Today, at 6AM in a release barely more than a paragraph long, the treasury announced that the British Geological Survey (BGS) had found 1300trn cubic feet worth of shale gas trapped in the rocks beneath Lancashire.
The release appeared only to go to select media, including Sky and the BBC.
The timing was interesting – the Department for Energy and Climate change (DECC) hadn’t planned to put the information out until 11.30 – at a press conference with lots of qualifiers. But the treasury had a story to tell, about shale and growth, and they wanted to tell it their way.
The numbers are mind boggling. Like the cost of bailing out the banks or the deficit they mean little to most people – enabling politicians to use them to make more or less whatever point they like. In this case Osborne claims that bills are set to fall as the UK heads for a US style shale gas revolution.
The problem is that these figures don’t tell that story.
As Jamie Speirs – an academic from Imperial University, who has studied shale gas estimates – explains this is merely the first stage in a process of discovery that will take years before any gas has even started to flow.
That’s the first problem with linking shale to economic recovery. An analysis done for shale explorer Cuadrilla suggests the gas won’t flow until well after the next election reaching a peak of 21 per cent of total supply within three decades.
None of which is a given, because what we have now is a well or two and an estimate of the organic content of rocks. Lots of rocks contain oil and gas we can’t get at, only some contain gas we can reach – and it so happens that our rocks aren’t very similar to those in the United States. They are far deeper and the geology more complex.
Guessing how much gas you can get out is foolhardy – it’s a complex formula about geology, technology and simple practicalities. For example, extracting 10 per cent of the Lancashire shale could need some 50-100,000 wells– based on US extraction figures.
The US Energy Information Agency (EIA) estimate you can get out around 4 per cent of the total reserve. But even that, they warn, ignores the issue of profitability.
And there’s the rub. Poland also has plentiful, deep shales – even more than us by most international estimates. But since the drilling started the story has changed, the numbers have been revised down and three energy giants, Exxon, Marathon and Talisman energy have quit.
Things may work out better here. Cuadrilla claim the deep shales could be more plentiful – but almost every analyst including the IEA, Ernst and Young and Deutsche Bank cautions that shale in Europe is likely to be far pricier and more difficult to extract than in the US.
All of which is to say the amount we finally get out may be far less than 4 per cent. We really wont’ know until we’ve drilled tens, or hundreds of wells, causing alarm and concern to communities across the country. As DECC point out “The report published today will give industry and regulators an indication of how best to plan future exploratory drilling.”
The economic differences with the US also suggests the gas we do get out may be more expensive than it is in the US which, combined with our connections to buyers on the continent, means bills are unlikely to fall.
Indeed, Cuadrilla accept that the impact of shale gas on bills will be ‘basically insignificant’, probably a difference of around 2 per cent compared to what would be the case otherwise.
That matters when you look at the wider economic story. Claims of hundreds of thousands of new jobs in the US are largely based on lower energy costs for industries that would then employ more people.
Finally there is an important economic point about the climate. A recent report by the International Energy Agency (IEA) argued that two thirds of existing fossil fuel reserves should be left in the ground, arguing that existing reserves of oil and gas are so large that it would be uneconomic to exploit new oil and gas, assuming the world intends to limit consumption.
Indeed with the UK committed to decarbonising its power sector by 2030 and heating sector by 2050, shale gas production could either undermine our chances of tackling climate change or end up a stranded asset, the wrong economic bet.
All of which isn’t to say shale won’t change the landscape in the UK too. The Financial Time’s Nick Butler compellingly argues that the fracking naysayers in the US found themselves rather spectacularly on the wrong side of history. But using a geological survey to pre-announce a shale gas driven boom could risk putting politics before scientific or economic reality.