With exploratory drilling about to restart, clear differences are apparent between the Tory chancellor and the Lib Dem energy secretary over Britain’s shale gas reserves
Cuadrilla Resources, the tiny company pioneering shale gas exploration in Britain, caused two minor earthquakes with its drilling near Blackpool. But the business, which has former BP boss Lord Browne on the board, has triggered much larger political tremors in London.
These culminated in Ed Davey, the energy and climate change secretary, giving the go-ahead in parliament last Thursday to what optimists believe will be a shale “revolution” similar to the one that has sent gas prices spiralling downwards in America.
But it has also unleashed a war of words with environmentalists, who not only believe that the chemicals used in fracking are dangerous but, more widely, argue it will trigger a new “dash for gas” that will tie the UK into fossil fuels and break climate change targets by creating higher CO2 emissions.
There is no doubt that the enormous financial benefits of shale, as experienced in the US, are real enough. The price of gas has fallen 85% from a high in 2005 to just above $2 per million British thermal units earlier this year. Economists see cheap power as one of the keys to an American economic recovery, with Lakshmi Mittal, Britain’s richest man and the chief executive of leading steelmaker ArcelorMittal, saying recently that cheap shale gas made him “much more optimistic” about investing in the US.
In fact, gas prices across the Atlantic have risen slightly this year to nearly $3.50 per million BTU; but that is still less than half the amount paid in Britain and continental Europe.
At a time when the UK’s North Sea gas is running down fast, nuclear power stations are being taken offline due to age and coal is being phased out for pollution reasons, it is little surprise that British manufacturers have seized upon the idea of a domestic shale industry as a saviour from the problems of rising power prices and a looming “energy crunch”.
Typical of the responses is one from Corin Taylor, senior economic adviser at the Institute of Directors, who said it was “excellent news” that shale exploration could go ahead: “Shale gas has great potential to create new engineering jobs, reduce our reliance on dirty fuels like coal and cut down on costly foreign imports.”
Natural gas from conventional sources plays a key role in the UK energy network: it currently accounts for almost half of all fuel used for electricity generation.
Meanwhile Cuadrilla, the only firm to have drilled exploratory wells in this country, believes there could be 5.6 trillion cubic metres of shale reserves beneath the surface – although the British Geological Survey says a more likely figure is 4.2tn cubic metres. Most industry experts believe that it is impossible to give any realistic assessment on the basis of the four wells drilled by Cuadrilla so far.
Yet many energy experts with no political axe to grind argue that there are key differences that make it impossible for Britain to repeat the American shale revolution.
Firstly, the geology is different from the key Marcellus and Barnett shale areas of the US; secondly, land rights that encourage homeowners to cash in on shale in America are not present here; and thirdly, the sheer population density of Britain tends to discourage the drilling of wells. And that is not taking into account the opposition of the highly organised environmental lobby, led by Friends of the Earth, Greenpeace and others.
So while George Osborne, a green-energy sceptic, has made clear his support for shale and a wider “dash for gas”, his coalition partner Davey has been more circumspect.
The energy secretary has downplayed hopes of a revolution, saying: “Until more exploration work has been done, a significant number of wells fracked and production patterns established over time, it will not be possible to make any meaningful estimate of likely economically recoverable resources of shale gas in the United Kingdom.”
He has attached health and safety provisions to future fracking operations, promising that the exact nature of any chemicals used to break up rock will be made public.
Davey has also commissioned a study into the possible impacts of shale gas extraction on the UK’s future greenhouse gas emissions: “This will consider the available evidence on the lifecycle greenhouse gas emissions from shale gas exploitation, and the need for further research.”
Critics say this will be too little, too late. Organisations such as the Tyndall Centre for Climate Change Research argue the circle cannot be squared: “Emissions from a fully developed UK shale gas industry would likely be very substantial in their own right. If the UK government is to respect its obligations under both the Copenhagen accord and low-carbon transition plan, shale gas offers no meaningful potential as even a transition fuel.”
As Cuadrilla prepares to reopen drilling operations in Lancashire, the row over shale can be expected to resume in earnest across the country.