When U.K. Energy Minister Michael Fallon talked with Texas Governor Rick Perry about the benefits of fracking, I’m sure it only strengthened the minister’s resolve to usher in shale gas production.
Although both parties agreed that England and Texas have different landscapes and economies, extracting shale gas by way of fracking would bring a positive surplus to the British economy.
And Fallon certainly seems determined; he not only intends to go ahead with fracking, but he also announced plans to stop several wind farm projects.
Nations including the U.K., Poland, Mongolia, Uzbekistan, Argentina, China, Algeria, and a slew of others are trying to emulate the North American shale boom.
Fracking has turned the once desolate region of South Texas into a prosperous area, and shale oil has managed to keep North Dakota out of the national recession.
The U.K. could certainly use the economic boost, since the country relies a great deal on imports for its energy needs, and output from the North Sea is not gaining traction. Besides nuclear power, fracking is the next best step in unlocking the U.K.’s energy prosperity.
That is why Fallon is telling South England residents to prepare for fracking in light of a report by the U.K. Water Industry Research, stating that fracking is indeed safe and will pose no risk to public water if regulated well.
Prime Minister David Cameron has also expressed support for fracking in England, but the British public does not seem convinced. Residents have teamed up with environmentalists in protesting fracking coming to local areas in the south.
Sussex, Surrey, Hampshire, and Wiltshire are some areas being targeted for shale production.
Public perception of fracking has not improved, and I doubt this report will win over fracking opponents. But it may ease the minds of British officials who have been on the fence about fracking operations.
British Energy Makeup
There could be as much as 1,800 trillion cubic feet of natural gas in the U.K., but it is unknown just how much can be extracted.
A great portion of these reserves are concentrated in the north, where some fracking has already been taking place, but the south looks just as fruitful. There is also still the midland portion of Britain worth looking into.
The fact that Britain is beginning to branch out its exploration is a sign that leaders are more determined than ever to begin mass commercial shale production.
But fracking in England will be nothing like in Texas and North Dakota. Even though Britain had enough iron ore deposits to turn the island nation into a massive empire, shale gas is about the only energy commodity that can be extracted, with little by way of oil deposits.
In 1986, ConocoPhillips (NYSE: COP) drilled for oil in the U.K. but did not find enough commercially viable reserves to begin full-swing production.
And despite Michael Fallon’s support, fracking in the U.K. will face heavier restrictions.
But even though the U.K. most likely won’t ever see the kind of success we have seen in the U.S., extracting some shale gas will improve the economy by reducing imports.
The U.K. consumes 3 trillion cubic feet of natural gas annually, importing 43 percent of all energy. Imports were at a record rate in 2012, and domestic output fell by more than ten percent.
More importantly, it will bring jobs to a country that desperately needs them. The energy field is already providing opportunities, and many workers are going back to school to get energy jobs.
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Shale Gas Investment
Despite opposition and skepticism from large portions of the public, fracking in England will inevitably take place.
It may be an overly optimistic assessment, but researchers are hopeful that full extraction of U.K. shale reserves could supply power to all British homes for over 100 years.
Drillers are having success in the north, and the U.K. government is encouraging more investment both on and offshore.
U.K. firm IGas (LSE: IGAS) has been a heavy operator in the north. The company believes there could be 170 trillion cubic feet in the region it's explored.
Cuadrilla Resources has also been exploring in the north and had intentions to explore further south, but operations were halted amid protests from activists and residents.
Local companies have mostly been at the forefront of U.K. fracking, but Big Oil is not convinced. Royal Dutch Shell (NYSE: RSD-A) chose to pass on investing in the U.K., citing skepticism of the island nation’s commercial potential. Shell is more hopeful of operations in North America and Eastern Europe.
Other major companies like Chevron (NYSE: CVX) and Exxon Mobil (NYSE: XOM) have no foreseeable intention of investing in onshore domestic gas in Britain, despite the tax programs.
For now, at least, the U.K.’s best bet in luring major companies is for offshore oil. But the U.K. has not shown the most positive track record in that area of oil extraction.
As of now, U.K. shale gas exploration is very much in its infant stages, and the future is uncertain. However, Big Oil failed to catch on early to the shale oil bandwagon in the U.S. If it doesn't act soon, it may be missing out on shale gas in Britain too.
Just as domestic companies are leading the charge in U.S. shale oil production, smaller companies in Britain may have the same success with shale gas.
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