Three reasons not to get too excited about the UKs shale oil and gas prospects
A new estimate suggests the world could have significant unconventional oil and gas resources – but does that really translate into a bonanza for the UK? The US Energy Information Agency (EIA) says the UK has 26 trillion cubic feet of shale gas and 0.7 billion barrels shale oil locked underground.
The Telegraph reckons this is enough to power the UK for a decade. While that’s technically true, the EIA’s figure would mean there is enough gas to provide for almost ten years of worth of the UK’s current consumption, the estimate includes any oil and gas which is technically recoverable with current technology – not accounting for any economic, political, and social constraints.
Getting the terminology right is important here, as there is a significant difference between the amount of fuel in the ground and how much is expected to be extracted once all the geological, regulatory, and economic obstacles are considered.
Geology
The first obstacle is geological. The UK’s shale is thicker than in North America, with lots of different types of rock irregularly layered on top of each other, making it harder to extract the oil and gas.
Even without these problems, extracting unconventional fuels is not easy to begin with. Exploiting shale gas requires using the controversial fracking method, while getting at shale oil involves mining the rock and heating it to around 350 degrees.
The UK’s geology adds to the difficulty. Nicholas Riley, team leader for unconventional gas at the British Geological Survey, explained to us that “faulting and changes in the rock type both vertically and horizontally” mean the fuel pools are more separated in the UK. This is why “drilling and completion costs for shale wells are substantially higher” than in North America, according to the EIA.
There is also significant political opposition in the UK to the methods of extracting unconventional oil and gas.
The EIA notes that UK fracking “got off to an abysmal start”: In 2011 oil and gas company Cuadrilla seriously damaged public confidence in shale exploration by causing a series of small earthquakes when drilling a test well.
Drilling resumed 18 months later after the government introduced stricter monitoring controls. Riley says the new regulations mean “a good appraisal of the geology to pick the best sites is very important” in the UK, as the rules increase exploration costs and mean companies have more to lose by drilling in the wrong place.
Regulation
The UK also has to comply with EU environmental regulations which are stricter than those in North America, making it less likely all the UK’s resources will be extracted.
International affairs thinktank, Chatham House, has drawn up a list of regulatory barriers to the development of a shale gas industry. For example, the UK’s Environment Agency requires companies to fully disclose which fracking liquids they use, and there are strict rules on the well designs and drill casings.
What’s more, the UK currently lacks the transport infrastructure needed to support large-scale oil and gas exploration. In addition, communities have less incentive to accept the disruption it brings because the land is state-owned – so they don’t get any money when companies buy drilling rights.
Professor Paul Stevens, senior research fellow at Chatham House, has previously said the regulatory environment means significant shale gas production in Europe is unlikely in the next five years, and not a “serious possibility” for 15 to 20 years. It also means unconventional fuels are unlikely to make it into the UK energy mix any time soon.
Economics
Finally, the EIA”s estimate does not take account of how the overarching economic conditions affect the unconventional fuel industry’s development.
Stephen Peake, environmental technologies fellow at the University of Cambridge, thinks this is a big oversight. He tells us:
“We can all go around counting energy streams and sources (and reserves) while writing reports – we could talk about how much energy there is in the waves arriving from the west Atlantic, it could power Britain forever â?¦
“But what is the point of using physics and geology alone: economics has to come into it for it to have real meaning. The key is how much will an energy resource cost to bring to market and what is its economic viability.”
Domestically produced shale oil and gas will have to compete with fossil fuel imports to be a viable energy option. Simon Moore, environment and energy research fellow at centre-right thinktank, Policy Exchange, says it’s currently “impossible to say” which way the import price will go, as more and more countries are supplying gas at a time of high demand.
The UK ultimately has to decide how much it’s willing to pay for the benefits of a having its own oil and gas supply – effectively paying a ‘premium’ for the security of using domestic energy. Moore says he’s not convinced it’s worth the UK paying much for the privilege of using it’s own oil and gas when there’s other options readily available.
A UK unconventional oil and gas industry?
There is a tendency in the UK media to confuse estimates of how much oil and gas the UK’s shale contains with the amount that we can feasibly extract, with each new estimate trumpeted with projections of plentiful oil and gas for tens, hundreds and even thousands of years.
There are many obstacles to even a small amount of unconventional oil or gas powering our homes, however – let alone relying on it for a decade.