Shale Gas

Memorandum submitted by Scotia Gas Networks (SG 11)

1. Scotia Gas Networks (SGN) response to the Energy and Climate Change

Committee ’s inquiry into S hale Gas

1.1. SGN would like to thank the Energy and Climate Change Committee for the opportunity to respond to the inquiry into s hale gas . Scotia Gas Networks is the UK’s 2nd largest gas distribution company providing a safe and secure supply of natural gas to 5.7 million customers through 74,000km of gas mains and services. SGN own and operate 2 gas distribution networks, one covers the whole of Scotland whilst the other network covers the South East stretching from Milton Keynes to Dover in the east and Lyme Regis in the west, including London Boroughs south of the River Thames.

1.2. As the UK’s second largest gas distribution company, SGN is extremely interested in the prospects for future gas reserves in the UK. As a distributed source of gas, shale wells are likely to need large numbers of smaller scale connections to gas distribution networks than typical conventional gas wells which require larger connections to the national gas transmission system; in our licensed area, it is likely that SGN will be the provider of many of these connections and all of these connections will need to join our network.

1.3. Last year, work commissioned by the Energy Networks Association and carried out by Redpoint showed that in 2050, gas could still be supplying a significant proportion of the UK’s total energy demand through both heating and electricity generation whilst ensuring that carbon targets were met [1] . Further still, this work showed that by utilising the existing asset base, i.e. the gas networks, the costs of meeting carbon targets and supplying clean energy were significantly reduced. If gas used in the UK’s energy mix is sourced domestically and is not imported, this also has clear benefits for energy security and the UK economy along with the carbon benefits associated with the reduced greenhouse gas emissions from reduced use of Liquefied Natural Gas (LNG).

2. What are the prospects for s hale gas in the UK , and what are the risks of rapid depletion of s hale gas resources?

2.1. As with the rest of Western Europe, it appears that the geology of the UK could provide significant volumes of s hale gas . It is however access to these sources of gas that may reduce total availability. The UK has a much higher population density than the US where levels of s hale gas production have been very high. In the US , a more favourable geology with higher concentrations of s hale rocks combined with free or easy access to much of the land allowed this rapid expansion [2] . In the UK , the availability of s hale gas is likely to be less due to this major human cons traint . However, t he large scale and wide coverage of the UK gas distribution network could, by providing easy and quick connections to the networks, increase the speed at which s hale wells can connect to the system and increase the availability of the gas .

2.2. It is very likely that gas price s will affect the rate at which s hale gas is developed in the UK and if wholesale prices increase as they are expected to do , the viability of domestically produced s hale gas is also likely to increase. In this situation, it is therefore likely th at the most readily accessible s hale wells will be used first and then, if wholesale prices increase further, more expensive wells will be developed.

2.3. The rapid depletion of s hale gas r esources does not appear to be a problem. The reserves of s hale gas worldwide are extremely large and it is likely th at a long way into the future, s hale gas will be available even if significant volume of gas has been used. In Western Europe for example, reserves of s hale gas are predicted to be larger that known reserves of conventional gas 2 . Although the actual wells may deplete much more qui ckly than conventional gas reserves , the wells are likely to keep producing gas for a number of years.

3. What are the implications of large discoveries of shale gas around the world for UK energy and climate change policy?

3.1. Gas is generally considered a ‘clean fuel’ as a result of having lower carbon emissions than other solid and liquid fuels when combusted. Its use, particularly in the domestic arena, is almost always associated with being more energy efficient and also more cost effective than equivalent electric or oil fired systems. It could therefore be suggested that if the availability of the gas resource increases through the production of shale gas, wholesale prices could be reduced and this will result in the increased use of gas and in many instances, this could result in lower greenhouse gas emissions.

3.2. The SGN ‘Assisted Connections’ programme focuses on helping the fuel poor connect to the gas network as installing gas heating can remove a significant proportion of households from fuel poverty [3] . Increasing the availability and therefore reducing the wholesale cost of gas could therefore not only reduce consumer’s bills, but would also ensure that gas is still a fuel that can assist with the issue of fuel poverty.

3.3. Even though shale gas is not likely to provide as high a percentage of total gas demand as it does in the US, if it can supply only a few percent of total demand, this will have significant implications for energy security as this source of gas will not be affected by any geopolitical or international energy issues.

4. What are the risks and hazards associated with drilling for shale gas?

4.1. The main hazards associated with the use of shale gas result directly from the process of extracting the gas. The process requires large volumes of water combined with chemicals and sand to fracture rock and thus release the gas. In the US, there have been some issues associated with the leaking of chemicals and methane gas into the domestic water system. When this has occurred, this is likely to have been due to poor management and low project standards. The release of a documentary/film in the US appears to have increased media coverage of the shale gas issue which often focuses on the negative aspects of the industry. Work currently underway by the Environmental Protection Agency in the US will hopefully shed some objective light on the real risks associated with shale gas. It is however very likely that investment in innovative approaches will reduce the risks associated with shale gas extraction in the future.

5. How does the carbon footprint of shale gas compare to other fossil fuels?

5.1. At the point of use, because of the composition of shale gas, the carbon footprint will be the same as conventional gas however, because of the way shale gas is extracted, it is likely that life-cycle emissions for shale gas will be slightly higher than for conventional gas. However, it must be considered that LNG, which requires compression into liquid, storage at very cold temperatures and high pressures and transportation by boat across very large distances will also have associated lifecycle emissions. We are not aware of the existence of exact numbers on the lifecycle emissions of shale gas however this is an area where perhaps further work is required.

6. Conclusions

6.1. Any increase in the use of shale gas in the UK and also across the world is likely to increase the availability of natural gas both reducing the costs of gas (relative to if there was no shale gas) and increasing supply margins. This could in the short term, result in the increased use of gas and reductions in carbon emissions.

6.2. However, the government needs to consider long term energy strategy to plan for a low-carbon future. The Gas Future Scenarios Project carried out by Redpoint1 shows how gas can fit into a low carbon future helping to meet 2050 carbon targets. Although the development of biogas is key to the future use of gas in these scenarios, biogas will need to be used in conjunction with some other sources of gas and in fact, as the UK continental shelf gas supplies decrease further, nationally sourced shale gas may be a very valuable resource if global gas prices rise as predicted. Shale gas may also help to increase the security of the gas supply.

6.3. Most importantly, the analysis by Redpoint showed that a future energy mix that included gas resulted in a lower system costs than scenarios in which more heat was provided by electric heating systems. In the period from 2010-2050, the analysis showed that by using gas, total system costs were reduced by £10,000 per person on a net present value basis. This is simply due to the fact that reduced investment is required in infrastructure as the capacity to transport gas already exists whereas, for increases in electric heating, greater electricity generating capacity is required and significant investment in electricity infrastructure is also required to carry the greater electric load. SGN therefore believes that shale gas could make an important contribution to national energy policy goals.

January 2011

[1] Redpoint 2010, Gas Future Scenarios Project, Available from: gas _future_scenarios_report.pdf.

[2] Stevens, P, (2010), The ‘Shale Gas Revolution’: Hype and Reality, Chatham House.

[3] DECC, (2010), Fuel Poverty 2008-Detailed Tables, Available from: