The prospects for the UK developing a viable shale gas industry are not promising due to a range of hurdles that will prove difficult to negotiate. This is the view of Howard Rogers, chairman, Natural Gas Research Programme and senior research fellow at The Oxford Institute for Energy Studies.
He sees supplies of gas from Qatar, Norway, Holland and Belgium (through the interconnector) remaining key. With reference to Qatar, he said: “Qatar has a medium-term contract with Centrica but I think that is fairly flexible so if prices are higher elsewhere, some of the gas can be diverted. But given Qatar’s investment into the import facility at South Hook, it is likely to continue to place significant baseload volumes of LNG into the UK for the foreseeable future.”
In his interview with Gulf Times, he explained why he doesn’t see the UK’s shale gas industry taking off.
“There is a huge question over whether the well sites are viable economically as individual investments. Even if successful, would a few shale gas pads — albeit drilling multiple wells with horizontal sections going off in different directions — make a meaningful contribution to the UK’s gas production which is already falling in terms of conventional gas production from the North Sea?
“Moreover, is the UK public going to allow this to develop on even a modest scale?
“On balance, my answer is ‘probably not’,” he said.
He believes the argument that jobs and associated industries could be generated around the development of shale to the benefit of the economy is over-stated.
“Shale is a low-manpower industry; so the number of jobs created would not be significant. There could be a multiplier effect on the local economy but significant job creation would only happen if there was a fast expansion of the industry with lots of drilling taking place,” he said.
The kind of activity seen in the US is not likely to happen in the UK, he maintains.
“The context for the shale gas industry in the US is very different to that in the UK. In the US, you have vast areas of ranch land where the local landowner has mineral rights. If the landowners have no better use for the land, they are happy for the fracking to take place. Those activities are not usually visible from public highways. In the UK, by contrast, the drill sites would mostly be visible,” he pointed out.
Even with a focus on drilling multiple wells in the same location with several multi-laterals off the main bore, there would be notable environmental impacts, he said.
“The good aspect of that approach is that it minimises the number of drilling locations but the downside is that you have more visual impact for a longer period of time because that activity would go on for perhaps a couple of years.”
He added that the devolution of planning powers from central government to local councils made it hard to progress.
“We have seen a lot of holdups for shale gas in the UK both in North West Lancashire where Cuadrilla is operating and North Yorkshire. Given the way that NGOs have managed to mobilise public opinion against shale gas, there is very little incentive for a country council to go against local opinion.
“In North Yorkshire, a decision has been taken to allow some wells to be drilled but look at how long this has taken. The last shale gas well was drilled in 2011; so this is not the kind of shale gas boom dynamic that we have seen in the US by any stretch of the imagination.”
With the picture on nuclear being uncertain, he sees gas as integral to meeting energy needs.
“In terms of the electricity supply, nuclear provides about 8 gigawatts. Typical UK demand in winter is 40 gigawatts and in summer it is down to around 25 gigawatts. So nuclear is significant but whether this level will be maintained is unclear. “Coal has declined significantly; it is down to about 4 gigawatts and gas is 15 gigawatts. Wind varies throughout the year; it is about 3 to 4 gigawatts at the moment – but that will grow. There are problems with intermittency.
“Looking ahead I think the UK is going to need gas both as a baseload power generation fuel and also as a fuel that is there as back up to generate electricity when the wind isn’t blowing.”
He believes there is a need for greater investment in gas-fired generation.
“Part of the problem is that power prices — partly as a consequence of government intervention — have been too low to incentivise investment in new gas-fired generation. Policy is slowly getting around to providing support payments to bring forward new gas-fired generation but they haven’t quite got there yet. “I think the UK is set to increase its reliance on gas imports. Many countries, such as France, have lived in that paradigm for many decades, so I don’t think that is a big deal from a security point of view.”