The myth of “Saudi America” is little more than a sick joke for people in the ghost towns at the heart of the US shale plays. The fracking bubble has long since burst. Most of the shale oil and gas firms have gone bust. And now local communities have to dig deep into their remaining funds to pay to clean up the mess.
It’s not a story you hear much about in the mainstream media just yet. In the UK, the story we are being asked to believe is a smaller version of the US myth – the “United Kingdom Emirates” perhaps. The widely discredited British Geological Survey claims that there is a century of shale gas beneath our feet. On this basis, the UK government has cut subsidies for renewables, scrapped research into carbon capture and storage, and forced the closure of all of Britain’s coal power stations by 2025, with a view to replacing them all with a new fleet of gas powered stations. Government ministers also claim that a vibrant UK shale gas industry will create more than three million new jobs by 2020.
This is, of course a very costly example of the old proverb about not counting your chickens until they have hatched. The British Geological Survey has said nothing about recoverable reserves of gas. All it has done is plotted likely deposits of hydrocarbon bearing rock formations. As Brian Davey notes:
“While the British Geological Survey has produced maps of shale layers, and while it has been suggested that the carbon content might be there, the data is lacking for other key parameters, for example for rock porosity. In addition the shale in the UK has more folds and faults when compared to US fields. This might to lead to more earthquakes which would damage the wells – plus leading to a potential failure to achieve the pressure needed for fracturing if fracking fluid leaks into small faults when pushed underground.”
A more sober assessment of Britain’s shale formations by Professor Andrew Aplin, Durham Energy Institute’s (DEI) professor of unconventional petroleum suggests that that far from a century of shale gas, we are more likely to have 10 to 15 years. Other analysts have arrived at a similar conclusion:
“According to a 2013 assessment by ARI [Advanced Resources International], UK shale holds 17,600 bcm of gas. Only 728 bcm of this is judged to be technically recoverable: if that could be profitably extracted, it would satisfy the United Kingdom’s gas needs for about a decade”
That’s still a lot of gas, of course. But to obtain it will not be easy. Estimates of recoverable gas tend to focus on geology and technology. But like any other industry, fracking has to operate at a profit – something that is much easier on the open plains of North Dakota than in a densely populated country like the UK. According to Andrew Alpin:
“We will not know what our reserve potential is until some 20 to 30 test wells have been drilled, but if my estimate is correct then to recover that would entail drilling somewhere between 15,000 to 20,000 wells on some 2,000 to 3,000 well pads.”
Each of those wells is going to cost around £10 million to drill. And if the US experience of them is anything to go by, only a handful are going to be in profitable sweet spots. Britain’s geology doesn’t help either. As Mason Inman writing in the journal Nature notes:
“the BGS’s studies used US shale plays as analogues for crucial parameters, the two nations have different geological histories. The United States has large deposits of shale that are not too thick and have been folded little over time. The shale in the United Kingdom is more complicated.”
Nor is Britain’s infrastructure up to the task. Many of the proposed shale drilling zones are in rural areas accessed by small B roads and meandering country lanes. It is these that the shale drillers are going to have to send their fleets of giant trucks loaded up with drilling equipment , fracking fluids and all of the other paraphernalia required to operate a gas well. Because of EU environmental legislation, they will not be allowed to simply leave toxic fracking fluids to decompose in pools on the site, but will have transport them away for safe disposal. In the absence of dedicated pipelines, any gas recovered will also have to be driven off site. As Inman observes:
“Given the geological hurdles and the United Kingdom’s dense population, it may prove difficult to find many promising, acceptable places to drill.”
This brings us to fracking’s Achilles Heel – the economics are horrible. As Brian Davey reports:
“At current gas prices all the exploration and production companies active in the UK and Ireland would struggle to make a profit. There are 4 studies of extraction costs of natural gas by fracking in the UK – by Ernst and Young, Bloomberg, Oxford Institute of Energy Studies and Centrica. All have maximum and minimum extraction costs. Current gas prices per therm are less than the minimum extraction cost in the lowest study. So for the industry to continue at all it has to assume that gas prices will rise in the future.”
The trouble is that there are plenty of places around the world that still can break even at today’s prices. Russia, in particular, can produce gas cheaper than any UK fracking company could hope to. And there is no guarantee that Russia will not defend its European gas market share in the same way that Saudi Arabia has protected its oil market share against US frackers. The other side of the economic problem is no better; because were prices to rise to the point that fracking becomes profitable, the ensuing demand destruction would lead to a glut of gas similar to the current oil glut. In those circumstances, prices would have to come down again.
We could still get a lot of gas out of the ground in the process of learning that fracking is unprofitable. But by dashing headlong for a gas future while cutting almost everything else, the UK government (and it is worth noting that Wales, Scotland and Northern Ireland are much less enthusiastic) is taking a dangerous gamble that the UK shale gas industry will be able to profitably recover vast quantities of gas despite the failure of fracking to achieve this aim elsewhere in Europe. Indeed, even the US frackers, faced with the best drilling conditions, massive shale deposits, government support and the vast financial resources of Wall Street have failed to find more than a decade of profitable shale gas.
If the experts are right, and the frackers and their Tory government cheerleaders are wrong, the problem for the rest of us is that there is no Plan B.