Sunday, 18 August 2013

Why are we even thinking of fracking?

Our prime minister says he is keen for us to develop our shale gas resources in order to bring down our energy bills [1] and the Church of England urges us to consider seriously any measures that will help relieve fuel poverty [2]. In the USA, massive investment in shale gas has lead to a big drop in price: wholesale gas now costs only half what it did in 2007 and domestic retail prices have dropped by 20% [3]. In evidence to parliament in 2011, gas drilling company Cuadrilla said shale gas 'has the potential to lower natural gas prices (tending to reduce electricity prices)'. However in June this year a representative from the same company, Mark Linder commented on the subject: 'We've done an analysis and it's a very small…at the most it's a very small percentage…basically insignificant' [4]. How can this be - and if it is why are we fracking at all?


I have discussed the environmental impacts of fracking before (What's wrong with fracking? and Worried about gas wells leaking methane) and in my view the threat of contaminating water supplies is low (if drilling is well regulated), and I'm certainly not worried about earthquakes. There is still a great deal of debate as to how much worse shale gas is compared to conventional gas for greenhouse gas emissions but it is surely an improvement on coal for generating electricity. So shale gas could be a step in the right direction for climate change.

If shale gas did lead to a drop in wholesale prices similar to that experienced in the USA then it would significantly reduce fuel poverty. Quite a lot of our energy bills are due to distribution costs, infrastructure, operating costs of various kinds, and VAT but for gas the wholesale costs add up to about 55% of the price (for electricity it is only 35%) [5]  - if those costs halved then theoretically we could be paying 27% less for our gas which would be very nice thank you very much. Nationally, 40% of our gas is used to heat our homes, and 24% to generate electricity [6].

However, the situation here is not the same as in the USA. If the drilling companies thought it was then they would not bother because gas is no longer profitable over there[7]. When you're losing money in one place it is simply madness to make the problem worse by creating the same conditions elsewhere.

The reason for the drop in price in the USA is because the country is in recession, demand is low and the market is isolated: there are no pipelines linking the USA to other large centres of gas demand; compressing the gas for shipping is possible but expensive. Here in the UK, however, we have pipelines linking us to Europe and Asia so extra gas produced will be quickly absorbed into the international market [8].

Also there are limitations to how fast we can produce the gas, compared to the USA. Fracked gas wells run dry quite quickly so it is necessary to keep drilling new wells. Even assuming that we can get 12 wells from each drill site, we would need 25 new sites a year to produce just 10% of our current gas use, plus we will need to build pipelines connecting each of these sites to the the distribution grid [8].

I don't wish to be accused of scare mongering. During the drilling stage, the wells are unsightly and noisy and generate extra traffic, but this only lasts about 18 months and the well in production can be almost invisible (see pictures of a West Virginia drill site). Perhaps farmland sites could be used, because they are an unnatural landscape anyway, and can be converted back to agriculture quickly afterwards. However, I still find the sheer numbers of sites needed alarming. For comparison, in Pennsylvania they have drilled 6000 wells in 6 years, more than 2000 in 2011 alone, and last year they produced 63 billion cubic metres of gas which is three quarters of UK use. They have more room there: Pennsylvania is a little smaller than England (45,000 sq. miles compared to 50,000) and has less than one quarter the population (12.7 million compared to 53.3 million) [8].

So let's get back to my original question - if it isn't to get cheaper gas, why are we even thinking of fracking? There are many other benefits such as jobs, improved energy security and tax revenues from the drilling companies - but we can get these from developing renewable resources and energy efficiency too.




[1] You must accept fracking for the good of the country, David Cameron tells southerners  (Telegraph) 17th August
[2] Opposing shale gas will increase fuel poverty, Church of England Warns (Global Warming Policy Foundation)
[3] Natural Gas Prices US EIA
[4] Cuadrilla PR man admits George Osborne's shale gas revolution won’t cut energy bills (Independent) June 2013
[5] Energy prices, profits and poverty - www.parliament.uk July 2013
[6] Digest of UK Energy Statistics (www.gov.uk)  August 2013
[7] Six reasons fracking has flopped overseas (Forbes) July 2013
[8] UK Shale gas: hype, reality and difficult questions (Oxford Institute for Energy Studies) Jul 2013

2 comments:

  1. There is a very good discussion of the problem of water use for fracking here:
    http://www.carbonbrief.org/blog/2013/08/carbon-briefing-could-shale-gas-suck-our-rivers-dry

    ReplyDelete