2 Shale gas resources in the UK |
of gas to the UK's energy needs
7. Natural gas forms a key part of the
UK's energy supply, with annual UK gas consumption of approximately
3 trillion cubic feet (tcf). As shown in Figure 1, 35% of all
energy consumed in 2012 came from gas.
While the most high-profile use of gas is in electricity generation,
witnesses highlighted the role that gas has to play in domestic
heating, cooking and industrial production: "over two thirds
of UK gas demand has nothing to do with electricity generation".
Ron Loveland, the Welsh Government's Energy Advisor, told us that
gas was the main source of heating energy in Wales.
Figure 1: UK Inland energy consumption
by primary fuel in 2012
Source: Department of Energy and Climate
8. In recent years, the UK has become
increasingly dependent on gas imports (see Figure 2).
UK-sourced natural gas had come predominately from the North Sea
since the early 1970s and reached a peak in 2000, when the UK
had been self-sufficient in gas (that is, produced 100% of the
gas it needed). By 2004,
however, decreasing production led to the UK becoming a net importer
of gas with net imports of gas in 2012 accounting for half (50%)
of supply. This imbalance is forecast to continue, with DECC forecasting
imports will account for nearly 70% of the UK's gas supply by
Figure 2: UK gas production and trade
1998 to 2013
Source: Department of Energy and Climate
9. The UK imports natural gas by pipelines
from Norway, Belgium and the Netherlands, as well as liquefied
natural gas (LNG) by sea. Witnesses believed that an increasing
reliance on imports generated energy security issues and made
the UK more vulnerable to volatility in global energy prices.
During our visit to Dragon LNG at Milford Haven Port we heard
how the nuclear disaster in Fukushima in 2011 had increased international
gas prices by 50%.
10. Most witnesses did not believe the
UK could remove gas from the energy mix in the short term and
thought that natural gas would continue to supply most of the
UK's heating demands. DECC confirmed that gas would continue to
be a "crucial part of our energy mix to 2030 and beyond".
Professor Hywel Thomas from Cardiff University told us:
... it is a question of where we
might get our gas rather than whether we will have gas for the
next 30 years.
How much shale gas is there?
11. Shale gas has been known about for
decades, but it is only recently that its importance and full
potential are beginning to be realised, driven by advances in
technology such as horizontal drilling and hydraulic fracturing.
World shale gas reserves are estimated at 450,000 billion cubic
metres (bcm) with large amounts of reserves available in North
America and Western Europe.
Shale gas exploitation is particularly advanced in the USA.
|Shale gas exploration in USA
Shale gas has been produced in the USA for several decades. However, advances in horizontal drilling and hydraulic fracturing led to a rapid growth in the production of shale gas after 2008; between 2005 and 2010, shale gas production increased by more than 45% per year. The International Energy Agency (IEA) announced in 2009 that unconventional gas had "changed the game" in North America and elsewhere.
In 2012, shale gas constituted 35% of total US gas production. The US Energy Information Administration has estimated that shale gas will account for 50% of total US gas production by 2040.
12. The potentially "recoverable
shale gas in the UK are uncertain, although industry estimates
of shale gas resources have increased markedly over the last few
years. In 2013, DECC commissioned the British Geological Survey
(BGS) to undertake a study to examine the Bowland Shale in the
north of England.
The BGS estimated that there could potentially be some 1,300 tcf
of shale gas recoverable resource in the areamore than
twice as much in the north of England than was previously thought
to exist across the entire UK. However, DECC recommended caution
about these figures:
At present, neither DECC nor the
industry have sufficient engineering, geological or cast information
to make a meaningful estimate of recoverable reserves.
13. There is very little information
regarding the amount of shale gas in Wales. Such exploratory work
as has taken place has been undertaken by private companies. In
2011, US consultants RPS Group, working for Eden Energy, estimated
that parts of South Wales could hold 34 tcf of gas, of which 12.8
tcf was recoverable. If correct, the amount is equivalent to four
years of the UK's gas consumption.
14. Commercial energy companies such
as Coastal Oil and Gas have an ongoing exploration drilling programme
to sample and test a number of sites in Wales. UK Onshore Gas
Ltd told us that there was "immense potential for commercial
unconventional gas production in Wales".
It explained that the geological layers underlying the coal layers
in Walesparticularly the Namurian measures, Lower Limestone
Shale, Devonian Sequence, and the Silurian and Ordovician layerscould
have potential to produce unconventional gas. Professor Hywel
Thomas agreed that the geology of Wales was "quite rich"
for potential shale gas.
will continue to play a significant part in the UK's energy mix
for the foreseeable future. In addition to using other sources
of energy, it is therefore vital that the UK identify new sources
of gas if it is to safeguard the UK's security of supply.
recognise that there is a lack of data regarding the amount of
shale gas in Wales. It is therefore difficult to estimate the
extent of shale gas resources in Wales and the potential impact
shale gas may have on the UK's dependence on imports.
recommend the UK Government and Welsh Government work with commercial
companies and others to provide a reliable range of estimates
of shale gas available in Wales. This should be published by the
end of 2014.
Development of a shale gas industry
18. Shale gas production in Wales, as
elsewhere in the UK, is currently at the "exploratory"
phase. During this phase of the process, commercial companies
drill vertical wells to verify the presence of gas, characterise
it and determine whether it could be economically produced. This
is then followed by the "appraisal" phasewhere
companies would decide whether to investand finally the
"production" phase. Further detail on the different
stages of development is set out in Appendix A.
19. We were keen to learn how quickly
a shale gas industry could develop in Wales and how extensive
it might be, provided reasonable reserves of shale gas are identified
during the current exploratory phase.
HOW LONG TO DEVELOP AN INDUSTRY?
20. UKOOG (United Kingdom Onshore Operators
that the exploration phase in the UK would take two to three years
while 20 to 40 exploration wells were drilled. Seven companies
in Wales, holding 23 licences in total, are currently undertaking
exploratory drilling for gas (this includes conventional gas as
well as shale gas and coal-bed methane).
21. Chris Faulkner, Chief Executive
Officer of Breitling Energy Companies from the USA,
told us that the cycle from the beginning of the process until
commercial production was approximately 10 years.
Ron Loveland from the Welsh Government said that the time scale
was difficult to predict: he believed a viable industry could
be established in Wales in five to 15 years.
EXTENT OF SHALE GAS PRODUCTION
22. Some witnesses identified specific
barriers in Wales to shale gas development, such as population
density and the number of wells that would be needed. Although
large parts of Wales are rural, it includes many natural parks,
small villages, protected environmental sites and areas of natural
beauty. Professor Richard Davies from Durham University believed
that "tens of thousands of wells" would be needed to
drill economically for shale gas (in the UK).
Thousands of wells, he believed, would be required to produce
as much gas as a large North Sea field. He believed that "it
was necessary to ask yourself how many wells are economic and
can be drilled in the social environment we are in".
23. Industry representatives agreed
that a "tremendous" number of wells would have to be
Breitling Energy Companies emphasised that population density
was not a barrier to development of shale gas because it was possible
to drill "24 or 30 wells from one single five-acre pad site"
(known as multi-well pads), thereby increasing the efficiency
of production and significantly reducing the visual impact at
the surface. Dart Energy said that 1,000 wells could exist on
100 pads of 400 acres using 250,000 acres of reservoir:
you are looking at a land
take of some 0.0002%; it is a very small amount of land, and for
1,000 wells and 400 acres, that is equivalent to three solar farms
[...] and the energy return is much greater.
24. Cuadrilla told us that advances
made in drilling horizontally meant that it was possible to drill
several laterals from only one surface drilling pad.
This meant that wells no longer needed to be built immediately
on top of shale gas deposits, but could be situated several miles
away. This had been done successfully in the USA, where there
were large-scale shale gas developments in urban areas in Texas
and Los Angeles.
25. The Rt Hon Michael Fallon MP, Minister
of Energy, was unable to tell us the number of wells that would
be required to drill economically for shale gas in the UK. But,
as it was possible to have a significant number of wells on a
pad, he did not foresee thousands of locations being used: "You
can think in terms of a number of locations, each with a significant
number of wells".
Shale Gas versus renewables
26. Both the UK Government and the Welsh
Government are committed to tackling climate change. The UK Government
is committed under the Climate Change Act 2008 to reduce the UK's
greenhouse gas emissions by at least 80% (from the 1990 baseline)
by 2050. It also has international commitments under the Copenhagen
Accord and Cancun Agreements. The Welsh Government has committed
to achieving at least a 40% reduction in all greenhouse gas emissions
by 2020 (against a 1990 baseline).
27. Both governments have undertaken
to increasing renewable sources of energy as a means to meet their
emissions targets. The burning of natural gas to produce energy
releases around half the carbon emissions from those needed to
produce the same amount of energy from coal. In the USA, the move
from coal to gas in power generation had helped reduce emissions
by 200 million tonnes (Mt).
However, witnesses disagreed about whether shale gas production
was compatible with meeting emissions targets and whether government
would be better focussing on developing cleaner sources of energy,
such as renewables.
28. UKOOG stated that the use of shale
gas could reduce the UK's overall carbon emissions, as gas would
displace coal in the energy mix. Cuadrilla believed that an energy
mix was necessary because renewables could not provide the UK's
full energy needs. Currently 4% of current total energy used in
the UK comes from renewables
and Cuadrilla believed that the UK was not in a position where
gas could be replaced by renewables in the near future.
29. Some witnesses believed that shale
gas and renewable energy sources should be developed in parallel
in order to meet climate change targets. The Welsh Government
considered shale gas to be a transition fuel, as Wales moved towards
a low-carbon economy.
Ron Loveland, the Welsh Government Energy Advisor, said that the
issue should not be approached from the absolutist perspective
of "renewables good, gas bad" because this was not economically
or socially responsible for Wales.
30. Environmental organisations, however,
did not agree that shale gas would necessarily displace dirtier
coal. Friends of the Earth Cymru said: "there is no example
of a fossil fuel having displaced another fossil fuel. Every fossil
fuel that is exploited is additional".
It noted that US exports of coal had increased while the production
of shale gas had developed: "coal is not displaced but used
WWF told us that there was a need to move towards a "low-carbon
power system" without reliance on shale gas: "the UK
is not faced with a false choice between a heavy reliance on coal,
on the one hand, or a heavy reliance on shale gas, on the other".
31. The Tyndall Centre questioned whether
shale gas could act as a "bridge" to a low-carbon economy:
"if you are serious about climate change, gas cannot be a
large part of your future".
It also expressed concern that exploitation of shale gas could
undermine investment in renewable energy. WWF agreed that shale
gas development risked "undermining the long-term policies
we need to attract a significant amount of investment in low-carbon
32. In evidence to the Liaison Committee
in 2014, the Prime Minister said that it was "irrational"
to oppose shale gas simply because it was another carbon-based
fuel in the UK's energy mix: "surely it is better for us
to extract shale safely from our own country, rather than pay
a large price for having it imported from around the world".
The Secretary of State for Energy and Climate Change, the Rt Hon
Edward Davey MP, has said that shale gas is part of the answer
to climate change as a "bridge in our transition to a green
in renewable energy technology will be an important factor in
the UK becoming a lower carbon economy. The development of shale
gas in Wales and the rest of the UK should not be done to the
detriment of the development of renewable energy technology.
recommend both the UK Government and the Welsh Government assess
the overall impact of shale gas supply on the level and mix of
energy produced in Wales and the UK. This should include an examination
of how the combination of nuclear, hydro-power, coal, wave and
solar, alongside efforts to reduce overall energy demand, impacts
upon carbon emission targets.
3 Department of Energy and Climate Change, Digest of UK Energy Statistics Back
Cuadrilla (ESG0031) para 1.3 Back
Department of Energy and Climate Change, UK Oil and Net Gas Production and Demand Back
Department of Energy and Climate Change (ESG0014) Back
"Frack responsibly and risks - and quakes - are small",
New Scientist, January 2012 Back
International Energy Agency, Golden Rules for a Golden Age of Gas,
http://www.eia.gov/dnav/ng/ng_prod_sum_dcu_NUS_a.htm -for US natural
gas production figures Back
US Energy Information Administration, Annual Energy Outlook 2013,
Recoverable resources is the estimated volume of gas that may
be recovered from the total resource. Reserves are the fraction
of the potentially recoverable resources that are deemed to be
commercially recoverable. Back
The Carboniferous Bowland Shale gas study: geology and resource estimation Back
Department of Energy and Climate Change (ESG0014) Back
UK Onshore Gas Limited (ESG0006) para 10 Back
United Kingdom Onshore Operators Group (UKOOG) is the representative
body for the UK onshore oil and gas industry Back
Breitling Energy Companies is based in Dallas, America. It is
involved in oil and gas exploration, production and investment Back
International Energy Agency, Redrawing the Energy Climate Map,
Department of Energy and Climate Change, UK Renewable Energy Roadmap Update 2013,
November 2013 Back
Oral evidence taken before the Liaison Committee on 14 January 2014,
HC (2013-14) 939, Q72 [David T.C. Davies] Back
Department of Energy and Climate Change, The Myths and Realities of shale Gas Exploration,
9 September 2013 Back