Fear and bad policy is holding back the UK’s huge shale potential

THE US Energy Information Administration (EIA) has just raised its estimate of the UK’s technically-recoverable shale gas to 26 trillion cubic feet (tcf). But it’s actually a little behind the curve. Over two weeks ago, we produced a report which combined the estimates of the exploration companies and came up with a figure of 309 tcf of gas in place. Then last week, IGas announced that – just for its license areas – its initial estimate of 9.2 tcf may have to be increased to as much as 170. This made our best-case scenario look rather mediocre.

In a way, discussion over the extent of our reserves is missing the point. The basic problem for British shale gas is that not one molecule of methane has been delivered to the marketplace. Too often, fear has had the upper hand over facts in the debate. The EIA was quite correct to call the UK’s record on getting shale gas moving “abysmal”.

The case for shale is clear. Our report found that developing a shale gas industry could create up to 74,000 jobs, billions in tax revenues, improve energy security, and reduce CO2 emissions and air pollution. But we need to move the discussion to how to deliver shale gas to consumers. There are barriers to overcome. Britain has long been ill-served by a tax system that only rewards central government, giving local government and communities no incentive to welcome infrastructure investment opportunities. Exploration companies are also faced with very high barriers to entry. They must deal with a multitude of overlapping agencies and tiers of government, all demanding information for planning, permitting and environmental impact assessments, married with long consultation periods on shale gas operations.

So first of all, planning and permitting has to be simplified, so that the drilling and fracturing process is controlled nationally, while above-ground development at the site is the responsibility of the local planning authority. Secondly, a financial framework needs to be put in place which openly benefits the local community as well as the local authority. Thirdly, to unlock investment, we need a National Policy Statement for shale gas. It’s nonsensical that the generation, transmission and storage of energy are deemed to be nationally significant infrastructure, whereas the extraction of energy – like shale gas – is not.

Shale gas is not going away. Next year, there will be a fourteenth round of onshore licensed exploration, which is bound to find more shale gas and oil as well. There is also great potential for natural gas liquids like ethane, propane and butane, which could be a huge feedstock asset to the chemical industry and may see a revival in the fortunes of cleaner liquefied petroleum gas vehicles.

With North Sea production declining, coal needing to be replaced, and nuclear and renewables unlikely to provide a large proportion of the energy we need over the next 15 years, the country will need a lot more gas. We must only decide whether to use our own or pay a premium to bring it in from abroad.

Dan Lewis is chief executive of Future Energy Strategies, and energy policy adviser to the Institute of Directors.