Fracking in the US (above) won't be very similar to the UK
The fight over whether or not we should go fracking in the UK is getting a little dirty.
With almost every journalist in Fleet Street geared up for the release of updated and significantly increased geological data on the amount of gas in rocks somewhere beneath Blackpool, the proxy war is well under way.
Leading the charge for shale is the inimitable Peter Lilley, a Cambridge economics graduate last seen in politics as John Major's Minister for Social Security and now, like much of the 1990's, undergoing something of a revival. So what is he saying and is it right?
First off - let's all declare our interests:
The Energydesk blog is editorially independent from Greenpeace but still owned by them and they are an environmental organisation not particularly sympathetic to fracking.
Peter Lilley is one of those MP's who believes that the interests of the oil industry are not so different from the national interest. Correspondingly he's been happy to receive $400,000 in oil company share options - according to The Guardian. None of those come from fracking however.
Britain could be sitting on shale reserves far larger than we ever dreamed of.
UNKNOWN: It’s hard to know – because we haven’t seen the updated estimates. But various claims from sources close to the data suggest we have enough gas to heat every home for 100 years.
This is calculated by taking a number for the total amount of gas there may be (which we don’t yet know, but we have sources) and dividing it by another number for the % of gas we can extract and then dividing that by UK demand. It’s not hard really – you could do it. Here is a version we did.
But as we’ve explained before, the second number varies wildly from place to place, according to economic and geological factors. It is improbable, for example, that the extraction rate from the US - where the shale is at a different depth, the industry more developed and the population more sparse - will translate to the UK.
In fact, a report put together by leading UK energy consultants Poyry based on data from the leading UK fracking firm Cuadrilla suggested peak production (if all goes to plan) of around 0.7tcf (trillion cubic feet) – enough to meet around a quarter of UK demand.
Shale gas resources may be on the scale that has boosted America’s economy by cutting gas prices to a third of the UK level, at the same time reviving their manufacturing industry, creating hundreds of thousands of jobs and generating massive tax revenues.
FALSE: The problem is there are big differences between the US and the UK when it comes to fracking.
Gas is relatively hard to transport and so in the US fracking combined with a recession led to a ‘gas glut’ - too much supply relative to demand.
The UK, by contrast, has multiple pipes linking us to the continent. We’re part of a European market which sets our prices. For shale to reduce the price here it’d have to do so all over Europe.
And not a single institution that we could find thinks that will happen.
In contrast the International Energy Agency (even in its golden age for gas scenario), BP (in its energy outlook), Centrica and even Cuadrilla have suggested that shale in the UK and EU will not be a game-changer.
When Poyry took a look at Cuadrilla’s own estimates for shale gas extraction and evaluated it as part of European shale gas push, they estimated it would lower prices… by 2-4%.
To argue that lots of gas in the UK will lower UK bills proportionally is to argue that lots of North Sea oil should result in cheap prices at the pump – sadly (for UK consumers) it just doesn’t happen.
Indeed in April an analyst at IHS global insight suggested relying on gas from shale would instead leave the uk "vulnerable to price spikes" that have been blamed for higher energy bills.
Peter Lilley is right that various studies have argued lower gas prices in the US will create thousands of jobs (elsewhere, not in the industry itself). However as the FT reports, the evidence for that ‘re-industrialisation’ is also looking pretty shakey - but that’s for another blog.
As for tax revenues – fossil fuel extraction does tend to be profitable for the exchequer but it must be remembered that even Cuadrilla doesn't envisage getting up to full speed until the late 2020’s (see Poyry’s analysis again) and that’s with some healthy tax breaks. So the gains won’t exactly sort out the immediate trouble with the deficit.
They [environmentalists] claim it will lead to contamination of the water table, “earthquakes” and methane coming out of your taps. In fact, fracking is a tried-and-tested technology which has been used since the late Forties.
TRUE (but also misleading): Peter Lilley goes on to accurately quote the Royal Academy of engineering report, which suggests health and safety risks from fracking can be managed with appropriate regulation (though documents obtained under an Energydesk FOI request suggest regulation has some way to go).
The concern over earthquakes, particularly, has recently been dismissed by the government with one study concluding the seismic activity was equivalent to jumping off a ladder. And there are few who realistically fear flaming taps in the UK.
However serious local concerns over fracking persist. A survey by the British Geological Survey into the possibility that fracking could impact on the Bath springs said it could pose an “undefinable risk to the springs".
There are also more mundane concerns, familiar to opponents of wind-farms, about roads, infrastructure, noise pollution, flaring, drilling under property and property prices.
The chief executive of Bloomberg New Energy Finance, Michael Liebreich has calculated replacing current north sea gas production (which meets less than half of our demand) with shale gas would require some 2,400 wells, clustered on around 240 ‘well pads’ each with significant infrastructure.
Fracking – or hydraulic fracturing – has indeed been around since the forties in one form or another but it hasn’t been used to extract gas at scale until recently. It’s rather like comparing a modern wind farm to a Dutch windmill.
When you hear shale gas and fracking described as “controversial” or “risky”, bear in mind that most campaigners against it are not concerned about fracking as such. Their main motive is to prevent us from exploiting fossil fuels.
TRUE: but only to a point.
There is a risk that an energy policy built around fracking will ‘lock-in’ more gas extraction than we can afford to burn if the aim is to reduce the risk of catastrophic climate change.
However that doesn’t mean arguments over the local environment and economics don’t matter.
For example, if fracking were to result in cheap, plentiful gas now, some may argue it could help reduce the UK’s current - but soon to be phased out - reliance on polluting coal. Others would claim that cheap gas – if delivered - could also lower bills – making renewable subsidies more acceptable to people who support action on climate change or even enabling carbon capture technology. The risk may be gambling on gas, not building alternatives and ending up with higher bills and higher emissions at the same time.
The argument isn’t therefore just between those who don’t like fossil fuels and those who do. It’s an argument about whether the evidence suggests it is smart to base energy policy on the potential of shale gas – or whether it doesn’t. It's not one that's going to end soon.
