7 Additional Impacts on the UK |
Security of Supply
87. Exploitation of shale gas both within the
UK and in other countries could lead to some energy security benefits
for the UK.
production of shale gas
88. Development of shale gas at a global scale
could increase the amount of gas available for the UK to import.
This would enhance energy security because the UK would be able
to access gas from a more diverse range of sources, thereby reducing
dependence on any one supplier. Shell believed that the UK was
in a good position to connect to, and benefit from, this potentially
increasing supply of gas, evidenced by the "abundance of
regasification terminals [needed in order to be able to import
LNG, which is transported by boat rather than pipeline]"
and the "global diversity of supplies available to the UK.".
The UK currently moves a lot of LNG through the country via pipleine
into Europe because the UK has a significant number of regasification
terminals. Professor Bradshaw of the UK Energy Research Centre
(UKERC) reported to us that, "if we are the first port of
call for a substantial amount of LNG, that must only reinforce
our security of supply.".
The only question is how much we are willing to pay in order to
attract this LNG in a tight global market. When giving oral evidence
to us, Alistair Buchanan, of Ofgem, stressed that, "I think
you will be able to get the gas but it is more about price. [...]
There is an expectation that you will get the gas but there is
going to be a squeeze on the price .".
production of shale gas
89. Increased domestic production of shale gas
could contribute to the UK's energy security by reducing our dependence
on imported gas. However, domestic production in Europe and the
UK will not, according to Mr Egan of Cuadrilla, "completely
negate the need for imports" and will at best, "replace
the decline of conventional production" and, as such, it
is unlikely to result in Europe becoming self sufficient in gas.
Even though shale gas development, both at home and abroad, has
the potential to improve Europe's and the UK's security of supply,
the future of the sector is still sufficiently uncertain to make
it unwise to rely on these benefits (see chapter 3 and 4). If
the price of foreign gas imports are high (see chapter 5), and
domestic production is slow to develop or is not as significant
as expected, and if investment is diverted from low carbon technologies
(see chapter 6) then the UK could still face security of supply
90. We recommend that Government
should not rely on shale gas contributing to the UK's energy system
when making strategic plans for energy security. We welcome the
commitment made by the Minister that the new Office for Unconventional
Oil and Gas will assess the effects of shale gas development on
the UK's security of supply - providing we can be reassured that
that the Office does not have a conflict of interest.
Jobs and skills
91. The US has experienced significant job growth
as a result of the shale gas industry. Analysis by IHS Global
Insight looking at the economic and employment contributions of
unconventional gas development in the US estimated that, "in
2010, unconventional gas activity supported 1 million jobs; this
will grow to nearly 1.5 million jobs in 2015 and to over 2.4 million
While it is difficult to say with any accuracy how many jobs a
successful UK shale gas industry would create, estimates range
from the thousands to the tens of thousands.
Estimates are high because shale gas is a labour intensive industry
and requires jobs across the spectrum including in the supply
chain industry to support the shale gas industry.
92. The UK already has extensive drilling experience
from the conventional gas industry in the North Sea, some of which
could be transferable to the onshore industry.
If the shale gas industry is slow to develop some of this experience
could be lost.
According to Professor Davies of the Geological Society, if the
"size of the prize is big enough" then it is likely
that shale gas will attract the large companies which have the
skills to develop the industry.
Mr Egan of Cuadrilla suggested, however, that the ability to import
skills is limited. Instead the UK needs to develop its own skills.
This could be achieved in two ways. Firstly, by training a new
generation of engineers, which Mr Egan believed requires coordination
and includes a role for both academia and the Government.
Secondly, through "on the job" experience. Mr Tiley
of Shell described how shale gas in the US had brought in a, "whole
new generation", many of whom "have only ever worked
in unconventional gas".Mr
Taylor suggested that the UK had already done this in relation
to the North Sea industry and other industries such as the nuclear
93. We recommend that Government
encourage partnerships such as the one between Cuadrilla and the
University of Central Lancashire to
ensure the skills required to develop the shale gas industry are
available. Government should make an assessment of the need for
skills development and should work with industry and the relevant
sector skills council to develop a skills action plan for shale
gas similar to the Nuclear Supply Chain Action Plan which the
Government has recently published.
ENERGY INTENSIVE INDUSTRIES
94. In the US the shale gas revolution has had
a transformative impact on the manufacturing sector especially
the energy intensive industries and in particular the chemicals
benefits include cheaper electricity prices but also cheaper chemical
prices both of which have fallen in the US as a result of shale
gas. INEOS Olefins & Polymers UK highlighted, for example,
that lower gas prices have resulted in a lowering of electricity
prices, giving a massive competitive advantage to the US electro-intensive
Crotty of INEOS Olefins & Polymers UK explained to us how
lower chemical prices in the US have also been carried over to
"For the chemical raw-material use, where it
is the ethane we are after, the import of ethane from US shale
gas extraction is more than economic. After all the liquefaction
and re-gasification costs, we can land it far cheaper than we
can buy it locally.".
95. The UK energy intensive industries are increasingly
feeling under pressure from rising energy prices.
The Energy Intensive Users Group highlighted that developing a
shale gas industry in the UK has the potential to deliver secure,
internationally competitive energy and feedstock supplies that
are vital for energy intensive and petrochemicals sectors."
INEOS Olefins & Polymers UK were similarly optimistic about
shale gas development in the UK and suggested that it had the
ability to be transformational.
Mr Crotty of INEOS Olefins & Polymers UK told us:
"It is the non-methane elements that are of
value to us: it is the ethane and the propane. For example, in
the US those elements are fractionated out and we can use them
as raw materials to build chemicals with. We are hopeful that
the UK shale deposits would allow us to do the same. As an industry
in the UK, the problem we have at the moment is that the quantity
of ethane coming out of the North Sea supply has declined dramatically
in the last 10 to 15 years to the point where it is almost non-existent
now. Therefore, getting a new localised supply would be a massive
96. If shale gas development
produces cheaper gas prices in the UK, as a result of the export
of shale gas from the US and the development of shale gas in the
UK, the energy intensive industries could benefit from lower electricity
and chemicals prices.
204 Ev 87 Back
Q 76 [Professor Bradshaw] Back
Oral evidence taken before the Energy and Climate Change Committee
on 26 February 2013, HC (2012-13) 1009-i, Q 7 Back
Q 105 [Mr Egan]; Q 77 Back
Q 320 Back
The Economic and Employment Contributions of Unconventional Gas
Development in State Economies, IHS Inc, June 2012, http://www.ihs.com/images/State_Unconv_Gas_Economic_Contribution_Main.pdf
Q 106 [Mr Egan] Back
Q 106 [Mr Egan; Mr Tiley] Back
Q 54 Back
Q 56 Back
Q 52 Back
Q 107 [Mr Egan] Back
Q 108 [Mr Tiley] Back
Q 107 [Mr Taylor] Back
Q 61 [Professor Bradshaw]; Q 87 [Dr Bros]; Q 106 [Mr Tiley]; Q
Ev 97 Back
Q 229 Back
Q 220 Back
Ev w13 Back
Ev 97 Back
Q 245 [Mr Crotty] Back