UK Gas Bounty Will Be Tricky to Exploit

Agenda-Setting Financial Insight.
April 19 2012 1:32 PM

UK Gas Bounty Will Be Tricky to Exploit

A shale fracking facility in Preston, Lancashire.On April 17, a UK government report backed the gas extraction technique, despite concerns that it can cause earthquakes.

Photo by Matthew Lloyd/Getty Images

The British government may have warmed to fracking. But while shale-gas extraction has put America on the road to energy self-sufficiency, it may be premature to bank on a similar boom in the UK. The country’s shale formations could be enough to meet decades of demand if bullish interpretations of geological data are right. But economics may keep much of the shale bounty under ground.

Tapping onshore shale fields might seem straightforward. Today’s import prices mean UK drillers would only have to be about half as efficient as their U.S. counterparts for onshore shale to be competitive with liquefied natural gas from abroad. But UK shale exploration is still embryonic. Britain’s small land area and dense population could complicate matters. Lancashire, where UK driller Cuadrilla says it has found about 200 trillion cubic feet of gas, counts more than 1,220 people per square mile, compared with less than 10 per square mile in shale-rich North Dakota.


Offshore reserves are likely to be five times whatever lies onshore, according to the British Geological Survey. That’s prompted talk of the UK sitting on 1,000 trillion cubic feet of gas. But offshore fracking has yet to be pioneered. The UK industry’s vast experience in the North Sea might help in developing the technique. Still, experts say it could take gas prices of up to $200 per barrel of oil equivalent to make it commercially viable. Today’s UK liquid natural gas imports go for $50/boe. And global LNG prices look set to fall as the United State begins large-scale exports from 2015.

U.S. drillers have made huge strides in efficiency, with some producers drilling wells twice as fast as they were just two years ago, according to energy consultants Navigant. Costs won’t fall forever. Some combination of tighter environmental controls, equipment shortages and rising labour costs is bound to bite eventually - just as it has in conventional petroleum production.

Given these pressures, it’s not immediately clear how UK shale could compete with LNG imports over anything but the very long term. It looks more like an insurance policy against a dystopian future of $200 oil.

Read more at Reuters Breakingviews.

Kevin Allison is global resources columnist at Reuters Breakingviews.


Medical Examiner

Here’s Where We Stand With Ebola

Even experienced international disaster responders are shocked at how bad it’s gotten.

It’s Legal for Obama to Bomb Syria Because He Says It Is

Divestment Is Fine but Mostly Symbolic. There’s a Better Way for Universities to Fight Climate Change.

I Stand With Emma Watson on Women’s Rights

Even though I know I’m going to get flak for it.

It Is Very Stupid to Compare Hope Solo to Ray Rice

Building a Better Workplace

In Defense of HR

Startups and small businesses shouldn’t skip over a human resources department.

Why Are Lighter-Skinned Latinos and Asians More Likely to Vote Republican?

How Ted Cruz and Scott Brown Misunderstand What It Means to Be an American Citizen

  News & Politics
Sept. 23 2014 12:43 PM Occupy Wall Street How can Hillary Clinton be both a limousine liberal and a Saul Alinsky radical?
Sept. 23 2014 2:08 PM Home Depot’s Former Head of Security Had a Legacy of Sabotage
Sept. 23 2014 1:57 PM Would A Second Sarkozy Presidency End Marriage Equality in France?
  Double X
The XX Factor
Sept. 23 2014 11:13 AM Why Is This Mother in Prison for Helping Her Daughter Get an Abortion?
  Slate Plus
Slate Plus
Sept. 22 2014 1:52 PM Tell Us What You Think About Slate Plus Help us improve our new membership program.
Brow Beat
Sept. 23 2014 11:48 AM Punky Brewster, the Feminist Punk Icon Who Wasn’t
Future Tense
Sept. 23 2014 1:50 PM Oh, the Futility! Frogs Try to Catch Worms Off of an iPhone Video.
  Health & Science
Sept. 23 2014 1:38 PM Why Is Fall Red in America but Yellow in Europe? A possible explanation, 35 million years in the making.
Sports Nut
Sept. 18 2014 11:42 AM Grandmaster Clash One of the most amazing feats in chess history just happened, and no one noticed.