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Shale Gas – yes or no? As public opinion on fracking in the UK continues to be divided, we look at what the future might hold …
Energy has always been at the heart of British public debate. From North Sea oil in the 1970s to shale gas today, it continues to be as contentious as ever.
This morning, City A.M. claimed that it will be at least 10 years before shale gas cements its place in the domestic energy mix. Barely 15% of all oil and gas industry players surveyed believed shale gas would be successful within a decade.
Notably, 13% of industry players seem to believe shale gas succeeding in the domestic energy market might take up to 20 years. Political opposition and environmental concerns have barricaded the fracking process in Britain. But, the government’s support for fracking makes it all but a certainty.
As an energy import-reliant economy, energy independence is a crucial issue for the UK government to address. Downing Street’s push for shale gas is based on the hope that it will improve Britain’s energy security. Consequentially, it is hoped, shale gas might also reduce Britain’s reliance on foreign energy.
Is a ‘Shale Gas future’ feasible?
Shale Gas production comparison with the US, a major fracking market, is key. Dr Steve Priddy, LSBF Head of Research, says it might be unreliable in the long-term. Citing research by Energy Aspects, he notes that Bakken and Eagle Ford registered immense growth between 2003 and 2012.
The key factors that contributed to the US shale gas boom included:
- Private ownership of underground resources
- Cheap cost of credit
- Liquid futures markets allowing producers to hedge production
There is no doubt that the yields have been tremendous since shale gas drilling commenced. But, whether the UK can replicate this model, remains to be seen. Additionally, it still raises concern regarding future stability. The US model also shows the importance of longevity, which, according to specialists, shale sorely lacks.
‘Drill, Baby, Drill’, a report on shale fracking published by Post Carbon Institute’s J David Hughes, highlights the fuel’s future unreliability. Since its peak in the 2000s, Bakken oil’s fields show a continuous decline in production. And this decline is set to continue. While energy supply creates its own demand, the presence of competition must not be ignored. Neither must we ignore the move towards green energy in countries that can afford to pay high prices for fuel.
The UK is not a huge market to trade and profit internally from the fuel. The fact that British shale gas might heavily rely on generating income through exports, is an important factor to underline. It must not be ignored that this not only relies on British production levels but also declines in demand for OPEC-produced energy.
On the one hand, shale gas might be the possible solution to lighten the UK’s energy woes. It might lessen energy imports and bring in export income. On the other hand, profiting from gas exports relies heavily on global prices. If the value of gas plummets, the environmental costs may just outweigh the touted benefits.
The Telegraph claimed that the British government might well have ‘over hyped’ shale gas benefits. The article also said that fracking industry estimates might have overstated financial benefits by almost 400%.
It is much more of a debate than just environmental well-being versus energy self-reliance. Can the UK truly benefit from shale gas? Time will tell.
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<Principal image courtesy Craig Sunter/Some rights reserved>