Economic Benefits of Shale Gas in the UK

Shale gas and oil could provide the UK with greater energy security, growth, jobs and tax revenue.
The Government is encouraging safe and environmentally sound exploration to determine our shale potential. The UK has a strong regulatory regime for exploratory activities but we continuously look to improve it.

Shale in the UK potential jobs created

UK NET energy Import/Export

The vast majority of the oil and gas production in the UK is currently based offshore, but exploration has turned to the land itself. Harnessing the potential of the shale reserves onshore could create over 74,000 jobs and lower the country's increasing import dependency dramatically.

Bowland Basin Contains an estimated2,281tcf of gas

Fylde coast of Lancashire

Covering the land from York to Derby and Liverpool to Hull, the Bowland basin's estimated size would make it the largest shale basin in the world. There is an estimated 200 tcf of shale gas under the Fylde coast of Lancashire alone, making it a focal point of the UK's shale developments.

The upper estimate of the Bowland's contents, 2,281 tcf, would make it the biggest shale basin in the world. Even if only 65 tcf of this gas was recovered, 5% of the central estimate, this would be enough to supply the UK for roughly 25 years.

Weald Basin Estimated to hold up to8.6bbl of oil

South Coast of England

Stretching from Hastings to beyond Southampton and reaching the edge of London, the Weald basin spans the southern coast of England. The area contains shale oil and could be vital, alongside the Bowland basin, in securing the UK's future energy requirements.

f the upper estimate of 8.6 bbl was recovered, this would be enough to fuel the UK's oil usage, an estimated 1.21m barrels a day, for over 19 years.

Midland Valley of Scotland Enough gas to fuel the UK for over 30years

Edinburgh, Falkirk and Glasgow

Though the Midland Valley of Scotland covers a wide area, the focused area of study includes the land surrounding Edinburgh, Falkirk and Glasgow. The range of carboniferous shales is estimated to hold between 49.4 and 134.6 tcf of gas, as well as significant amounts of oil.

Between 3.2 and 11.2 billion barrels of oil are also estimated to be in-place here. Between this estimate and that of the Weald Basin, the UK's oil needs could be covered until well beyond 2040.

Energy consumption

Toggle year 2013 2003 1993

% Contribution to GDP by fuel source

1980 - 2013

Trends in energy employment

Economic Benefits

The potential benefits of shale gas to the UK

Operators have offered [Councils] a £100,000 [incentive] plus 1% of production revenues, which The UK Onshore Operators Group (UKOOG) estimates could generate more than £1.1bn over a 25 year period for local communities.

With much of the UK's media tending to focus on the environmental risks of shale gas extraction, less attention has been paid to the huge potential upside, which includes downward pressure on energy prices, improved energy security, higher growth, more UK jobs, improved trade balances and increased tax revenue. Add to this tough regulation to combat what appear to be rather overstated and fixable risks – at least when compared to alternatives such as coal, hydro or nuclear - and it is not surprising that all the main UK political parties are very much behind shale gas development.

With an eye on falling US CO2 emissions, UK politicians also believe shale gas could be an efficient means of meeting our ambitious greenhouse gas targets, especially when compared to the £2 billion a year (and rising) in subsidies spent on renewables. In a recent report, even the Low Carbon Hub – a green pressure group - acknowledged that "shale gas has the potential to reduce UK carbon emissions, with a carbon footprint… around half that of coal."

 

 

Stages of shale gas and oil

Exploration (2 - 6 months)
Exploratory drilling to identify if oil or gas can be produced profitably. The operator may do seismic surveys, samples, of the shale rock, one or more fracks and flow testing.
A 'pad' is built and a 30m tall drilling rig is installed. The operator may need to transport equipment, water and chemicals to and from the site.
£100,000 in community benefits provided per well-site where fracking takes place.
Moving into production (0.5 - 2 years)
If the site is suitable for production more wells will be drilled and fracked. Water chemicals, equipment and material will be brought on and off site and waste water carried away for treatment and disposal.
Production (20 years)
Maintenance activity will take place from time to time and further wells may be drilled, but the overall level of activity is likely to decline.
1% of revenues at production stage will be paid out to communities.
Decommissioning & restoration
Restoring the site to its original condition. It includes making wells safe for abandonment and the removal of surface installations.
Decommissioning and restoration could happen at any stage if the site doesn't develop into the next one.

source: Gov.uk

Shale gas can also help renewable development, as every megawatt of intermittent renewable capacity needs back-up, and will do until more effective storage systems are found. Gas-fired generation is the lowest carbon option and is also the most flexible, being easily switched on and off as the sun and wind vary. So, far from distracting energy firms from a focus on renewables – as some environmental groups claim – gas should be seen as an essential part of any system that prioritises wind and solar power, for the time being at least.

Add to this the fact that about a quarter of UK energy consumption is in the form of gas for heating homes and other buildings, which cannot quickly or easily be replaced by renewables, and the importance of shale gas to the economy and society becomes even clearer. The Department for Energy and Climate Change (DECC) states that shale gas will be used as a "bridge in our transition to a green future in conjunction with carbon capture and storage (CCS), nuclear and renewables." Efficient and easily constructed gas power stations, "provide flexibility to help balance out increasing amounts of relatively inflexible and intermittent low carbon capacity".

There are also substantial advantages to the UK in reducing energy import costs and improving energy security, against a background of declining North Sea production. Every cubic foot of gas recovered domestically means one less that needs to be imported, and money that would have gone to Qatar or Russia instead goes to fund British jobs and economic activity.

Francis Egan, CEO of pioneering UK shale developer, Cuadrilla, recently estimated that shale gas could supply up to a quarter of UK demand, but that this would take ten years or more. Whatever the actual level of production, it will certainly put downward pressure on prices – potentially helping those in fuel poverty, while also providing a further boost to the economy from cheaper energy. The anticipated price falls are, however, likely to be limited as the gas must be shared with European buyers, unless our neighbours on the continent also decide to develop the resource.

At a local level economic benefits are even more pronounced. Councils are able to keep all the business rates from shale gas operations, compared to half normally. Alongside this, operators have offered £100,000 plus 1% of production revenues, which The UK Onshore Operators Group (UKOOG) estimates could generate more than £1.1bn over a 25 year period for local communities, or £5-10 million per site. However, the Local Government Association wants more, stating that given the impact on local communities, "returns should be more in line with payments across the rest of the world and be set at 10 per cent." Industry group, Energy UK, has suggested another option might be for developers to set up joint ventures with Councils and residents.

As well as providing additional income, local communities should benefit from job opportunities. A recent government report concluded that 32,000 new jobs could be quickly generated. Others are even more optimistic – the Institute of Directors estimates up to 70,000 jobs could be created, while in April a UKOOG report predicted shale gas development could provide over 64,000 jobs and investment of £33 billion over an 18 year timeframe. Cuadrilla has estimated that 15% of jobs from their Lancashire operations were contracted locally, a figure that is expected to rise as local supply chains are established.

While opposition to shale gas extraction has been vocal, national opinion polls are generally positive, and – perhaps with the incentives in mind - local communities even more so. The Green party, which is the only one to oppose hydraulic fracturing, came last with 4% of votes cast in a recent council by-election in Fylde, where Cuadrilla is active.

Echoes of the great game

Current tensions in Ukraine and Europe's heavy reliance on Russian gas has pushed the issue of energy security back up the agenda. State-owned Gazprom has criticised attempts to develop shale reserves in Europe, claiming fracking has "significant environmental risks" including water contamination. But Gazprom's opposition to shale gas is not motivated by environmental concern.

Vast sums flow from the UK and other western gas consumers to the Middle East, North Africa, Norway and Russia, of which Gazprom is the biggest beneficiary of all. Shale would reduce our reliance on and consequent support for these suppliers, presenting them with a significant risk.

Shale is such a concern to Gazprom that it is even attempting to boost opposition in Europe through environmental NGOs. According to NATO's Anders Fogh Rasmussen, Russia is "engaged actively with… environmental organisations working against shale gas, to maintain European dependence on imported Russian gas." This gives the development of shale gas a strategic imperative, not just here, but across Europe.

Earthquakes in perspective

The biggest cause of fracking-related earthquakes in the US has actually been the reinjection of waste water into disposal bores, rather than the actual fracking itself. This is a practise not permitted at all in the UK. In addition, these earth tremors need to be put into context. Similar effects have been produced from the filling of reservoirs for hydropower, and coalmines have long been a cause of earth tremors.

Since early drilling triggered tremors in Lancashire, a review by the Royal Academy of Engineering and the Royal Society has concluded that risks "can be managed effectively in the UK as long as operational best practices are implemented and enforced". With strict seismic monitoring and more attention to geological detail including faults, DECC says the risk of future earthquakes will be lower.

Other concerns include water contamination and methane leakage. Water recycling will be compulsory in the UK, and sites will be tightly contained at the surface. New chemicals and treatment methods are already being developed to reduce clean water requirements. During extraction there can be leakage of methane, which is a powerful greenhouse gas. In the UK tight monitoring should pick up any emissions, and there is considerable focus on improving well casing and drilling procedures to address the problem.

The Institution of Mechanical Engineers and leading operators emphasised recently that they believe shale gas exploitation and production can be done safely in the UK. And in early May this was backed up by a House of Lords report that urged the Government to "go all out for shale" - but with the highest standards of regulation, including independent well inspectors.

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Vivid Resourcing Ltd - All sources of information gathered from Gov.uk and the CIA World Factbook.