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UK Determined To Realize Its Fracking Dreams

UK Determined To Realize Its Fracking Dreams

The development of shale oil and gas reserves in the United States has been credited with pulling the U.S. out of recession, reducing the country’s reliance on foreign oil, and recently, overtaking Russia as the world’s biggest oil and gas producer.

Across the pond in the United Kingdom, oil and gas production has always been centred in the North Sea, but declining fields, high extraction costs, and shrinking margins due to slumping crude oil prices, has the British government looking at shale to fulfill the island nation’s appetite for fossil fuel-based power.

This week the government made clear its intention to follow the American lead in using hydraulic fracturing technology to exploit shale oil and gas reserves, by opening up 27 new onshore oil and gas blocks for exploration. A second group of 132 blocks will be offered after an environmental assessment. The Oil & Gas Authority says it has received almost 100 applications from 47 companies, including British oil and gas company IGas and France’s GDF Suez, both of which have been granted licenses.

“As part of our long-term plan to build a more resilient economy, create jobs and deliver secure energy supplies, we continue to back our onshore oil and gas industry and the safe development of shale gas in the UK,” Energy Minister Lord Bourne said in a statement.

The Conservative government has actually taken its support for the industry a step further by promising to fast-track the permit process for oil and gas exploration, stating last Thursday it will require local councils to decide on shale permits within 16 weeks of an application.

"To ensure we get this industry up and running we can't have a planning system that sees applications dragged out for months, or even years on end," said Energy and Climate Change Secretary Amber Rudd. Related: Donald Trump Sees No Danger For Environment In Keystone XL Pipeline

Rudd’s views reflect the frustration that pro-fracking voices in the government, including Prime Minister David Cameron and Chancellor George Osborne, must feel over fledgling UK shale.

Efforts by Cuadrilla Resources, one of the first companies to attempt fracking in the UK, were all for naught when it admitted that it caused small earthquakes near Blackpool. Later the company’s request to frack in Lancashire was denied by local planners. Since 2011, no new fracks have taken place in Britain.

The reason, of course, is local opposition. Many councils are reluctant to allow companies to do any exploratory work, fearing a backlash from residents. Cuadrilla was rejected for a permit based on the potential for noise and typical NIMBY concerns such as how the site might blight the landscape. The company had planned to drill four wells to explore for shale gas. The fact that other European countries, namely France and Germany, have banned fracking, adds to the anti-fracking sentiment among Britons.

However that hasn’t stopped the national government from pushing a pro-fracking agenda. Undoubtedly its enthusiasm is driven by the eye-watering shale oil and gas reserves estimated to be contained in British rocks. According to the British Geological Survey, there may be over 1.3 quadrillion (a quadrillion is a thousand million million) cubic feet of natural gas contained within the country’s shale basins, mostly in the North, and 4.4 billion barrels of oil. Related: This Week In Energy: A Dangerous Global Trend Emerging

Cuadrilla estimates that could be as much as 200 trillion cubic feet in Lancashire alone.

Finding that shale oil and gas, producing it, and getting it to market will go a long way towards meeting domestic energy demand, especially for natural gas, which in terms of primary production, is falling rapidly in the UK.

"North Sea oil and gas output has fallen by 38 percent over the last three years. By 2020 we will be reliant on imports to meet 70 percent of the country’s gas needs. So when it comes to security of supply, there is a pressing need for solutions,” Sam Laidlaw, the CEO of Centrica, the British utility company, told an international energy conference in Houston in 2014.

Those numbers are a big reason why the British government continues to pursue fracking despite the reticence of local governments and outright hostility from certain anti-fracking quarters.

While three quarters of imported gas arrives via pipelines from continental Europe, the rest has to be liquefied and shipped in LNG tankers. In 2013 Centrica signed a deal to import LNG from Qatar, which currently supplies 15 percent of UK gas.

Like the United States, Britain wants to reduce its dependence on foreign oil and gas, and increase its energy security, especially in light of ongoing turmoil in the Middle East and recently in Russia. The dispute between Russia and Ukraine that in January boiled over into Gazprom cutting off gas supply to six European countries, is a reminder of how vulnerable the UK is to Russian gas exports. In May, Centrica, the owner of British Gas, extended a gas supply contract with Gazprom’s subsidiary in the UK to deliver 4.16 bcm per year to the UK until at least 2021 – an increase of 70 percent. Related: Low Oil Prices: Assessing The Damage So Far In 2015

As for how the government is going to square the circle of trying to increase energy security, while assuaging the public’s distaste for fracking, the jury is still out. The chief of a British task force on the environmental and health effects of shale fracking said in July that it’s too soon to say whether fracking would be a “good thing” for Britain.

“We have not yet concluded that fracking is a good idea for the UK. We still have to look at climate change, and the economics. It would be premature to make conclusions yet on whether it is a good or bad thing. If someone demonstrated that developing this industry in the UK would mean a substantial raising of greenhouse gas emissions, that would be a showstopper,” Lord Chris Smith, a former Labour MP, told The Guardian.

A report from the taskforce found that fracking could be safe if properly regulated and monitored. Recommendations include “green completions” on frack wells which mean collecting over 90 percent of the methane; and public disclosure of chemicals used.

By Andrew Topf of Oilprice.com

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