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UK Government Asserts Unlocking Shale Gas Won't Hurt Emission Goals

Thu, 7th Jul 2016 14:06

LONDON (Alliance News) - The UK government Thursday said developing the shale gas industry would not impact its ambition to lower carbon emissions and said there is a "clear need" to explore the resource to better understand the potential size and impact of the industry.

However, unlocking the onshore petroleum market will require the UK to lower carbon emissions elsewhere in the economy to facilitate the rise that would come from exploiting the potentially vast resource lying underneath the UK.

Current estimates from the British Geological Survey suggest there could be anywhere between 23.2 to 64.6 trillion cubic metres of gas lying within the Bowland-Hodder basin under Northern England alone - potentially equivalent to somewhere between 4.00 to 11.00 trillion barrels of oil.

However, it is not known how much of that potential resource would be extractable, either on a technical or economic basis, but the UK government is keen to open up the industry to strengthen the country's own energy supplies.

To put that potential resource into perspective, the UK currently consumes around 70.00 billion cubic feet of gas on annual basis, and the commodity accounts for around one third of the country's overall energy supply - but none of that comes from shale gas production at the moment.

The government's comments on Thursday were in response to the report conducted by the Committee on Climate Change that evaluated the onshore petroleum potential in the UK.

Natural gas is seen as the key to bridging the gap that is expected to emerge while coal generation is phased out and new renewable and nuclear energy comes online. The current aim is to have all coal plants closed by 2025 and although all of the current UK nuclear fleet will be decommissioned in the next two decades, at least six new sites are set to come online in the future.

Gas has an advantage as an energy supply, as it can be used not only to generate electricity but also directly for heating and cooking. Crude oil cannot be used in this way without processing.

The UK been importing gas from abroad since 2004 after the UK's main home for energy production, the North Sea, began to experience declining production rates. Although oil still flows offshore the UK, the area is mature and expensive to operate in, especially during the current oil market.

Around 45% of the UK's gas consumption in 2014 was imported, and estimates show this will continue to rise in the foreseeable future, placing further pressure on the government to find new sources of domestic energy.

Compared to 2014, the oil and gas sector in the UK is expected to have cut 120,000 jobs by the end of this year, but the government plans to transfer the skills currently being lost into the wider engineering sector - and the shale industry, if unlocked, could create around 64,000 new jobs.

In tandem, investment has also slowed in the UK oil and gas industry, but the government forecasts investment into the shale industry could reach GBP33.00 billion if pursued, including the boost it would give to associated markets such as construction and engineering.

One the main issues that was analysed by the Committee on Climate Change was the compatibility of opening up an onshore petroleum market in the UK with the country's climate change commitments and ambitions.

The UK signed off its fifth carbon budget last week that outlines the country's target to reduce emissions by 57% during the next period, part of the longer-term goal of reducing emissions by 80% by 2050. The reduction targets are based on emission levels in 1990.

Environmental groups have also been concerned by the potential implications of fracking, the popular method of extracting gas in the US which is highly controversial in the UK, slowing the industry's development over recent years.

Not all onshore projects require fracking. One of the most eagerly watched projects onshore the UK at the moment is the Horse Hill project near Gatwick Airport that is being developed by a number of London-listed companies and involves no fracking.

Under test conditions, one well at Horse Hill managed to produce 1,688 barrels of oil per day from three intervals. Notably, that well is only recovering a minor amount of the total oil that lies beneath the project, somewhere between 3.0% to 15% - demonstrating the uncertainty over estimates made about potential shale gas resources in the UK.

Importantly, Horse Hill lies over the Weald basin in the south of the country and is completely separate from the Bowland-Hodder basin in the North.

Both basins hold numerous onshore petroleum projects that are under development, with many being pursued by London-listed companies, mainly smaller exploration firms looking to benefit from an early mover advantage when, or if, things take off.

However, a local council earlier this year approved a plan to frack the first well in the UK for five years, and the market is hoping that means more operations will be given the green light going forward. The government said operations that require fracking will still need further consents compared to conventional projects that do not use the method, such as Horse Hill.

Importantly, the report has advised the government that a UK shale gas industry in production "is compatible with carbon budgets if certain conditions, set out in three 'tests', are met".

The first 'test' is to ensure the emissions released during well development, production and decommissioning are closely monitored to allow quick responses to any leaks or issues and the second is to ensure the country's gas consumption remains in line with carbon budgets.

The third requires the UK to facilitate and offset the guaranteed rise in emissions that would be caused by the shale gas industry by lowering emissions elsewhere in the UK economy.

"The government believes that the strong regulatory environment for shale gas development, plus the determined efforts of the UK to meet its carbon budgets, means that the three 'tests' put forward by the Committee on Climate Change will be met," said the government.

By Joshua Warner;; @JoshAlliance

Copyright 2016 Alliance News Limited. All Rights Reserved.

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