The big picture on shale

The granting of planning approval for Third Energy’s shale gas test well is a significant development, but it is only the first step for an industry with much to prove, says Tom Grimwood.

With no planning applications approved in the UK since 2012, the decision by North Yorkshire County Council to approve Third Energy’s fracking application has begun to put the pieces of the shale gas puzzle together and has rekindled hopes of a shale gas revolution.

Nevertheless, a number of obstacles remain. Here, Utility Week examines what those hurdles are, how they might be overcome, and what would need to happen for shale gas to become a mainstream part of the energy system.

Proving it is safe

The industry needs to allay safety fears, and specifically concerns about water contamination and seismic activity.

Newcastle University professor of geoenergy Robert Davies heads the fracking research consortium Refine and says its work has uncovered a series of issues “around trust, the language people use, and the amount of engagement that’s happened”. Participants in its research said they felt they “were being sold something” and were sceptical of the motives of industry players.

Durham University CeREES Centre for Geoenergy director Andrew Aplin says the discourse has reached a point where talk won’t cut through. He says operators need to use early wells to demonstrate “they can do it safely and with low impacts”.

Gas Forum managing director David Cox agrees: “I think once you see something going on and there’s no end of the world – earthquakes or contaminated water – then people will start to relax a little bit.”

Demonstrating its commercial viability

“We know there’s a huge amount of gas in the ground,” says UK Onshore Oil and Gas director Corin Taylor. “What we don’t yet know is how much of that gas can flow to the surface. Will enough flow to the surface to make it commercially viable?”

Aplin says around 20 to 30 wells will need to fracked before the industry can get a decent idea of the potential productivity of the UK’s geology: “Some wells will probably produce a reasonable amount of gas; some won’t. It’s often hard to know why until you actually build up that database.”

IGas chief operating officer John Blaymires believes UK shale gas should be viable if British wells can achieve the same flow rate as US wells.

Despite higher drilling and regulatory costs, he says UK has the advantage over the US of more developed gas infrastructure in and around its fields which it can “tap in to”. He says: “We have a market on the doorstep so getting it to market is easier and relatively cheaper.”

Much of this will depend on the price of gas. The US shale industry has moved from boom to bust after a fall in global prices. Even if UK wells can match US flow rates, they will still not be economic if the gas price is too low.

The road forward

The shale gas industry is still very much in its nascent phase. The North Yorkshire decision marks a significant step but one that is only the sector’s first. For the shale gas revolution to take hold, many steps more need to be taken before the industry can grow up. Safety concerns are likely to remain a concern and must be allayed to recruit public support or at least dampen opposition.

However, the main driver behind how the industry will develop is economics. If fracking can prove itself commercially, one of the biggest hurdles to it becoming an established part of the UK energy scene will be overcome. Once the numbers stack up, the drills will be heading down and the fracking puzzle will become complete.

Why developing a shale gas supply matters to the UK

As the UK continues to decarbonise its energy system, with coal being taken completely off the system by 2025, natural gas is viewed as the logical transition fuel.

In 2015 gas plants generated 30 per cent of the UK’s power and a recent report from Bloomberg New Energy Finance predicted gas would still be the country’s largest single source of power in 2040.

Gas also plays a big role in heating. It meets 70 per cent of the UK’s heating needs and 80 per cent of British households use it to keep warm as well as for cooking. The difficulty of replacing it with something else means gas is likely to keep playing a significant role in heating for some time.

While gas is set to remain an important part in the energy mix, production from the North Sea is in decline. According to Decc figures the UK imported 45 per cent of its gas in 2015 and by 2030 nearly three-quarters will come from other countries.

Relying on imports for so much gas will leave the UK vulnerable to supply disruptions and price fluctuations. Having another reliable source of ‘home-grown’ gas will help to reduce the reliance on imports and boost the UK’s security of supply.