22 March 2013

Shale gas: Saviour or dangerous diversion?

Written by Published in Digital content
Shale gas: Saviour or dangerous diversion? ©Ken Stein

Likened to a modern day gold rush, development of the UK’s shale gas resources has generated both excitement and dissent in equal measures

It’s strange to think that 30 years ago, geologists failed to rouse even a flicker of interest from the then ‘Department of Energy’ on their discovery of extensive shale gas resources in the UK. A decade later, in 1995, the British Geological Survey also noted the potential of UK shale gas production. But again, bureaucrats and policymakers stirred not.

Meanwhile, on the other side of the Atlantic, the US flirted with its own shale gas resources, just as it had for more than 60 years. As technologies developed – particularly instruments and computer models that allowed precise identification of ‘sweet spots’ (an area within a shale gas region that contains a high concentration of gas) – development of shale gas began to gather pace.

But, it wasn’t until US demand began to outstrip conventional natural gas supply – and with it a growing reliance on imports – that shale gas production took-off. Now, 30 per cent of US natural gas demand is met by shale gas extraction, up from just 1% in 2001.

It’s this remarkable transformation in the US that finally threw the Brits into a shale gas frenzy. The announcement late last year by the International Energy Agency that the US shale gas boom would help it achieve the holy grail of energy policy – energy security – by the end of the next decade only further inebriated ‘frack heads’ already tanked-up on the potential of a UK shale gas revolution.

fracking2Protesters at Occupy Wall Street, October 2011Although still only at the very first stages of exploration, shale gas development in the UK is now championed as a route to a secure energy future, whilst concerns about the societal, environmental and economic impacts of exploitation appear to have been flung into the debris of the scramble.

Yet, there are a growing number of academic studies carried out in the US and the UK that have demonstrated we can’t frack our way out of climate change – even with carbon capture and storage, should that ever become commercially viable. Even the Committee on Climate Change has argued a future energy system based on gas will guarantee the UK overshoots its own legally binding emissions targets. But this is apparently no deterrent.

What about cost? Will the UK be able to replicate the US’s cheap gas prices? It seems highly unlikely.

The US is highly unusual in that the subsurface mineral resources are owned by the landowners. In virtually every other country on Earth the mineral rights are owned by the state.

This matters because the reason for cheap shale gas in the US is largely the result of landowners rushing to develop their gas resources. Landowners issue fixed-term development leases, which contain obligations to drill a number of wells within the term of the lease, typically 5 years, with extension provisions.

The gas company owning and operating the lease massively increases the value of the acreage they have leased by proving that it is productive by drilling up and producing gas. They then have the option of selling the gas and/or selling part or the entire lease. This has produced a glut and depressed prices to below properly accounted development costs. One estimate suggests that the industry is running at a loss of about $3.5-4 million per BTU (British Thermal Unit). The expectation is that US gas prices will return to rather higher prices in a few years’ time making shale gas a truly economic proposition and shale leases well worth hanging onto.

Other concerns regarding water contamination from fracking fluids entering the water table and earthquakes have been raised. But a recent report jointly published by the Royal Society and the Royal Academy of Engineering dismissed these risks as small, especially if the UK enforces strict regulations. History, however, tell us that regulations are there to be broken.

While economic and wider environmental concerns must not be dismissed, climate change is the primary concern here.

If an energy source effectively guarantees the UK will miss its legally binding climate targets then it is effectively unburnable. So what is the value of even flirting with the idea?

The University of Kassel has demonstrated a 100% renewable energy system is technically possible, without nuclear. But it does require a fundamental shift in the way we view energy. Energy systems don’t have to be based on large centralised plant, as Germany and Denmark both demonstrate. And, if more attention is devoted to reducing the demand for energy, the transition to a low carbon future will be much easier.

Perhaps solar panels and loft insulation aren’t as sexy as shattering rocks several kilometres below the ground, but those on the front line of climate change will thank us for resisting the urge to frack.

 

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