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.



The Democrats’ War at Home

How can the president’s party defend itself from the president’s foreign policy blunders?

Congress’ Public Shaming of the Secret Service Was Political Grandstanding at Its Best

Michigan’s Tradition of Football “Toughness” Needs to Go—Starting With Coach Hoke

A Plentiful, Renewable Resource That America Keeps Overlooking

Animal manure.

Windows 8 Was So Bad That Microsoft Will Skip Straight to Windows 10


Cringing. Ducking. Mumbling.

How GOP candidates react whenever someone brings up reproductive rights or gay marriage.

Building a Better Workplace

You Deserve a Pre-cation

The smartest job perk you’ve never heard of.

Hasbro Is Cracking Down on Scrabble Players Who Turn Its Official Word List Into Popular Apps

The Ludicrous Claims You’ll Hear at This Company’s “Egg Freezing Parties”

  News & Politics
Sept. 30 2014 9:33 PM Political Theater With a Purpose Darrell Issa’s public shaming of the head of the Secret Service was congressional grandstanding at its best.
Oct. 1 2014 8:34 AM Going Private To undertake a massively ambitious energy project, you don’t need the government anymore.
The Eye
Oct. 1 2014 9:26 AM These Lego Masterpieces Capture the Fear and Humor of the “Dark” Side
  Double X
The XX Factor
Sept. 30 2014 12:34 PM Parents, Get Your Teenage Daughters the IUD
  Slate Plus
Behind the Scenes
Sept. 30 2014 3:21 PM Meet Jordan Weissmann Five questions with Slate’s senior business and economics correspondent.
Brow Beat
Oct. 1 2014 8:46 AM The Vintage eBay Find I Wore to My Sentencing
Future Tense
Sept. 30 2014 7:00 PM There’s Going to Be a Live-Action Tetris Movie for Some Reason
  Health & Science
Bad Astronomy
Oct. 1 2014 7:30 AM Say Hello to Our Quasi-Moon, 2014 OL339
Sports Nut
Sept. 30 2014 5:54 PM Goodbye, Tough Guy It’s time for Michigan to fire its toughness-obsessed coach, Brady Hoke.