The government has lifted its moratorium on fracking but will this, as in America, lead to big changes in our energy markets? Simon Wilson reports.
What's happened?
The hydraulic fracturing (fracking') of rocks to release natural gas trapped deep underground was suspended last year after exploratory drilling in Lancashire by Cuadrilla caused small earth tremors. Last week, however, energy secretary Ed Davey, gave the go ahead for fracking to restart under stringent new rules designed to address safety and environmental concerns.
The move was applauded by many in the energy industry: fracking for shale gas has famously transformed the energy market in America by driving down gas prices. Enthusiasts hope the same can happen here as part of what David Cameron calls a "shale gas revolution".
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How far have US prices fallen?
In America, the price of gas crashed by 85% from its peak in 2005 to just above $2 per million British thermal unit (BTU) earlier this year. Since then it has stabilised at about $3.50 per million BTU, compared to $8 or $9 in Britain and mainland Europe. That low price is credited by economists with delivering a boost to US economic recovery.
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Now British energy businesses, manufacturers and politicians led by pro-fracking chancellor George Osborne think shale gas can play a big role here in tackling ever-rising power prices and Britain's looming energy crunch as it tries to move from fossil fuels to renewables.
How much shale gas does Britain have?
Cuadrilla's drilling so far suggests there could be 200 trillion cubic feet (tcf, 5.5 trillion cubic metres) of shale gas beneath its 347 square mile concession in Bowland in Lancashire. If 10% of it proves to be recoverable, then that single field would in theory be enough to supply all of Britain's gas needs for seven years.
However, such an outcome is highly unlikely; Cuadrilla reckons "realistic" production levels from Lancashire shale can reach 20 billion cubic metres a year. That, says the company, would cut Britain's dependence on imported gas from 79% of total consumption to 58% by 2030.
Can it be believed?
As yet, no one knows. Recent authoritative estimates of the total recoverable reserves in Britain range from around 20tcf (the US government) to 40tcf (a report by Energy Contract Company, a consultancy).
According to the latter, if production in Britain goes well, it could hit 2,100 standard cubic feet a day (mmscf/d) by 2030, equivalent to just over half the North Sea gas production this year. To put that in context, British demand in 2011-2012 was 8,550 mmscf/d.
When will we know more?
Early next year the British Geological Survey is due to publish its revised estimates for Britain's shale gas reserves. But since much of the gas lies under densely populated areas, there will still be a big question mark over how much will be accessible.
As ever, the question is not how much gas is trapped in the rocks (the resource', in industry jargon) but how much is economically recoverable (the reserve'). The only way to find that out is to undertake more exploratory drilling.
There are ten shale basins in Britain that are broadly comparable to Lancashire's the only one so far even initially explored. The other large ones are in the Weald area of Sussex and Hampshire, and in a broad swathe of England from Cambridge across to Oxford and down to Bath (interestingly, all Tory areas, where local opposition is likely to be strong and well organised).
What do the sceptics say?
Andrew Rawnsley argues in The Observer that large-scale fracking here is a pipedream. Shale seams in Britain and Europe are typically thinner and deeper than in the US, so will be far more expensive to tap. Colin Smith of VTB Capital notes that, to date, of 50 wells drilled across Europe, not one appears to have flowed at a rate that would make it commercially viable. "So while the frack-heads fantasise about a bonanza," says Rawnsley, "the reality is that not so much as one cubic metre of shale gas" has been profitably extracted anywhere in Europe.
Meanwhile, University of Sussex professor Jim Watson tells The Guardian that even successful extraction of shale gas may "not necessarily bring down prices to UK consumers... any price difference between UK gas and continental European gas will quickly disappear as a result of demand from other countries".
Do all geologists agree with Rawnsley's analysis?
No. Earlier this year, Peter Styles, professor of geophysics at Keele University and expert in mining geology, argued in The Times that exploiting the natural gas locked in the shale reserves and coal seams that lie beneath 30% of Britain's territory was a no-brainer. We must "protect our water supply and environment". But done right, there is "probably" enough to meet gas demands for decades, cutting our dependence on foreign sources.
Can we then expect a cheap gas bonanza?
The most extensive independent survey has been conducted by Professor Richard Selley, a geologist and shale specialist, and David McGough, an ex-Mobil engineer, who co-authored the Energy Contract Company report. They conclude that Britain won't see an American-style revolution leading to a bonanza of cheap shale gas.
Extraction here is likely to be far less intensive, due to greater population density, tighter regulation, and the fact that the state rather than landowners owns subterranean mineral rights. They do, however, expect shale gas to attract £95bn of investment and account for a quarter of British consumption within 20 years, lowering consumer prices and improving energy security by cutting dependence on imported liquid natural gas.
