Energy generation in Wales: Shale Gas - Welsh Affairs Committee Contents

2  Shale gas resources in the UK

Importance 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.[3] 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".[4] Ron Loveland, the Welsh Government's Energy Advisor, told us that gas was the main source of heating energy in Wales.[5]

Figure 1: UK Inland energy consumption by primary fuel in 2012

Source: Department of Energy and Climate Change

8. In recent years, the UK has become increasingly dependent on gas imports (see Figure 2).[6] 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).[7] 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 2025.[8]

Figure 2: UK gas production and trade 1998 to 2013

Source: Department of Energy and Climate Change

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".[9] 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.[10]

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.[11] 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.[12] 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.[13] The US Energy Information Administration has estimated that shale gas will account for 50% of total US gas production by 2040.[14]

12. The potentially "recoverable resources"[15] of 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.[16] The BGS estimated that there could potentially be some 1,300 tcf of shale gas recoverable resource in the area—more 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.[17]

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".[18] It explained that the geological layers underlying the coal layers in Wales—particularly the Namurian measures, Lower Limestone Shale, Devonian Sequence, and the Silurian and Ordovician layers—could have potential to produce unconventional gas. Professor Hywel Thomas agreed that the geology of Wales was "quite rich" for potential shale gas.[19]

15. 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.

16. We 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.

17. We 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 in Wales

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" phase—where companies would decide whether to invest—and 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.


20. UKOOG (United Kingdom Onshore Operators Group)[20] estimated 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]

21. Chris Faulkner, Chief Executive Officer of Breitling Energy Companies from the USA,[22] told us that the cycle from the beginning of the process until commercial production was approximately 10 years.[23] 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.[24]


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).[25] 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".[26]

23. Industry representatives agreed that a "tremendous" number of wells would have to be drilled.[27] However, 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"[28] (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.[29]

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.[30] 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".[31]

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).[32] 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[33] and Cuadrilla believed that the UK was not in a position where gas could be replaced by renewables in the near future.[34]

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.[35] 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.[36]

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".[37] It noted that US exports of coal had increased while the production of shale gas had developed: "coal is not displaced but used elsewhere".[38] 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".[39]

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".[40] 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 infrastructure".[41]

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".[42] 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 future".[43]

33. Investing 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.

34. We 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

4   Cuadrilla (ESG0031) para 1.3 Back

5   Q187 Back

6   Q274 Back

7   Q134 Back

8   Department of Energy and Climate Change, UK Oil and Net Gas Production and Demand Back

9   Department of Energy and Climate Change (ESG0014)  Back

10   Q4 Back

11   "Frack responsibly and risks - and quakes - are small", New Scientist, January 2012 Back

12   International Energy Agency, Golden Rules for a Golden Age of Gas, 2012 Back

13 -for US natural gas production figures Back

14   US Energy Information Administration, Annual Energy Outlook 2013, 2013 Back

15   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

16   The Carboniferous Bowland Shale gas study: geology and resource estimation Back

17   Department of Energy and Climate Change (ESG0014)  Back

18   UK Onshore Gas Limited (ESG0006) para 10 Back

19   Q16 Back

20   United Kingdom Onshore Operators Group (UKOOG) is the representative body for the UK onshore oil and gas industry Back

21   Q287 Back

22   Breitling Energy Companies is based in Dallas, America. It is involved in oil and gas exploration, production and investment Back

23   Q235 Back

24   Q197 Back

25   Q7 Back

26   Q8 Back

27   Q224 Back

28   Q225 Back

29   Q115 Back

30   Q113 Back

31   Q265 Back

32   International Energy Agency, Redrawing the Energy Climate Map, 2013 Back

33   Department of Energy and Climate Change, UK Renewable Energy Roadmap Update 2013, November 2013  Back

34   Q134 Back

35   Q183 Back

36   Q204 Back

37   Q55 Back

38   Q55 Back

39   Q59 Back

40   Q2 Back

41   Q55 Back

42   Oral evidence taken before the Liaison Committee on 14 January 2014, HC (2013-14) 939, Q72 [David T.C. Davies] Back

43   Department of Energy and Climate Change, The Myths and Realities of shale Gas Exploration, 9 September 2013 Back

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Prepared 16 June 2014