Arguments over the potential development of UK shale gas resources are too often characterised by rhetoric and hyperbole on both sides. Some of the wilder claims need to be challenged and we need to separate the facts from the ill-informed speculation. That is why I am one of a cross-party group of MPs and Peers who have come together to set up the new APPG. Members include MPs who are in favour of developing a domestic shale gas industry, MPs who are opposed, and MPs who simply want to better understand the truth. The intention is to cut through the rhetoric and get to the facts.
Much of the excitement over the potential benefits of shale gas come from those who cast an eye across the Atlantic at the transformation shale gas has wrought on American energy prices. As US shale gas production has soared, the price of gas in the US has fallen by two thirds to a ten year low. Average electricity prices in the US fell last year by more than a quarter. Not all of these changes can be attributed solely to the shale gas boom, but it is undoubtedly a significant contributor. To give an idea of the scale of the growth in US production, the state of Pennsylvania alone – with a population of just 12 million – went from producing zero natural gas to overtaking the entire output from the North Sea in just four years.
The impact of structurally lower energy prices have been significant, not just for hard pressed consumers but for the wider economy. The US has seen an unexpected boom in energy intensive industries such as steel, and in the chemicals industry. Some companies are taking advantage of cheaper gas prices by relocating back to the US, production which had previously been moved offshore. The statistics I find most remarkable are the International Energy Agency’s predictions that the United States will overtake Russia as the words biggest producer of natural gas by 2015, and will overtake Saudi Arabia as the worlds biggest producer of oil by 2020. We may need to prepare for a world in the which the US is no longer reliant on the Middle East for oil but is energy self-sufficient, and the geopolitical implications of that.
However, the economic impact is not the only picture. As the production of shale gas and unconventional oil continue to rise (shale gas is expected to account for almost half of all US gas production by 2035), so too has the controversy. Accusations of environmental damage and water pollution have dogged the US shale industry, leading to fracking bans in a number of states. A hard hitting documentary called ‘Gasland’ took the internet by storm in 2010 with its dramatic images of people setting fire to their tap water, allegedly as a result of fracking for shale gas. While that claim is widely believed by experts to be mistaken, there is a large and growing anti-fracking movement that cannot be ignored. That movement is already active here in the UK.
The reason the debate is about to take off in Britain is due to the rapidly changing picture with regard to our own shale gas resources. Two years ago, the Energy & Climate Change Select Committee (on which I sit) looked at UK shale gas potential and concluded it was unlikely to be a game changer. At that time the British Geological Survey estimated British onshore shale gas resources to be in region of 5.3 trillion cubic feet (TCF). In just a few weeks time they are expected to dramatically increase that estimate to 1300-1700 TCF. That would make us one of the most shale gas rich nations on the planet. This is the total amount of gas in place, not the economically recoverable figure which will be a lot lower. However, that is still a huge amount of shale gas – too much to be ignored. We don’t yet know what the technically and economically feasible recovery rates in the UK might be. In the United States average recovery rates are around 18 per cent. If we were to access just 10% of the lower end of this estimate, that would be 130 TCF. To put that in context, the entire North Sea gas production from 1970 to 2011 was just under 85 TCF. It’s no surprise that shale gas is getting some people very excited.
As a country we have some important decisions to make, but there are still too many unanswered questions. Just how much shale gas is realistically recoverable, and at what price? What are the real environmental effects of fracking, and what would be the effect on local communities? What impact could shale gas production at scale have on our climate change commitments? What could be the impact, if any, on UK energy prices? How many jobs might a domestic shale gas industry create? How much tax revenue might the government expect?
It is to consider questions like these that the All Party Parliamentary Group has been set up, and I am very excited to be chairing it. We will interrogate companies involved in the onshore gas industry, government officials and both industry and environmental regulators. We will hear from respected academic organisations such as the the Royal Society, the British Geological Survey, the Durham Energy Institute, Manchester University School of Earth, Atmospheric & Environmental Sciences and others. We will consider the detailed economic analysis currently being put together by the Institute of Directors. And we will hear about the environmental concerns from organisations such as Friends of the Earth and WWF.
The Chief Economist of the International Energy Agency, Fatih Birol, has described unconventional oil and gas as the most significant development in energy since the Second World War, with massive economic and geopolitical implications. The UK could be sitting on one of the worlds largest shale gas deposits. These are questions we can no longer afford not to answer.
Dan Byles is the Conservative MP for North Warwickshire and chair of the All Party Parliamentary Group for Unconventional Oil & Gas.