UK Goes for Shale-fuelled 'Gold'
If shale gas discovery were an Olympic sport, the UK may already be in medal contention. That is if the UK Government resists insurmountable EU regulatory hurdles and the mud-slinging of fact-free fractivists. It may be early days when it comes to adducing reliable figures for UK shale gas reserves, but all the indicators point to the strong possibility of a full-blown North Sea-style economic energy miracle.
In the first week of April, IGas more than doubled its estimate of UK onshore “gas in place” to around 10 trillion cubic feet (Tcf). In mid-April an independent report cleared Cuadrilla to resume frack drilling in England’s north-west, where it claims a massive 200 Tcf of reserves may be held. Taken together, IGas and Cuadrilla estimates alone have sent the figure for UK shale gas reserves scorching up the European rankings. But hot on the heels of UK onshore reserves estimates comes a report by the British Geological Society (BGS) revealing additional offshore reserves could easily catapult the UK into the elite company of the global shale big hitters, including the United States, China and Argentina.
According to the BGS, potential UK offshore reserves of shale gas could exceed one thousand Tcf; about five to ten times the figure for onshore. Even if, as some conservative observers maintain, only 10 to 20 percent is ultimately recoverable, that would propel the UK to become entirely self-sufficient in shale-sourced gas for decades to come, ending the dependency on imported Russian, Norwegian and Qatari gas which currently account for around 70 percent of the UK’s needs. The impact that could have on the UK economy and soaring domestic energy prices cannot be overstated.
In the US, shale gas production has already transformed the energy landscape. It threatens, almost single-handedly, to turn around the US economy. US domestic gas prices are just 25 percent of those in Europe. The shale industry has already created 600,000 jobs; by 2015, that figure is expected to rise to 870,000. The impact has not just been on domestic gas prices, the knock-on effect has helped revive manufacturing industry. Even the seven percent fall in US carbon emissions in 2009 is attributed to the national switch from coal to gas.
With Europe’s shale gas reserve potentially on a par with that of the US, you might expect Europe to be eager to join the race for shale. Not so. For all the negativity of the Obama administration towards fossil fuel development, the economics of shale gas and oil has to date blown away any serious opposition to fossil fuel developments. But the bureaucratic quagmire that is the EU has ensured that for the moment in Europe anti-fracking ‘negativity’ rules; not least as key states Germany and France have introduced fracking moratoria. The UK has thus far, however, resisted all attempts to introduce a fracking ban. And the recent decision to allow Cuadrilla to resume drilling after its activities caused two minor earth tremors in early 2011, presents the UK with a gilt-edged opportunity to outstrip its potential European shale competitors.
If the UK is to race into a European lead on shale development, however, it will have to inure the public to the alarmist ‘superstitions’ of the green fractivists. More significantly, with an EU bureaucracy whose sole guiding philosophy appears to be the stultifying ‘precautionary principle’. Few know the history and practice of fracking more than Exxon Mobil CEO Rex Tillerson. Tillerson has clearly had enough of the softly, softly PR approach when it comes to the increasingly unrealistic safety standards of governing bureaucracies and the green anti-frackers. “What’s happened is the tables have been turned around now to where we have to prove it’s not going to happen,” Tillerson recently told Fortune. “Well, that is a very dangerous exchange to get into because where it leads you from a regulatory and policy standpoint is to govern by the precautionary principle. And the precautionary principle will absolutely undermine the economy.” As he bluntly states, “If you want to live by the precautionary principle, then crawl up in a ball and live in a cave”.
Such is the economy-changing potential of shale gas and oil that public debate over it has the power to further weaken already strained EU political and economic bonds. Currently, the Berlin-Paris axis that drives European politics remains reticent about hydraulic fracturing in the shale drilling process. Other European states may yet impose bans. In other words, early green-lighting in the UK could speedily see it grab an unassailable lead and expertise in European shale development.
There are some good signs. The word is that senior British officials were recently asked to pull together a briefing on the potential of British shale gas and oil reserves for David Cameron. According to The Economist, those same officials not only grasp the economic significance, but also perceive “an irrational European nervousness about science, technology and the environment”. A UK parliamentary committee has even urged the Department of Energy & Climate Change to work with the Treasury to “explore the impacts of tax breaks on the sector”.
UK lawmakers may have green-lighted but further choking EU regulation under the ‘precautionary principle’ may yet help to derail UK shale development. If that happens, the early development of large scale UK shale gas reserves could quickly become a new and critical focus of serious economic and energy security disagreement between London and Brussels. In a recent poll the United Kingdom Independence Party (UKIP) eclipsed the Liberal Democrat Party as the third force in UK politics for the first time. UKIP’s central tenet – the need for the UK to leave the EU – is plainly resonating with UK public opinion. Disaffection with EU interference in national affairs is rife. Putting hurdles in the way of the UK’s race for shale gas and the prize of economic recovery it alone offers could easily, for a public alerted to the importance of UK shale reserves, prove to be the last straw.
While Eurocrats and eco-fractivists remain captivated by the synchronized stupidity of anti-fossil fuel policies and the precautionary principle, some UK officials, at least, perceive 2012 as the time to go for what promises to be an Olympian-scale prize: shale-fuelled economic ‘gold’.