2016 has shown that predicting anything, anywhere on politics is for the brave. I’ll be brave and assume that by next Thursday, October 6, the interminable planning permission saga in Lancashire will draw to an almost close. I say almost because Friends of the Earth in a suicidal attempt to squander members’ money better served defending the countryside, bees and the rights of refugees, will drag Cuadrilla or the council or the government into court, just as they have with Third Energy in Yorkshire. But with Third already having an accelerated hearing in late November on their application any delay promises to be minimal.
So that someone thinks they have a victory, Cuadrilla may only get permission for one well pad. But one will work. One is enough.
Politically, it’s impossible to conceive of Theresa May’s government agreeing with Jeremy Corbyn’s Labour (and the Greens) over such an important issue. The government might as well send the message that Britain is closed for any type of business, an especially implausible signal in the Brexit world. To imagine this happening the week of the Conservative Party Congress is more inconceivable still. Some fear all bets are off in the Brexit /Trump universe of Post Facts, but as someone who likes facts over emotion, I’ll stick my neck out and say the net result will be we have to wait for the rocks to finally speak via drilling sometime in 2017. The Bowland Shale has been the silent spectator all along, and any geologist could admit that it could possibly send out mixed or even negative messages. But at least we can have a debate based on facts, not opinions, and finally, after at least five years of delay, move on.
A lot has advanced in the six years since Cuadrilla revealed their estimate of 200 TCF resources for their section of the Bowland back in 2010. Sadly, the UK debate hasn’t been one of them. Yet. But the time is coming. Back in 2010, people saw shale as a flash in the pan. It was of course the biggest bang to hit energy markets since the light bulb. Yet the UK debate still uses outdated economics, 2010 flow rates and 2010 energy policy concerns. Shale is still “controversial”. Meanwhile in the US, the unconventional is the new normal, 70% or higher of 2016 production.
As the shale debate in the UK has barely moved, the one in the US has moved incredibly fast. Compare the UK Bowland Shale and the Ohio Utica. The Utica Shale didn’t even exist outside of a gleam in the eye of geologists in 2010. First drilling started in 2012, yet this month, it’s producing at a rate of 37 billion cubic meters per year, a shade under the 40 BCMY produced in the UK North Sea. That could have been us. But the naysayers and handwringers produced absolutely nothing.
The Ohio Utica is never mentioned by UK opponents who talk about the Pennsylvania Marcellus as if it’s a living hell of afflicted communities. That’s in part because they are stuck in 2010, the year the Gasland movie came out which exaggerated some 2008/09 impacts in the state. Yet Ohio proves, like the UK could, how, if given the chance, natural gas extraction can be low impact, high production and zero damage. The unintentionally hilarious “List of the Harmed” barely mentions Ohio for example. Even an anti-fracking report this year from Environment Ohio omits their home state even as it recycles the List of the Harmed horror stories and places them everywhere else. It’s strange to talk about fracking threatening the Grand Canyon, while missing it entirely in their own backyard. Perhaps nothing is actually happening after all?
Just as will happen in the UK, Ohio is easily missed because there isn’t that much to actually see. The Baker Hughes Rig Count shows the number of rigs per state on a weekly basis. It’s rarely been over 18 in Ohio in the last few years and was only 13 last week, further proving the most recent increases in drilling productivity possible today. If we extrapolated Utica to UK numbers, we’d be talking of a handful of rigs. Using BCMY divided by 13, we see that each rig in Ohio, which is drilling a well every couple of weeks in various locations, or increasingly from one pad, can produce 2.85 BCM a year. Thus only 5 rigs could theoretically produce 14BCM a year, or enough to remove all 2015 UK LNG imports. UK drill rigs may well be relatively static and won’t wander too much from one pad for 18 months at a time, drilling a new well every other week. Whatever the numbers are, they are a far cry from anyone’s definition of industrialization of the country – or city – side.
But what if there were another threat to the landscape? What if there were 14 new facilities that had several truck deliveries per day – for ever? That would be Waitrose. What if there were 80 new facilities opening in 2016, in bigger stores and even more trucks and traffic. For that, Aldi is the one for you.
A few weeks ago at an All Party Parliamentary Committee on Shale Gas meeting, the leading anti in Ryedale was visibly shocked when his pet fear was exposed as, excuse the pun, groundless:
John Blaymires, Chief Operating Officer of IGas, said:
“We understand the need to do this [estimate site numbers]. It is one of our biggest issues.”
He said some of figures being talked about for the number of sites were “ludicrous” but he described the figures mentioned at the meeting as “not unreasonable”. He added:
“There are limited places to which one can go. We cannot pepper the countryside and nor would we wish to.”
Francis Egan of Cuadrilla has often said how in a few years people’s first question will be: “Is that it? Is this what all the fuss was about?”. Remove protestors and nothing will be visible. It would be a good plan to ask planning to set up a protestor camp. Oops. That rational plan may slow things down. But then a protestor camp is likely to be as welcome to Roseacre as an alternative music venue, even if they are often the same thing.
Only the strong, and the long, survive in UK shale. Whatever hurts us makes us stronger. There are four reasons why shale gas will move from zero to hero, but much depends on finding some gas and and, more importantly, not losing sight of the four strategic reasons why UK shale will prosper.
- Much of UK gas consumption isn’t going anywhere. The UK is faced with falling gas demand for various organic reasons around insulation, efficiency and competing renewables but not as fast as collapsing UK North Sea supply. London for example uses 9 BCM a year of gas, almost all for heat and hot water. It for only one example, will do so for years.
- The entry costs are far lower than international equivalents. One can get huge blocks by US standards all at once, leading to further efficiencies. The UK lends itself for political reasons to minimize surface expenses.
- Midstream – the pipeline system to deliver gas to customer -is not a problem. The international oil and gas industry has been in far more hostile – or inaccessible- areas, sometimes devoid even of roads. Any costs around UK planning delays or public opinion are outweighed by the ease of delivering any discoveries to market. The UK onshore is the least stranded energy asset on earth. And once planning creaks along, any sovereign risk premium is the lowest going.
- The killer reason is price. Get through 2 and 3, and prices are phenomenal by US standards. UK gas prices will be set by US LNG imports (or the threat of them) giving US Henry Hub and a permanent basis reflecting transport costs. UK gas prices are also volatile in the winter, with a current winter 2016 strip of $5.3 MMBTU, 80% higher than US Henry Hub. That basis will exist for years. In parts of Pennsylvania gas prices are below $1, and yet the industry still grows even as new mid stream pipelines are unavailable at any price. Expenses may be higher than in the US, but not 80% higher.
Add these together, and UK shale, will be worth the wait. Better, and great days, are coming.