UK Backs Fracking Plans

Brian Hicks

Written By Brian Hicks

Posted March 20, 2013

It looks like Britain has advanced one step further along its path toward making shale fracking a reality.

The Grantham Institute on Climate Change and the Environment at the London School of Economics has come out with a report that suggests the U.K. ought to use natural gas to reduce national reliance on coal for power supply over the coming years.

Gas-powered plants, of course, give out less than half the CO2 on a per-kilowatt hour basis compared to coal-fired plants. However, the study does warn that assuming shale fracking would lead to cheap gas prices (as is the case in the U.S.) is premature.

As well, the U.K. cannot afford to develop a reliance on natural gas in the long term because it will slowly become more difficult (and thus more expensive) to achieve the nation’s goal of an 80 percent reduction in greenhouse emissions by 2050 via gas alone.

From the Financial Times:

“There is a very clear logic to using gas as a transition fuel because over 20 per cent of carbon dioxide emissions in 2011, the last year we have data for, came from burning coal,” said one of the study’s authors, Bob Ward of the Grantham Research Institute on Climate Change and the Environment at the London School of Economics.

The U.K. has been eyeing the shale revolution in the U.S. (as, indeed, have many other nations around the world) and has been foraging around for a path toward a solid shale development program. However, environmental concerns over fracking have so far limited such development.

fracking 6Just last year, the U.K. finally approved fracking, but on the condition of highly regulated application and careful study. The LSE report essentially surveys the scenario and provides some insight into the pros and cons of the U.K. shale sector.

Thus, the report adds that once gas-powered power stations are developed, they would need to be equipped with technology that can trap and store their carbon emissions; only then would they be worth keeping in use beyond 2030. Again, the national goal has a deadline of 2050.

Meanwhile, Chancellor George Osborne has stoked expectations of some sort of a British “dash for gas” when he suggested tax relief for shale gas exploration and development, as well as a gas generation strategy that supports the burning of fossil fuels for electricity, reports the Guardian.

While the report does clear the way for fracking as a method to exploit British shale deposits, it contains clear warnings against assumptions that this could be a long-term solution to Britain’s energy goals. As mentioned earlier, the idea that a shale program could lead to continued low prices is likely mistaken.

Similarly, the U.K. cannot afford to bank upon “large unconventional reserves.” Instead, what the report advocates is the sort of quick program that could see shale exploitation and development in selected areas, where such programs could play a major role both in boosting the regional economy and bring down carbon emissions by the most.

The British government has floated the idea of easing “carbon budgets” that target goals set for the 2020s, according to the Guardian, in order to allow more natural gas to be burned for generating electric power. However, the Grantham report contradicts this, suggesting that such a move could make the elimination of carbon from the economy unreasonably expensive due to the accelerated pace that would be necessitated.

Also, even if Britain gets a shale program started right away, shale gas would likely not be available commercially in bulk until the late 2020s, according to the Carbon Brief. So as the U.K. faces a restructuring of its energy sector over the next few years, with old power plants shutting down and increasing electrification of heat and transport causing demand for power to go up, transitioning to gas in that short-term period of heightened demand would be the best option.

Despite a marked lack of enthusiasm from the major oil and gas players, such as BP (NYSE: BP), Cuadrilla Resources has emerged as a clear leader in the nascent British shale sector. The company was formed in 2007, and it has undertaken significant exploration in the Bowland Basin.

Likewise, as the Guardian reports, IGas Energy (LON: IGAS) has raised 23 million GBP ($34.8 million) as of January to begin drilling in order to evaluate shale resources.

Several other smaller players, like Greenpark Energy, Dart Energy (ASX: DTE), BCG Energy, and Adamo Energy, are either posting losses or barely breaking even as of now.

But the LSE report should see the British shale sector gear up, and once things get moving, we should see some positive indications from these companies.


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