Oil & Gas E-Briefing: UK Shale Gas - importance of onshore oil and gas exploration to the economy

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13-02-2013

Shale gas - increasing recognition of the importance of onshore oil and gas exploration to the UK economy as new estimates of UK shale gas reserves likely to show significant increase over previous estimates

The United Kingdom Onshore Operators Group (UKOOG), the representative body for UK onshore oil and gas companies, announced yesterday that it is expanding its scope to reflect the increased importance of onshore oil and gas exploration to the UK economy.

As part of this expansion, UKOOG has appointed its first Chief Executive, Ken Cronin, who joins from the communications firm Kreab Gavin Anderson. Mr Cronin has extensive experience in the energy industry working with firms such as IGas, Gazprom and British Energy.

Mr Cronin commented, “this is a critical time for the future development of the onshore oil and gas industry in the UK with production set to grow significantly for the first time since the North Sea oil boom of the 1970s.”

The British Geological Survey is expected to publish its revised estimate of shale gas resources in the UK next month. Its original estimate was 5.3 trillion cubic feet of shale gas reserves. It is however expected to revise this to a figure of between 1,300 and 1,700 trillion cubic feet, an increase of over 200 times.

Resources on this scale could provide enough energy to heat every home in Britain for 1,500 years. This vast and valuable resource will increase the country’s energy independency and commentators believe that it will help reduce the cost of increasing gas prices as it has in the USA. Whilst experts consider that it is still too early to predict how much of the shale gas will actually be recoverable, it is hoped one fifth of the resource will be recoverable.

Ed Davey, the Secretary of State for Energy and Climate Change, has commented that shale gas “is much cleaner than coal and we need more gas. I hope we get loads of it.” He added that where energy resources are developed, local communities should receive some benefit, whether that be through lower energy prices or funds to use in the local area. However, he warned that shale gas “is not the golden goose. The experts are clear that they do not expect this to have a major impact on the gas price.”

The suspension on shale gas exploration was lifted in December 2012. The Environment Agency confirmed that existing regulations are sufficient to protect people and the environment in the current exploratory phase. Ed Davey also stated that consistent application of good practice by the industry, supplemented by the additional controls on seismic hazards, would ensure no unacceptable damage to the environment, or threat to the health of local residents or interference with their lives. An increase in shale gas activity is expected in the UK this year. Cuadrilla has applied for environmental permits for its sites in Lancashire which are currently subject to public consultation.

Mr Cronin of UKOOG also commented, “the  industry has come together to ensure that the most stringent standards are in place for safety, environmental management, exploration and production. My role is to work with companies in the industry and all stakeholders to ensure that the industry can make a meaningful contribution to the UK economy by creating jobs, skills and producing energy that will help British business and households while at the same time working in partnership with the communities it operates in.”

In the meantime, DECC is establishing the new Office of Unconventional Gas and Oil which will regulate activity and the Government is expected to announce a new round of onshore licensing in the near future. The expansion of UKOOG comes at a critical time in the UK’s shale gas story as the Government, regulators and operators continue to assess the commercial prospect  of shale gas extraction, recognising its potential to play a vital role in the energy mix of the country in years to come.

Elizabeth Shepherd, Head of Environment.
David Sellers, Head of Oil and Gas.