According to Nick Riley (of the British Geological Society, BGS) at the European Shale Gas and Oil Summit in London in October, the ‘UK’s geological make up is far more complex than the US’s layer cake build’ which will make it harder for companies in the UK to conduct shale explorations even though the UK is “blessed” with significant shale resources.
This revelation comes as the BGS’s report last summer concluded that even though the UK was home to fair denser shale gas basins than the US, they unfortunately were far deeper and therefore more complex to extract.
While the gas would still be extract-able, the complex nature of the operation in the UK would likely result in far higher production costs.
Andrew Foulds, director of Petrafiz was quoted saying:
“The best shale is in the US, the shale resources there are phenomenal… but they aren’t in the UK, hence they will need a lot more work”.
Incidentally a recent report from the UK Energy Research Centre (UKERC) has also suggested that significant shale gas production in the UK is unlikely to get underway until the next decade and is unlikely to hail a ‘shale revolution’ in the UK like one that has put the US on course to energy self-sufficiency. The research centre went even as far as to suggest that the promised ‘goldrush’ of shale exploration were ‘hyped’ and ‘lacked clear evidence’.
Going all out for shale
This year the Prime Minister said that the UK was ‘going all out for shale’, with exploration alone likely to create over 64,500 jobs and estimated that there could be 1,300 trillion cubic feet of shale residing in the UK countryside.
The UK Treasury has said that the potential of shale gas was “too big to ignore” with MPs suggesting that the UK could set up a Shale Gas Sovereign Wealth Fund, learning from the ‘squandering of North Sea Oil in the 1980 through till 2000’.
In fact, last week, British Finance Minister George Osborne told BBC Radio:
“You could create a sovereign wealth fund for the money that comes from the shale gas that we’re going to be pulling out of the ground, particularly in the north of England… We want to make sure money is not squandered on day-to-day spending”
Shortly after the UK began drilling for oil and gas in the North Sea in the late 1960s, the idea of a wealth fund was first floated, but it never saw the light of day. As a result, many feel that oil and gas revenues were “wasted” without any benefit to future generations.
Clearing the way
The UK began accepting licensing bids in July from companies looking for shale gas, three years after a series of earthquakes led to a suspension of hydraulic fracturing.
With the threat of Russia ‘turning off the taps to Europe‘ and consistent ‘problems in the Middle East‘, the government argues that shale gas is the only way to secure the UK’s energy security by reducing reliance on imports.
While the new licenses are a first step in the exploration process, they do not grant companies explicit permission to drill.
Once a license is given out, a company still needs to obtain health and safety permits, as well as an official guarantee that drilling would not harm the environment.
(Below – Infographic from EY.com)