Consciousness of Sheep
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Despite the upbeat propaganda put out by the fracking companies and repeated by the mainstream media, UK frackers are in serious trouble.
In response to a freedom of information request by independent journalist Russell Scott, the UK government has released papers that show that the industry is unable to secure private investment.
In a meeting with then Minister Anna Soubry last May, the Onshore Energy Services Group complained that the industry had been unable to secure investment from the UK banks, which consider the fracking companies too small to warrant the risk. As a result, the industry was struggling to secure what little private investment it could find, just to keep going. The result, according to the released papers, is that the industry is only barely capable of developing “incremental gains” making a small number of fracking sites operational.
The papers have been released just weeks after fracking company, Cuadrilla, posted huge losses and was forced to slash and restructure its workforce. Nor are financial pressures the only problem facing the frackers. According to the papers, there are doubts about the availability of fracking supplies and equipment unless the industry grows massively. For this to happen, however, the industry admits that it needs to win public support – something that is highly unlikely in the foreseeable future.
The irony is that the apparent success of the US fracking industry may be the single biggest obstacle to the development of UK fracking. This is because most of the early hype and consequent investment in UK fracking came on the back of the huge increase in global oil and gas prices at the start of the decade. However, the US industry was first out of the starting blocks because of the twin advantages of an already mature onshore oil industry coupled to a Wall Street financial sector desperate for yields (which so-called “junk bonds” of the kind issued by the US fracking companies offered). The result was that the US industry rapidly scaled up to produce so much additional oil and gas that world prices collapsed in mid-2014, and have remained stubbornly low ever since.
The reality for British frackers – who cannot say for sure if there is any profitable shale gas reserves beneath the British Isles – is that any increase in prices of the kind that would make investment in the UK industry anything more than a fool’s bet, will – at least until the US resource is used up – simply boost US production to the point that prices come crashing down once more.
It appears that UK investors are far cannier than the frackers gave them credit for. And that is unlikely to change at least until global gas prices are permanently back above 2011 levels. In the short-term, that is good news for the British countryside and, given the UK government’s fetish for gas; Qatar, Vladimir Putin and Gazprom too.
