The US shale gas boom has been one of the most significant events in the energy industry for decades.
With the high cost of oil since 2008 acting as a catalyst, US oil and gas production has gone through the roof, and shale has been central to this. In March 2013 the US produced 7.124m barrels of oil equivalent per day – its highest monthly figure since October 1992.
Meanwhile, the share of US gas production from shale quintupled from 5 per cent in 2000 to 25 per cent in 2010, and is forecast to rise to 50 per cent by 2035.
But could the UK follow in the US’s footsteps?
The US government’s Energy Information Administration (EIA) estimates that the UK’s technically recoverable shale resources are 26trn cubic feet – approximately nine times the UK’s annual gas consumption.
If the shale dream is realised, it will give a shot in the arm to energy self-sufficiency. Just as the US will be less reliant on imported oil in the future (from 50 per cent of US oil consumption in 2012 to less than 20 per cent by 2030), the Institute of Directors estimates natural gas from shale could reduce UK gas imports from 76 per cent to 37 per cent by 2030.
But there are stark differences between the US shale industry and the nascent UK one.
The EIA report the shale geology of the UK is “considerably more complex” and costs are “substantially higher” than in the US. Although the UK’s resources appears substantial, commercial levels of production are “yet to be established”.
While the US has drilled 150,000 shale gas wells, the UK has drilled a dozen or so, and only one has a detailed geological examination. Significant further drilling needs to be completed to fully assess the viability of shale prospects and this will take time.
If UK shale is to prove viable, considerable infrastructure spend will be required, investment that will stimulate the shale service industry as it has in the US. Already, the US has more than 15m horsepower of pressure pumps and 400,000km of gas pipeline in use.
Clearly, investment in the UK’s infrastructure of storage, processing facilities and pipelines would be critical to sustain a boom.
Alongside the environmental and social concerns over ‘fracking’, the deterioration of shale wells is a drawback. Unlike conventional wells, shale gas production declines rapidly in the first years of a well’s cycle, falling by 75 per cent after one year and by 90 per cent after three.
This means continual investment and drilling must occur to maintain production.
Finally, mineral rights may prove to be a stumbling block. The US’s private mineral rights, both on and below the ground, allow explorers to negotiate directly with landowners rather than governments. This enables a quicker and more secure investment environment. The UK lacks similar below-ground rights so it is uncertain how landowners might be compensated.
