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Mat Hope

20.01.2014 | 1:45pm
UK policyGovernment ignores own evidence to promote shale gas push
UK POLICY | January 20. 2014. 13:45
Government ignores own evidence to promote shale gas push

The government claims that developing a UK shale gas industry could mean millions of pounds and thousands of jobs soon heading to a community near you. But a closer look at the evidence suggests the situation is not so clear cut.

The Prime Minister, David Cameron, last week told MPs he “really, really” wanted to get a UK shale gas industry up and running. He’s certainly been busy promoting its prospects with some impressive numbers: The government claims communities could get a £10 million financial reward for permitting fracking, with the industry supporting 74,000 jobs.

Critics have accused the government of overstating shale gas’s case, however. They point to the government’s own research which suggests a considerably less bountiful future than the prime minister claims.

Community benefits

The government is keen to get the public on board with its fracking vision. To help things along, it is set to offer communities £100,000 for each shale gas well drilled in their area, along with 1 per cent of its subsequent revenue. The government says the deal could be worth up to £10 million per site.

The Daily Telegraph revealed the government’s own research suggests the benefits could be considerably less than this, however. It says a government report, researched by engineering consultancy AMEC, suggests the financial reward is likely to be between £2.4 to £4.8 million.

So why the disparity between the two estimates? It comes down to assumptions about how much shale gas will be extracted.

The £10 million figure comes from industry representatives, the United Kingdom Onshore Operators Group (UKOOG). It worked out how much communities stood to benefit based on analysis by business lobby group, the Institute of Directors (IoD).

The IoD’s report assumes that, at best, each shale gas ‘pad’ – the area containing drilling rigs – could have 10 wells. Each of these 10 wells could in turn have 40 ‘lateral’ wells attached, drilled horizontally rather than vertically. The horizontal drilling technology allows companies to extract shale gas without having to build a new rig on the surface.

AMEC’s report assumes each pad will have 24 wells with only one lateral well attached, in contrast. That means considerably less gas flowing out, lowering revenues, and reducing the amount companies pay communities.

Currently it’s very unclear which of the estimates is more likely, as companies are still in the early stages of exploring for shale gas.

Ed Hough, Team Leader for Unconventional Gas at the British Geological Survey, tells us there is “no geological reason” for the assumptions to be so different. He says the disparity is down to a lack of technical knowledge and that “until someone does more than just horizontal drilling, [the figures] will stay as assumptions”.

That’s some way off. As such, it’s basically too early to say for sure how much communities stand to make from shale gas, because no one is confident about how much gas will eventually flow.

Jobs

It’s not just financial rewards the two reports disagree on. The IoD and AMEC also offer different figures for the number of jobs a UK shale gas industry could create.

The government claims a UK shale gas industry could support 74,000 jobs – a figure again taken from the IoD’s report.

AMEC estimates it’s more likely to be between 15,900 to 24,300 jobs, however.

Both reports define what counts as a shale gas job very widely. The estimates include jobs created by drilling, the need to get things to and from the drilling site, and servicing the new army of workers. As such, the jobs created by the shale gas industry – and included in the estimates – could be anything from an engineer, to a truck driver, to a waiter in the local pizzeria.

Since the IoD expects there to be a lot more wells yielding a greater amount of gas than AMEC, it estimates more people will need to be employed to keep the booming industry running.

But given the uncertainties around how many wells will eventually be drilled, it’s again hard to say how many jobs will be created as a consequence.

Uncertainty

The government clearly chose to publicise numbers at the top end of estimates of community benefits. But it’s still too early to say what the effects of the developing the shale gas industry will be.

The picture will become clearer once more wells are drilled. But to make that happen, the government needs to persuade communities to accept fracking. Its recent announcements suggest it’s willing to use optimistic industry figures at the expense of its own research to do just that.

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