December 14, 2018

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U.K. Finally Goes Fracking But Benefits Won’t Be Visible Anytime Soon

U.K. Finally Goes Fracking But Benefits Won’t Be Visible Anytime Soon
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Following years of legal challenges, protests, arguments and counterarguments, fracking for shale gas has begun for the first time in the U.K. since 2011.

Exploration and production company Cuadrilla Resources confirmed fracking had started at its site in Little Plumpton, Lancashire on Monday (15 October), following the failure of a legal challenge the previous week.

Ever since fracking was brought to a grinding halt seven years ago by those who claimed it was linked with earthquakes, there has been no shortage of hot air between the opponents of technique, led by vocal protesters and environmental groups doing everything they can to disrupt proceedings, and the proponents and lobbyists claiming it is safe and flagging the need to frack for the sake of British energy security.

Cuadrilla Resources’ Preston New Road, U.K. pilot shale gas well site. (Photo: Matthew Lloyd/Bloomberg)

Cuadrilla Resources is not alone in its endeavor, and has several peers eyeing shale gas opportunities, including IGas, Third Energy, and petrochemicals Tycoon Jim Ratcliffe’s Ineos. According to the British Geological Survey (BGS), the median estimate for U.K. shale gas reserves stands at 1,329 trillion cubic feet (tcf), although it urges caution on linking the figure to viable recovery levels.

There could be as much 2,281 tcf or as low as 822 tcf of natural gas trapped in British rock formations, it adds. But supporters of the shale industry note that even if 15% of the lower estimate or 10% of the median estimate is viably extracted – i.e. 123 tcf to 133 tcf; that has the potential to power the U.K. for at least four decades via a low carbon fuel alternative to coal that needs to be phased out.

Cuadrilla Resources stressed fracking remains safe and would be of “enormous” benefit to the British economy. The first phase of its operations would see the company frack two horizontal wells over a three-month period to test for commercial viability. If successful, the site at Little Plumpton would see up to 20 wells being dug.

“These are the first exploration wells that will be tested. We have high hopes for them but we have to wait and see what comes out,” said Cuadrilla chief executive Francis Egan. “If we are successful, this would lead to tens of thousands of jobs and could be a very significant contributor to the exchequer. It could also reduce emissions because it will be better than importing gas from far afield.”

That enthusiasm is echoed by the U.K. government which is working towards lowering and eliminating the use of coal, and has put a lot of faith in the industry. The first tax incentives came as early as 2014 when the future of U.K. shale exploration was under a cloud. The incentives were bolstered further during the oil downturn of 2015.

Over the last two fiscal years, the government has kept up the momentum maintaining onshore tax allowances, licensing acreages and fast-tracking planning applications. The Department for Business, Innovation and Skills said: “We have been clear that any shale developments must be safe and environmentally sound.

“Shale gas has the potential to be a new domestic energy source, enhancing our energy security and delivering economic benefits, including the creation of well paid, quality jobs.”

However, the expected returns have more to do with long-term hopes and potential tax revenues, rather than short-term gains. Will Scargill, Senior Oil & Gas Analyst at GlobalData, said: “Although the beginning of fracking is an important step for the industry, we’re still a long way from shale gas playing a significant role in the U.K. energy sector.

“The government has put a lot of support behind the U.K. onshore sector in recent years. But in the end however, it will be technical and economic factors that determine whether shale gas is commercial and at what scale.”

Results from Cuadrilla are expected next year which would provide the first gauge of commercial potential. On paper, the Lancashire sites could yield at least 20 tcf but the reality could yet be very different. It took the U.S. nearly 30 years to get its shale bonanza going, the U.K. won’t get there overnight.



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