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Last updated: December 13, 2012 8:42 pm
The contentious practice of fracking for shale gas has been given the go-ahead in the UK, but only under stringent new rules that the country’s leading shale driller says will add “millions of dollars” to its production costs.
The government decision was applauded by many in the energy industry who hope it will drive down gas prices by putting the country at the heart of what Prime Minister David Cameron this week described as a potential “shale gas revolution”.
The growth of shale gas has transformed the energy landscape in the US, which pioneered fracking, by lowering gas prices and reversing the fortunes of some manufacturers.
But the UK move also unleashed a wave of protests from environmental campaigners such as Friends of the Earth, which condemned what it said was a “reckless decision which threatens to contaminate our air and water and undermine national climate targets”.
Green groups plan to lobby Conservative MPs in constituencies where fracking is likely. The upmarket Cheshire seat of Tatton represented by the chancellor, George Osborne, could potentially be affected, prompting one Liberal Democrat official to joke: “Most of the shale gas is under Tory constituencies, so we’ll see how much they like it when the drilling starts.”
Fracking, or fracturing rocks to release natural gas trapped deep underground, was suspended last year after Cuadrilla, the only company to have started exploring for shale gas in the UK, triggered two small earthquakes in Lancashire.
On Thursday, Ed Davey, the UK energy secretary, told reporters official studies had convinced him fracking could be done safely if strict guidelines were introduced to control and monitor it.
Among the rules the UK will impose are a requirement for seismic activity to be closely monitored and a traffic light system that will halt operations if there are tremors above a “red light” magnitude 0.5.
This is a relatively strict threshold but Mr Davey said he made “no apology” for taking such a cautious approach.
“Fracking must be safe and the public must be confident that it is safe,” he said, adding the concerns people had about fracking in the US were “entirely reasonable”, even if many of the claims made about the dangers of fracking had not been substantiated.
Francis Egan, Cuadrilla’s chief executive, told the FT his company had already started installing some 140 seismic monitoring devices in Lancashire, where it has a drilling licence covering 900 square miles from Fleetwood in the north down to Southport.
The equipment will cost Cuadrilla “millions of dollars”, he said, declining to name an exact figure because of commercial sensitivities.
But he said the company was eager to resume exploration that had already shown that “under Lancashire there is a belt of gas-filled shale over one mile thick”.
Government officials say it is still unclear how much recoverable shale gas is actually present in the UK. Some analysts say it is unlikely to have the revolutionary impact seen in the US. Others believe it would be foolish to ignore the economic potential of anything that could boost the UK’s energy independence.
“We welcome unreservedly this momentous decision which has potential to create jobs and enhance energy security in Europe,” said Mónica Cristina of Shale Gas Europe, the industry group.
The US shale gas revolution is thought to have helped lower that country’s greenhouse gas emissions, because it has encouraged more use of gas than the dirtier option of coal. But some researchers claim that fugitive emissions of methane – a potent greenhouse gas – make shale gas production more harmful than its supporters claim.
Mr Davey launched an inquiry on Thursday into the impact of shale gas extraction on emissions, led by experts including his department’s chief scientific adviser, Professor David Mackay.
Additional reporting by George Parker BACKGROUND NEWS
The US leads the world in shale gas production, with explosive growth in the past decade, writes Guy Chazan. Official figures project US shale gas output to more than double from 7.8 trillion cubic feet (tcf) in 2011 to 16.7 tcf in 2040. The International Energy Agency says the US will overtake Russia as the world’s largest gas producer by 2015 and will be almost self-sufficient in energy by 2035.
Shale gas has failed to take off in Europe. France, Bulgaria and the Czech Republic have imposed moratoriums on shale exploration, as has the German state of North Rhine-Westphalia. High hopes were initially placed on Poland, which is believed to have one of the largest shale gas resources in Europe: but early wells have found less gas than expected. Exxon Mobil pulled out after drilling just two wells.
China is believed to have more shale oil and gas than the US. The authorities want to produce 6.5bn cubic metres of shale gas by 2015 and 60bn by 2020, up from zero commercial production today. But the sector faces numerous challenges, including a lack of pipeline infrastructure, difficult geology and a dearth of technical expertise.
Argentina is often cited as the next potential shale gas power. Its Vaca Muerta – or “dead cow” – formation is one of the largest shale plays in the world. But after Buenos Aires expropriated the local unit of Spanish oil company Repsol, investor sentiment has soured. Many foreign oil groups are biding their time, hoping that domestic gas prices and energy policies will become as attractive as Argentina’s gas prospects.
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