Are we underestimating the productive potential of UK shale gas? I’m sometimes accused of being as unrealistic in my assessment of the potential of shale gas outside the US as the fractivists are in their assessment of the dangers.
However, given the reassessment on the upside by the IEA and CSIS this week, along with another event Friday at Rice University in Houston, it’s only logical to refresh the conventional wisdom on the UK potential.
A report out this week by Bloomberg based on the Pøyry Point of View: UK Shale Gas Where are We Now, made me look at where we are today in Pennsylvania.
First to Bloomberg, who add some depressing reality to UK shale:
In Texas it takes seven days to get permission to use hydraulic fracturing to drill for oil and gas. In the U.K. the wait is six months.
That difference helps explain why Prime Minister David Cameron’s dream of a fracking boom in the U.K., where there may be enough shale gas to meet the country’s demand for decades, has been slow to take shape.
Texas offers an expedited service for fracking permits in seven business days, and normally it takes about 11, according to the authority that handles applications. North Dakota averages 27 days, and by law Pennsylvania can take no longer than 45 days. The U.K. Onshore Operators Group, which represents the industry, said approvals will take at least six months.
The Pøyry piece is far more pessimistic about the potential for UK Shale:
Unless streamlining takes place we are unlikely to achieve any scale of production of shale gas in the UK. Time from initial geological survey to production will need to halve from around 8 to 4 years or less.
I think it must - and can - be reduced even further. At the stage we’re in right now, a more efficient use of capital would be to bury any potential investment in UK shale in a hole in the ground - you’d get the same return for less investment in wasted time. Assuming of course, that the local planning department would give you permission to bury the money, something that may make the third runway at Heathrow seem easy. Simply put, the record on any infrastructure project in the UK does not inspire confidence. We have a fundamental choice to make. Are we to be a serious country or not?
One way forward is to base our planning decisions, or lack of them, on a realistic notion of what’s under the ground, and thus more accurately measure not only the risks on what might go wrong, but to uncover what may go right. It’s been a long time since OIES, or Chatham House or indeed, Pøyry studied the US to provide us with a now outdated measure of how much gas the UK could produce - and just as importantly how quickly it would do so. Let’s go back to Pøyry’s report of 2012 which seems be overly pessimistic on production, but then again, this one was written for Ofgem, who needed a rationale for their policy construct which assumed that gas prices were ever upward: From Page 6
In the UK, our expectation is that there will be only 1-4 BCM of production by that time (2030)
In a Pøyry Point of View from later that year, they projected the Bowland alone would go all the way up to over 20 BCM, but not until the 2030’s. They predicted 10 BCM by 2020, a forecast they now recant, assuming the immutable object of the UK planning system. They also see a connection, as I do, between environmental fears and the hyper-caution of the planning system.
The most recent production figures from Pennsylvania provide up-to-date concrete examples of both actual production and environmental footprint evolving way past the US experiences the conventional wisdom were quoting in the OIES report of 2009. Unfortunately, in an example of what is called an availability cascade, academic or expert opinions feed off each other. I discussed the process here in something from 2012 entitled “The long half-life of shale gas reports”. Today’s reality is that production in the US is soaring beyond even the most optimistic predictions, which in turn, likely makes UK production estimates out of date.
The US, as we’re constantly told is a much bigger and uncrowded country, but Pennsylvania’s Susquehanna County has an area of 2115 sqkm compared to 3079 sqkm for Lancashire. For comparison, the Cuadrilla license is 1180 sqkm.
Going to the excellent, and up to date, figures from the Pennsylvania DEP, we see Susquehanna County produced 692,330,999 MCF of gas in 2013 from 631 wells. There was an increase of 110 wells in H2 2014, although much of the production increase came from an inventory of wells drilled in the past only now coming on line because there was no gas infrastructure present when drilling started in 2008.
This point is significant by the way, since one of the “expert” reasons why shale gas won’t take off in Europe is lack of infrastructure, yet the two 4 well pads exploration projects Cuadrilla propose for next year are merely 20, and 50 metres away from the pipeline. Thus if they do prove gas flows, it can be monetised very quickly. But only if we want it. The gas has been under the ground for about 350 million years. It’s not going anywhere. Or to be exact anywhere it can't do any good for the climate or the economy if we let the narrative of inconsequential amounts inform planning bureaucrats.
692,330,999 MCF (1 MCF = 1,000 cubic feet) is 19.607 Billion Cubic Metres and the entire UK used 78.3 BCM in 2012. At today’s wholesale price of 60 pence per therm, or 22 pence per cubic meter, that’s £4.3 billion. There will of course be deductions, and gas prices may come down, but a straight 62% figure as the government take is £2.66 billion. Should we only trust planning officers from county councils to make the decisions that impact the property rights of the gas owners, in this case 64 million people of the UK? We also have to look at the differences between the US and UK. The first horizontal well in Susquehanna County wasn’t drilled until April 2008, and multi well pads didn’t start until May 2010. So the production we see today is the result of relatively recent drilling.
631 wells sounds a lot, but we should subtract single and vertical wells to get an idea of what the UK would look like and how productive modern wells in PA are, recalling that vertical wells were still being drilled as recently as 2011. The top 100 wells in 2013 produced 4.9 BCM, the same amount of gas consumed in all of the island of Ireland, and the majority of them are multiple wells from the same pad. We may well see, given multiple wells, that one pad could produce 1.5BCM a year - a true gas factory or also a hole in the ground that will spit out £300M a year for decades to come. Local communities need to be told this so they can decide if six months of a truck every hour is a price worth paying. If they decide it isn’t, they also need to rationalise their decision to the owners of the gas: everyone else in the UK.
Returning to the basic fear of UK residents, the Baker Hughes Rig Count for Susquehanna County shows there are only 12 operating rigs in the county as of last week,one for each 176 sqkm. The BH Rig Count App from the Apple Store shows this detail far easier than the raw data link above. The county also has far less modern multi well pads, the only type we’ll see in production in the UK.
As seen from this video from Cuadrilla, they are planning, thanks to the great thickness of the Bowland (over a mile thick compared to an average 300 feet in Susquehanna) to run 40 stacked lateral wells from one location, making landscape impact, and costs, far lower.
To sum up, if one county in Pennsylvania can produce 19BCM with the modern technology that only came about over the last three years, why would the UK need five years to reach half of that or 15 to reach just over it? Especially considering that technology moves on every quarter in the US, something missing from academic studies that only report on what has happened two years before they got the funding to produce peer reviewed studies.
A consistent trend among antis, who lets make clear, also include those with a vested interest in renewable investments, has been how shale gas will be uneconomic in the UK. Which it may well have been if technology hadn’t moved on from 2010.
A lot of this is natural English pessimism. But Britain is also known for great scientific advances, with mobile phones, LCD displays and graphene being just three of the modern era. We can at least meet US production levels if we want to. But the planning system is stopping us, and the idea that shale gas is expensive, difficult, dangerous and ultimately won’t even produce much, re-enforces the natural administrative reaction to make no decision at all.
UK shale gas may not ever work. But if we don’t find out, and soon, then the eternal dithering over energy, and climate, policy will simply continue towards the inevitable conclusion: Either the lights will go out or we won’t be able to afford to switch them on in the first place.
Clarification: I originally put million of cubic feet instead of MCF (thousands of cubic feet, but it still adds up to 19.607 BCM.