Shale gas find is Britain's 'golden opportunity'
by Benny Peiser
The discovery of 200 trillion cubic feet of shale gas in north-west England could revolutionise Britain's energy market
Last week the drilling company Cuadrilla Resources announced that it had discovered an estimated 200 trillion cubic feet of shale gas under a small patch of land in the north-west of England. The find suggests that Britain has considerably more shale gas resources than earlier estimations predicted – possibly by an order of magnitude.
Despite the fact that typically only around 10-30 per cent of gas locked in shale formations is recoverable, the astoundingly large discovery may turn out to be one of the biggest gas finds in the past decade.
Next year Cuadrilla will submit its development plans for approval to Chris Huhne's Department of Energy and Climate Change. If the government approves of the exploration plan, Cuadrilla hopes to bring the first gas to market in 2013. But whether or not the coalition government will give the green light to what appears to become a veritable energy revolution depends to a large extend on Huhne's ill-famed objections against a new dash for cheap gas.
The reason for his opposition is not difficult to grasp. The discovery of vast unconventional gas reserves beneath Lancashire is likely to undermine Britain's renewable energy sector. In sharp contrast to government targets or costly subsidies, the shale revolution could create a whole new energy industry that would generate billions of much needed revenue and thousands of real jobs.
Cuadrilla estimates that shale exploration could contribute £5bn to £6bn to the local economy over the next 30 years through job creation and business taxes. What is more, the new shale estimate only relates to the 440 square mile Bowland area between the cities of Blackpool and Preston. There are other large scale shale formations in other parts of the country that may be just as large if not larger than the Bowland play.
And then there's the North Sea. According to the British Geological Survey, shale gas resources there could dwarf onshore supplies. Britain may be sitting on a huge gold mine of cheap, abundant and comparatively clean energy that could supply the UK's energy needs for a century or more. No wonder then that a growing number of MPs want the North Sea to be at the heart of a new offshore shale gas industry.
The knock-on effects of a shale gas revolution could be just as staggering: cheap energy would make UK manufacturing more competitive, gas and electricity bills would fall significantly and the rising trend in fuel poverty could be reversed. If there ever was a potential silver bullet to tackle Britain's economic and financial problems, shale gas has placed it on the government's table.
But cheap and abundant shale gas is a competitive threat to all forms of renewable energy – and also to the coal and nuclear industry. Vested interests have turned against shale, using flawed and misleading environmental arguments to protect their market share. Chris Huhne in particular is renowned for his uninhibited antagonism towards natural gas. At the Liberal Democrat party conference in Birmingham last week he promised to halt a new "dash for gas" because it would undermine the UK's unilateral climate targets.
Huhne's main concern, however, is not CO2 targets that could be met quite adequately if Britain were to switch from coal-fired to gas-fired power generation. His real apprehension is that if a significant amount of cheap shale gas were to enter the UK market, it would almost certainly deter investment in expensive renewables.
In order to stifle the emergence of a cheap energy market and to shield expensive renewables, DECC's energy bill would force UK families and businesses to subsidise renewable energy by approximately £120bn in the next 20 years. Electricity prices would likely double as a result.
There can be no doubt about it. If cheap shale gas were to displace expensive renewables and expensive imported energy, the price of electricity would fall significantly. If shale gas is more abundant than previously thought, the already high cost to households and businesses of subsidising nuclear and renewable energy would go through the roof.
Of course, this development is politically and economically unsustainable. It is no surprise that a recently leaked letter by David Cameron's energy advisers described Huhne's energy plans as "unconvincing" and warned that his green obsession will hit consumers hard. David Cameron would be well advised not to allow his green minister to squander Britain's golden shale gas opportunity.
Dr Benny Peiser is the director of the Global Warming Policy Foundation
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A few points.
Cuadrilla have claimed 200tcf in place, but it has been suggested that it could be more like 20tcf. It's too soon to tell yet.
Even Cuadrilla are only talking about 10-20 per cent recoverable, per the original piece in the FT. At present we just don't know whether any gas will be recoverable.
What is certain is that this is not cheap gas. The typical conventional gas well can drain a square mile or more of reservoir, whereas shale gas wells drain only a few acres. Even in the US there is still some debate as to the actual cost of shale gas, with estimates varying up to twice the current wholesale price of gas. In turn tight gas in the UK could be twice as expensive as it is in the US, thanks to planning problems - much shale gas in the US is in empty desert, the UK is much more densely populated - and some technical factors. Time will tell, but shale gas will not cause electricity prices to fall significantly.
Apart from the amount of the gas actually recoverable and usable, there are issues of environmental concerns. The extraction of shale gas is quite damaging to the environment, but, given the proper steps can be mitigated. So all these have to be taken into account.
There are the factors that the quantity of these reserves are most often overstated by the companies leading to massive overestimation of the financial benefits of the gas. There is the question that the UK Green minster rightly fears - what happens when the reserves are depleted? Pulling the plug on research and commercialization of other renewables isn't the answer by a long shot. Environmental concerns are real dangers, not some fancy words that dreamy people write on research papers. The revenues that this gas yields must be used to exactly those ends. The gas itself can be safely and relatively extracted, but that requires careful implementation and some initial investment. These must be monitored by the government.
In short, the discovery is indeed a boon for the strained UK exchequer. But the benefits could vanish faster than smoke if the government displays the same ineptitude it did during the recent financial crisis.
Aritra - India
I've got no objection to green energy, but Huhne's plans for offshore wind will actually increase CO2 emmissions through the need for stand-by gas-fired generators that will run for much of the time in standby mode. This mode generates more CO2 that their designed optimum power levels. Sort of like running in first gear instead of fourth. So the £110bn spend of our money will be absolutely wasted.
John Campbell - UK
As has been mentioned, renewables are very expensive at a time when neither the UK consumer - nor government - has the money, so must be placed on an even commercial footing as other energy sources for power generation. This means the removal of all subsidies and positive discrimination, and letting the wind and solar companies compete in the open market - investing with their own money, not the public's. If they can survive in the longer term by being cheaper/more efficient than other energy sources, so be it, but I suspect they will never be able to.
Where the government should invest, is via R&D tax breaks in thorium based nuclear process development, but again, not via subsidies. We should then let the power-generation companies use their own money to build the infrastructure based on an assessment of the research outcome, with an ROI that competes with the other power generation energy sources.
It seems we only need two things from Cuadrilla and other shale gas producers, a commitment to a safe operating model - but not burdensome regulation - and a commitment to stop, or at least pause, if issues of increased tremors and any ground water contamination are detected. The shale gas industry also needs an independent, including politically independent, body to monitor shale operations.
All energy sources should be freed from political interference, but allowed within the framework of an 'overseer' - rather than regulator - to conduct their businesses within a policy framework that provides long term certainty.
Simon - Cambs, UK
The political demise of Huhne is to be welcomed if it now results in a balanced discussion. Fracking for shale gas is an identical method as is used for fracking formations to deposit carbon dioxide.
Alistair Stewart - Aberdeen, Scotland. CoP