Make-or-break time for UK shale gas
The viability of the UK's shale gas sector will be decided in the by 2015, say industry leaders. Dan Byles, a member of the UK's parliament and chairman of the parliamentary Group for Unconventional Oil and Gas (APPG), told Petroleum Economist the future of the nascent UK shale gas industry would be decided within the next 12-18 months. The upcoming 14th onshore oil and gas licensing round, the 2015 general election and the impact of any economic sanctions on Russia would determine the success of UK shale gas, he said. "We're seeing a raft of applications starting for the next wave of exploratory wells ranging from Northern Ireland to different parts of England and Scotland," he said. The licensing round, to be this summer, would be a "barometer" for interest in then UK's shale prospects, Byles said in an interview in Aberdeen. "If we get a large number of new players bidding we'll know the confidence is there and that it's going to happen."
Domestic gas would help with the fight against climate change and efforts to cut UK imports, he said. "We need to talk less about water and earthquakes and more about climate change. The real battle with climate change is between gas and coal. This isn't about the UK burning gas. It's about burning domestic gas and creating jobs. The question policy makers should be asking is not: do we need gas? But: where should that gas come from?"
Ken Cronin, chief executive of the UK Onshore Operators Group, told a conference in Aberdeen that 2014 was a crucial year for showcasing the economic benefits of shale gas development and demonstrating it can be done without harming the environment. "If 2013 was about getting our fiscal planning and permits fit for purpose then 2014 is the year that we have to all ensure that we communicate as effectively as possible with local communities," Cronin said. The industry needed to help the public understand the "processes, the risks and the mitigations and the benefits that can be enjoyed both nationally and locally". The industry's target must be local communities, he added.
Byles said cross-party support from the three largest UK political parties would be a critical to shale. However it could also jeopardise the industry if that support was to suddenly break down. Next year's general election meant politicians wouldn't necessarily "think rationally", he said, leaving shale hostage to short-term political tactics.
Public opinion on shale gas in the UK remains deeply polarised – something politicians will be mindful of as the 2015 election nears. Not all politicians are on board with the shale drive. Tom Greatrex, the opposition Labour party's shadow energy minister, said the government had "overstated the evidence on shale gas", hurting the credibility of claims that it would offer important new supplies – and jobs.
The true scale of the UK's shale gas will only become known as drilling takes place, making the next licensing round a crunch point. "The slightly dangerous point is that with the 14th licensing round we'll see areas that, up until now, haven't had shale gas issues coming into play," said Byles. "Some local authorities and members of parliament might wake up and find a company they've never heard of has been awarded a license in their constituency. So we might see some knee-jerk reactions and protests for people who have not had the opportunity to inform themselves."
A recent study by the University of Nottingham claimed UK public support for shale was falling because of fears that hydraulic fracturing (fracking) could contaminate water supplies. Many environmental groups also continue to oppose fracking and to resist the political momentum behind it.
UK prime minister David Cameron said recently that domestic shale gas would cut into Russian supplies to Europe. But Greenpeace, a fierce opponent of shale gas development, said the comments were "a cynical attempt by the prime minister to exploit the Ukraine crisis". But Byles said tensions between Russia and Ukraine was likely to boost support for shale gas development in the UK, convincing "people who might not love the idea of developing shale gas" that the practice had value.
Meanwhile, anti-shale gas protesters should be "handled sensitively in the planning system", Byles said, adding that the industry and regulators should do a better job communicating with the public about the potential environmental risks and benefits of shale gas.
A report from the Intergovernmental Panel on Climate Change (IPCC), released last year, said emissions from unconventional gas could be significantly higher than from conventional gas. A new report is expected out in April. "Shale gas is not a silver bullet which will solve all our energy problems but the idea that we're going to replace oil and gas with renewables in a short time frame is completely not practical," Byles said. "This is not an idealogical question, it's a practical question: how do we continue decarbonising in an affordable, practical way? It's not rational to make shale gas some kind of a bogey man."