Britain’s long-promised shale gas boom has fizzled and a new report from a government watchdog paints a bleak outlook for the industry.
Shale gas was supposed to be an energy saviour for Britain as oil and gas production from the North Sea wound down. The country currently imports 60 per cent of its gas and the hope was that shale gas would help offset the reliance on foreign sources. In 2013, the government went all in on shale, promising up to 40 wells by 2025, the creation of 64,500 jobs and £33-billion, or $55.5-billion, worth of investment. But those heady plans have fallen woefully short.
Only three exploratory wells have been drilled so far and they’ve all had to shut down after causing minor earthquakes, including one that measured 2.9 on the Richter scale. Public sentiment has swung sharply against fracking, and local governments have complained bitterly about the soaring cost of keeping protesters away from drill sites.
As the government weighs whether to provide more support for the industry, the National Audit Office has offered a damning assessment of the sector. In a report released on Wednesday, the NAO said government officials had no idea how much shale gas could be commercially extracted and the agency threw cold water on the bold predictions about investment and drilling. The NAO also said there was no evidence shale gas would lower prices for consumers and it warned that the government’s plan for covering clean-up costs was so unclear that landowners could be stuck with the bill. The agency also cited an internal government study that said the economic benefits of the shale gas activity in rural areas was uncertain, and it expressed concern that health and environment officials relied on companies to self-report problems.
The Department for Business, Energy, and Industrial Strategy, BEIS, is expected to decide soon on whether to ease some regulations on shale gas exploration, but the NAO’s report has dampened expectations that the government will act. Political support for fracking is also fading.
Public opposition to fracking has jumped from 21 per cent in 2013 to 40 per cent in 2019 because of concern about risks to the environment and fracking-induced earthquakes, according to government figures. “Local authorities we interviewed said the strength of public opposition for shale gas planning applications was unprecedented,” the NAO said. The Opposition Labour Party and Liberal Democrats have said they will ban fracking if they win power and the ruling Conservatives have toned down their enthusiasm for shale gas. ”The government has always said shale gas exploration can only proceed as long as it is safe and environmentally responsible,” BEIS said in a statement.
Environmental groups welcomed the NAO report and urged the government not to change the regulations. “This is a quietly critical report that doesn’t give the fracking industry any revived sense of hope,” said Jamie Peters, a fracking campaigner at Friends of the Earth. “Nothing has changed; fracking isn’t wanted, it’s a failed industry, and the future is renewables and energy saving.”
Industry representatives said companies have been hamstrung by excessive regulation and they pointed out that the NAO highlighted the restrictive regime. “It is not uncommon to see delays in the energy sector, as experienced in the development of the North Sea oilfields,” said Ken Cronin, chief executive of UK Onshore Oil and Gas. He added that there “is a significant role for both onshore oil and gas in the future, which, if allowed to reach potential, will bring the compelling environmental and economic benefits as detailed in the National Audit Office report.”
Another major problem facing the industry is the swelling supply of gas from around the world which has driven down prices. A report this week from the Oxford Institute for Energy Studies said that by next summer gas prices in Europe could fall as low as US$2 per million British thermal unit, mmBtu, from the current level of $4 per mmBtu.
Michael Bradshaw, a professor of global energy at the University of Warwick, said the shale gas industry is so undeveloped that the government can’t even assess whether it’s worth building up a domestic supply. “There’s nothing to study because there’s nothing happening,” he said. “We’re not really at the starting gate. We’re still stuck in exploration. . . . The bottom line is this whole process is taking a lot longer than one anticipated.”