UK energy policy: gas and fracking

The Energy Secretary, Amber Rudd MP, made a speech last IMG_1401month which ‘reset’ energy policy in the UK. She set out the Government’s priorities with a focus on “keeping the lights on” and minimising the cost to the consumer. The Government’s aim is to move away from coal power generation and focus upon gas and nuclear, with lip service being paid to renewables, and only then off shore wind power.

All coal-fired power stations will need to cease generating by 2025 – many will close far earlier due to a lack of investment. This will mean that a significant amount of gas-powered generation will need to be built in the next 10 years which, in turn, will result in an increase in the level of gas usage.

The UK consumes, on average, three trillion cubic feet (Tcf) of gas a year. The North Sea, the main source of supplies since the 1970s, is now a mature field and only has approximately 19Tcf remaining. More than half our supplies are imported from continental Europe, most coming from Norway, some from Russia and the rest by ship as LNG from the Middle East.

The UK’s immediate reserves of gas amount to 15 days, so any interruption of supply to the UK could be disastrous. Political unrest in Eastern Europe, arguments between Russia and Ukraine, or even a storm in the Atlantic could all lead to issues. Initially, this would result in quickly rising energy prices but ultimately in restricted supplies.

The UK’s current power supplies are already under pressure. Only a few weeks ago there was not a sufficient buffer between electricity supply and demand and the National Grid asked some major uses to switch energy sources to preserve the safety margin. This is even before the onset of winter or any severe weather when energy consumption could spike resulting in even more drastic actions to maintain domestic supplies of both gas and electricity.

It looks as though there is a perfect storm forming is on the horizon: a national grid already under pressure, a policy of increasing reliance on imported gas, continuing instability in Eastern Europe and an increasingly unpredictable Russian leader, could combine to produce an energy crisis the likes of which has not seen since the 1970s.

So, is the Government’s current strategy a safe one? That all depends upon shale. The Government is confident that there is huge reserves of both gas and oil under our feet, and we should be taking advantage of it, exploiting it using fracking and increasing our security of supply and independence from volatile politics. Even the most conservative estimates of potential gas and oil reserves indicate around 50 years’ supplies of gas. In the north of England, taking a 10 per cent recovery rate of the 833 Tcf of “In Place Resources”, provides 83.3Tcf, which equates to over 27 years’ supply at current consumption rates. But no one can be sure until some wells are drilled.

The Government is increasing applying pressure to enable those initial wells be drilled. It has introduced legislation requiring county planning authorities to make a decision on shale applications within the required timeframe, or it could take over the application. In Lancashire, the Government has already indicated that it will make the final decision on Cuidrilla’s planning appeal in Lancashire, allowing the Inspector to make a recommendation before the Secretary of State makes the final determination. No prizes for guessing which way that will go.

It is encouraging to note that the reasons for refusal surround traffic movements and impacts on landscape and not the integrity of the process itself. The often irrational arguments put forward by protectors questioning the safety of the process have now been finally put to bed. The same arguments over Third Energy’s application in North Yorkshire, where the application is currently going through the processes running up to committee, are also hopefully all but resolved, although it remains politically sensitive and is likely to also end up at appeal as local councillors are unlikely to have the balls to give consent.

The Government has put in place these steps to ensure shale is explored in the near future, with the first commercial wells to come on line within a few years. Once the first handful of wells have consents, others will follow, leading to a plethora of applications and drilling over the coming decade. The future’s bright, the future’s gas.

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