Institute at the Ministry of National Land and Resources also made it clear that there is no confirmed connection between the hydro fracturing method and earthquakes. Instead， it is necessary to see whether the earthquake-stricken area is within the area of the shale gas exploitation. Even though it is indeed within the range， they might be different in the depths “The detailed data is needed to connect the two together. I daresay the present evidence is not enough to support the connection.”endprint

Apart from the disagreement about the focal depth and the connection between shale gas exploitation and earthquakes， the Chinese scholars also put forward questions for the research method of U.S. researchers. “Another possibility is that the earth is now in a period with high occurrence rate of earthquakes in recent years， which happened to coincide with the massive development of shale gas. These two subjects might be positively related with each other， but the explanation to the positive relation might not be objective enough，”said Wei Zhihong， deputy director of Shale Gas Exploration Department of Exploration South Corp at Sinopec. The evidence U.S. scholars have displayed is too macroscopic.

A lot of Chinese researchers believe that even though there is possibility that the shale gas exploitation might cause small earthquakes， its impact on humans living and safety is too low to be counted. Prof. Zhang Jinchuan from China University of Geosciences said that the mild earthquakes can release the stress of the crust and thus is even good for evading large and destructive earthquakes.

However， the study of Won-Young Kim into Youngstown showed that the biggest earthquake in this area， which is 3.9 Richter scale in power， had already caused tiny damages to the buildings.

It is notable that 40% of the shale gas in China is reserved in the Sichuan Basin and Yunnan-Guizhou Plateau， where a lot of earthquakes， including several destructive ones， happened in these years. “To reduce the possibility of inducing the earthquake， people need to intensify the surveillance and monitor （of the shale gas exploitation） and locate the site far from populated area，” said Won-Young Kim.

Presently， there are not enough materials available for Chinese scholars to study into the connection between the shale gas exploitation and earthquakes because the shale gas industry just started in China. “The Chinese scholars do not have many cases to study. Right now only the U.S. had the massive exploitation，” said Xue Haitao， when China began to massively exploit the shale gas， the seismic research must keep up with the project.

Another Conspiracy？

Though the academicians have not agreed upon whether the shale gas exploitation can cause the earthquake or not， the capital owners and operators have already made responses to this claim.

Actually， the doubt of Grantham for the hydro fracturing method supports his viewpoint of bearish crude oil price. In his letter to investors， he pointed out that the slow economic growth in the world and the rise of new energy cars will lead to the decrease of the oil demand in developed countries and the decrease might be faster than expected.endprint

“There are great uncertainties in the shale gas industry and market in the U.S. All vested interest groups of this country are furiously wrestling with each other to decide which orientation this industry will move to，” said Chen Weidong， chief energy researcher at Energy Economy Institute of China National Offshore Oil Corporation. “The saying about the earthquake is actually a new concept the wrestlers threw out to draw the attention.”

In 2013， after the fast development of shale gas industry and massive investment into the market， the heat of shale gas began to fade away. This is mainly because the supply of natural gas in the U.S. is now larger than the demand. The large increase of the shale gas and its impotency to be exported has already pulled the natural gas price in the U.S. to an extremely low level. By the end of 2013， the natural gas in North America fell to US$4.23 per million BTU， very close to the lowest point in the history.

The U.S. companies that invested in shale gas are also trapped in the low price and loss. They strongly hope that the government can remove the restraint over the export. But the low natural gas price is somewhat helpful for the resurrection of the U.S. manufacturing and especially good for bettering the business performance of chemical companies， which give the objectors enough reasons to object exporting natural gas.

A report made by PricewaterhouseCoopers said that completion of infrastructure for the natural gas in the U.S. in the next 3-4 years will turn the benefits of lowered raw material cost into the lowered price of daily-use products and durable consumer goods. This is very helpful for the recovery of the now fragile U.S. manufacturing.

“Actually， many investors that are still fascinated with the shale gas put their hope onto the governments permission of exporting shale gas，” said Cao Yin， Energy Director of The Martec Group. Against this background， there are numerous sayings about the bubble， pollution and earthquake， which are actually the methods both groups used for their own interest.

In addition， Grantham is also an environmentalist that pays a lot of attention to the climatic change. He and his wife founded the Grantham Foundation that is fully devoted to environmental protection. In February 2013， Grantham and his daughter even joined in the demonstration in front of White House to protest the governments construction of oil pipes.

“Though many people doubt about his purpose of the theory about shale gas exploitation and earthquake， I am not surprised at all in consideration of his way of doing things，” said an investor that has been doing bulk commodities business in the Wall Street.endprint