A high-powered committee of the UK House of Lords has warned of the increasing risks of UK electricity power black-outs in winter 2015-16, whilst at the same time urging the UK government to high-prioritise the development of the onshore UK shale gas and oil industry.
Exploration and production of shale gas must become an “urgent national priority”, according to the House of Lords’ Select Committee on Economic Affairs, which called on the coalition to “go all out for shale”.
The Lords’ report also highlighted the “substantial benefits shale gas can bring to the economy, to national energy security and to the environment”.
In their report, the Lords expressed disappointed that the (English) Environment Agency had not received a single application to explore for shale gas using “fracking” – or hydraulic fracturing – since a moratorium on drilling ended in 2012. They called for a “simplified and clear regulatory regime to encourage development of shale and reassure communities that risks of harm to the environment or human health are low”.
Lord MacGregor, Chairman of the Lords’ Economic Affairs Committee – a former Conservative minister under Margaret Thatcher and John Major – said: “A successful shale gas industry in the UK would be good for our economy and energy security.
“The United States has raced ahead with the development of shale gas and oil in recent years, with enormous benefits to US industry and the economy generally. The Committee (whose members included former Scots Labour MP John, now Lord, McFall) strongly supports the Government’s decision to go ‘all out for shale’.”
The Lords called on Prime Minister David Cameron to set up a new Cabinet Committee, to be chaired by Chancellor George Osborne and dedicated to matching his commitment ‘ to go all out for shale’ to be matched with action, and also that the government should:
Streamline and improve the ‘unwieldy’ regulatory structure to make it effective as well as rigorous;
Take the lead in setting out the economic benefits of shale and in reassuring the public that with proper regulation environmental and health risks of developing it are low, while
The industry should engage better with local communities, build on its community benefit schemes, ensuring that its plans are clear and well-explained and be ‘a good neighbour’.
The Lords stated:
“In 2014, the future of shale gas in the UK hangs in the balance. America stands as an example of the huge economic impact that shale gas and oil can have. Some estimates suggest that the amount of gas recoverable in the UK could be over 40 times greater than current annual UK gas consumption.
The UK opportunity
The shale gas revolution in the United States has illustrated the economic opportunity offered to the United Kingdom by its own shale gas resources – if they can be developed successfully. We strongly support the Government in their objective to exploit these resources but believe they need to do much more to encourage exploration and get development moving.
The US experience
In the US, new production techniques using horizontal drilling and hydraulic fracturing (fracking) to release gas from shale rocks have brought abundant and growing new supplies of gas to market in a short time. Shale oil production is also growing rapidly. The US energy mix has changed fast.
The impact of shale gas on the US economy is already dramatic. Gas prices have fallen to about one-third of the UK price level. Cheap gas has displaced coal from electricity generation. Plans for new nuclear generating capacity in the US are on hold. Investment is rising fast in energy intensive industries and petrochemicals, since cheap shale gas makes “reshoring” of overseas plants economic.
The global implications
The effects of the US revolution are already being felt globally. The UK and Germany, for instance, are generating more electricity from US coal displaced by shale gas. North America is expected soon to become self-sufficient in energy and a large exporter of shale gas in the form of liquefied natural gas (LNG).
Many other countries have also been alerted to the economic potential of their own shale resources and expect to develop them.
Patterns of global trade in energy seem likely to change, reducing dependence on the Middle East and Russia and promoting energy security through greater diversity of supply.
Gas prices, unlike oil prices, are regional rather than global. While world price cuts on the US scale are unlikely, abundant new shale gas supplies are bound to have a restraining effect on prices.