Fracking FAQ: what is fracking, and why is it in the news?

Fracking – the high-tech drilling technique for shale oil and gas – is a subject that’s constantly in the news. But what exactly does fracking entail, and what are the pros and cons?

What is ‘fracking’?

Hydraulic fracturing (known as ‘fracking’) is the process of using water, sand and chemicals to release deep deposits of oil and gas.

A company first drills a deep vertical well near the shale deposits. It then creates horizontal branches from the main vertical shaft. Next it blasts a mixture of water, sand and chemicals at high pressure into these branches. The pressure smashes the nearby rocks, enabling the oil and the gas to flow into the branches, and therefore the main well.

Despite all the recent attention, this process is not new. It was first developed as long ago as 1947.

Why are people paying attention now?

Despite a brief period of interest in fracking during the energy crisis of the 1970s, up until recently it was considered to be too expensive to be of much use. However, the rise in energy prices over the last decade, combined with improved technology, has made the process economically viable.

In fact, the technique has led to an oil and gas boom in various parts of the US. According to America’s Energy Information Administration, the amount of crude oil produced in American oil fields has risen by 50% over the last six years. Around 40% of that is down to shale oil. It’s had a huge impact on the US economy, which we’ve explored in several of our stories on investing in shale

The shale gas revolution: the winners to buy and the losers to avoid

Profit from the American energy revolution

Cash in on the second great American oil rush

How does this affect the UK?

With politicians across the globe looking enviously at America’s new-found oil wealth, many other nations have been investigating whether they might have previously inaccessible shale deposits to exploit. And Britain is one of the lucky ones.

Last year, experts from the British Geological Survey announced that they think there could be up to 2,281 trillion cubic feet (tcf) of gas in the ground underneath Lancashire. To put that into perspective, this is more than four times the size of the main American shale field.

It’s not the only shale field in Britain either. There are several belts of shale in England, as well as smaller areas in Midlothian in Scotland, and Fermanagh in Northern Ireland. While not all of these will prove fruitful, it is likely that – given time, and the right development policies – our total reserves could transform Britain into a major player in the world energy markets.

So why is it controversial?

Opponents have seized on the fact that in a few American cases, fracking has been linked to the contamination of groundwater supplies. More notoriously, preparatory drilling was blamed for several earthquakes in Blackpool in the spring of 2011, leading to a temporary moratorium.

Campaigners also point out that the UK is far more densely populated than North Dakota (the main ‘shale boom’ state in the US), which in turn means that the potential disruption could be much greater. Another major problem – as our own Matthew Lynn has flagged up – is that landowners don’t own the mineral rights under their land, so they can’t benefit from it. On the other hand, they can currently block development – so they don’t have much incentive to welcome the drilling rigs with open arms.

Are these objections valid?

The latest evidence suggests that water supplies are safe provided there is a sensible level of supervision. As for earthquakes, Professor Ray Davies of the University of Durham thinks that fracking “causes as much seismic activity as falling off a ladder”.

It’s also worth understanding that this really isn’t new – fracking has been taking place on a small scale in mainland Britain for decades. The Beckingham Marshes oil rig in Nottinghamshire has been fracked four times between 1963 and 1989. The Royal Academy of Engineering estimates that 200 oil wells in the UK have employed fracking at some point, in order to boost their flow.

Rather than mass pollution and earthquakes, probably the most significant – and worrying – objection is that because fracking uses large amounts of water, it has been linked to drought. For more on the pros and cons of fracking, take a look at this report on the process that my Fleet Street Letter colleagues have put together.

How is the British government promoting it?

Having finally lifted the ban on fracking last December, George Osborne announced that he plans to cut the tax on onshore exploration to 30%. That’s one of the lowest rates in the world, and a big incentive to explorers.

Local opposition is also being circumvented with a mixture of carrots and sticks. To reduce opposition, 1% of revenue and a fee of £100,000 per well will go to the local communities directly affected by the development. Local councils will also be allowed to keep 100% of the business rates, which could make fracking worth up to £1.7m per site, according to the BBC. Finally, the government is moving to change trespass law so that landowners will not be able to stop companies from drilling under their land.

What about consumers and firms?

There is general agreement that the glut of shale gas has pushed down domestic gas prices in America. This has given heavy manufacturing firms a cost advantage, and led to the movement of formerly outsourced jobs back to the US (known as ‘reshoring’).

However, the UK is far more integrated into the European energy network, so the price benefits will be spread over a wider population. Even in the US, the gap is starting to disappear, thanks to more countries building gas terminals and US politicians moving to ease export restrictions. There are also worries that increased gas exports from the UK could eventually lead to ‘Dutch Disease’ – where demand for commodity exports drives up a country’s currency and hollows out its other export industries.

What about global energy prices?

While shale gas has pushed down gas prices, its effect on the oil market has been much more limited. This is because oil is traded globally. While shale oil isn’t the most expensive source of oil, it still costs about $70 a barrel to produce. This means it will have the biggest impact on high-cost producers, such as those in North Africa. However, while it won’t cause prices to plummet (not while the cost of production remains at current levels) it still helps to reduce the power of oil cartel Opec, and will probably provide something of an anchor to prevent the price from drifting upwards.


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  • Vincent Boardley

    This all sound like more money to the government, do we really need more fuels when we can get resources from sustainable energy like solar and wind. Our corrupt government once again will be putting aside the peoples wellbeing for backdoor dealing with major global companies trying to buy councils with most probably obscene monies and promising all the fruits when really all they get is the spoils to be accounted for in the future. What a farce. Our future energy solutions should be invested into by our “dear government” to local companies instead of policing other countries bearing oil, costing millions ever year. All the monies saved would be better spent here investing in clean energy, but then again the government would not benefit from this as they are only puppets and told what to do anyway.
    “We could benefit from a new government with better insentives but as usual all turn out the same, is they any wonder 1/3 choose not to vote or seem it pointless as they are all vagabonds and thieves only there to line their own pockets”!!!!!

    Vince

  • Keiron

    The benefits to UK PLC are not just from “cheap” energy but far more importantly having our own, indigenous secured energy supply. At present we rely on Norway and Russia for the bulk of our gas imports as the UK no longer produces enough gas from the North Sea to fuel its own needs. Norway I not so worried about but given Putin has already cut Ukraine off for various reasons do we in the UK really want to be reliant on Russian supplies??
    The other thing Shale Gas will give the UK is time. Time to build the next generation of Nuclear stations to provide the vital basal load capacity (the capacity that keeps the lights on basically), to build wave, tidal, fluvial (rivers – think waterwheels) generation and even carpet the country’s roofs with solar generation. Wind is not reliable enough to provide anywhere near enough power despite what the “greenies” try to tell you. Does anyone think all the wind turbines in UK were actually generating anything during the extended period of high winds we have been having??
    While we continue to want the latest gadgets, have the lights on all the time, our heating on a 25C so we can walk around the house in winter in a t-shirt, drive our cars, get food from all over the world, watch TV on our tablets anywhere and so on we will need hydrocarbons.
    If we don’t develop the natural resources under this country fully then we are letting future generations down. Shale Gas can keep the lights on, could see manufacturers coming back home, rebuilding the UK economy away from what is currently a finance centred one and potentially allow the UK to become the place to be to develop new energy generation that re-powers the world.

    Don’t let the media and “green” groups scaremongering and oversensationalising cloud the picture. There is a lot of misinformation and total falsehoods being banded around about hydraulic fracturation. It’s not dangerous, doesn’t use dangerous chemicals (food grade guar gum is one chemical that is used for example, sand is another), certainly doesn’t use radioactive waste as one person claimed during the last protests in Sussex and as for earth tremors at worst it’s like a truck driving past but for the most cases 99.9% of people would not even notice them.

  • Inquisitor

    What a bunch of apes. Don’t like the law? Change it when it suits you. They should at least consider trying to compensate the landowners rather than just changing the law to suit them.

    That said, I am pro fracking but don’t really give a toss as to whether the government gets anything out of it.

  • http://- Brian E J Bridgman

    Well the difference between Vince & Keiron is I believe between absolute nonsense
    and a great deal of Wisdom. I follow wholeheartedly what Keiron said, but would add caution to the point about the EU. This organisation will grab most of the revenue from any British Fracking activity and thus, is yet further evidence, that we need to get out of that dreadful organisation, as soon as possible.
    Another point that Keiron makes, is about American ownership of land. The American Landowner properly owns his or her land. Unlike the British system, that will rob any landowner of the wealth the lies beneath their land. This of which the British people do not realise, is because we are NOT a democracy in this land.
    We are an elected Dictatorship ( yes the Dictator is benign ), but this make us subjects of the Queen and not Citizens of a true Democratic State such as the U.S., Germany, France, etc,. However, if the unthinking electorate continue to vote inside the box, and thus keep those parties in power of which their leaderships, have vested interests in the EU. What type of Democracy we are or are not, will fall by the wayside, as we are gradually crushed by the sovietisation
    of the EU State and Fracking decisions will be beyond, our remit.

  • Peter Cairns

    The Fracking Boom

    Some History of Fracking

    Shale has become an increasingly important source of natural gas in the United States since the start of this century, and interest has spread to potential gas shales in the rest of the world. The earliest description of the process dates to the 10th century.

    In 1684, Great Britain granted the first formal extraction process patent. But extraction industries and innovations only became widespread during the 19th century.

    The industry shrank in the mid-20th century following the discovery of large reserves of conventional oil, but high petroleum and energy prices at the beginning of the 21st century have led to renewed interest, accompanied by the development and testing of newer technologies.

    In the 10th century, the Arabian physician Masawaih al-Mardini (Mesue the Younger) wrote of his experiments in extracting oil from “some kind of bituminous shale”.

    The first shale oil extraction patent was granted by the British Crown in 1684 to three people who had “found a way to extract and make great quantities of pitch, tarr, and oyle out of a sort of stones”.

    Modern industrial extraction of shale oil originated in France with the implementation of a process invented by Alexander Selligue in 1838. In 2011, following strong lobbying from Euro MP José Bové against shale gas exploration the French government suspended gas exploration permits.

    On 20 July 2012, Environment minister Delphine Batho confirmed that the government would maintain a moratorium on shale gas exploration. French president François Hollande still refuses to allow fracking following pressure from the green party.

    France derives most of its electricity from nuclear power. As a result, the country often has a surplus of electrical power, which supports the use of electric cars.

    Alexander Selligue’s invention was improved upon a decade later in Scotland using a process invented by James Young. During the late 19th century, shale-gas plants were built in Australia, Brazil, Canada, and the United States.

    The 1894 invention of the Pumpherston retort, which was much less reliant on coal heat than its predecessors, marked the separation of the oil shale industry from the coal industry.

    China (Manchuria), Estonia, New Zealand, South Africa, Spain, Sweden, and Switzerland began extracting shale oil in the early 20th century. However, crude oil discoveries in Texas during the 1920s and in the Middle East in the mid-20th century brought most oil shale industries to a halt.

    In 1944, the US recommenced shale oil extraction as part of its Synthetic Liquid Fuels Program. These industries continued until oil prices fell sharply in the 1980s.

    The last oil shale retort in the US, operated by Unocal Corporation, closed in 1991. The US program was restarted in 2003, followed by a commercial leasing program in 2005 permitting the extraction of oil shale and oil sands on federal lands in accordance with the Energy Policy Act of 2005.

    In 2000 shale gas provided only 1% of U.S. natural gas production; by 2010 it was over 20% and the U.S. government’s Energy Information Administration predicts that by 2035, 46% of the United States’ natural gas supply will come from shale gas. Shale-gas discoveries are also opening up substantial new resources of tight oil / “shale oil”.

    Some analysts expect that shale gas will greatly expand worldwide energy supply. China is estimated to have one of the world’s largest shale gas reserves.

    A study by the Baker Institute of Public Policy at Rice University concluded that increased shale gas production in the US and Canada could help prevent Russia and Persian Gulf countries from dictating higher prices for the gas they export to European countries.

    The Obama administration believes that increased shale gas development will help reduce greenhouse gas emissions (in 2012, US carbon dioxide emissions dropped to a 20-year low. Human and public health will both benefit from shale gas displacing coal burning.

    A 2013 review by the United Kingdom Department of Energy and Climate Change noted that most studies of the subject have estimated that life-cycle greenhouse gas (GHG) emissions from shale gas are similar to those of conventional natural gas, and are much less than those from coal, usually about half the greenhouse gas emissions of coal.

    Shale gas emits 20% less carbon than petrol, and produces 120 times less harmful particulates than diesel.

    Gas for vehicles has never quite reached expectations, due largely to the Government’s inability to recognise its considerable environmental advantages by reducing duty.

    However, the fuel did become very popular for fork lift trucks.

  • http://hotelscentrallondon.info christine

    I think that there is no way that the government will not let the Fracking go ahead
    they just cant afford not too despite all the protests. It is the only way we can get this country out of this mess that we are in. But I don’t think that the ordinary people will benefit from it as far as cheaper bills goes. I also thing that they shouldn’t let it go to foreign companies we need to be in control of it. France wont do it in they’re own country but they want to do it in ours so they can rip the British off. I have bought the domain name ShaleGasShares.com Do you think I should sell it or hold on to it.

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