Cuadrilla and the Community: Measuring the Economics of Shale

When news of Cuadrilla’s massive shale gas find in Lancashire spread, so too did the news of the creation of thousands of jobs in the UK, both locally and countrywide.  In a community which has struggled to attract investment, Darren Wisher, Director of Regeneris Consulting says, the impact of shale gas could be huge.

Mr. Wisher, a financial consultant to Cuadrilla Resources, has been working with the company to establish the economic impact of the possible 200 trillion cubic feet find. He says, when all the factors are taken into account, the effect on the local economy is profound.

Using a 40 pad-400 well scenario for the Lancashire site, Mr. Wisher estimates that 5,500 jobs could be created as a result of Cuadrilla’s operations.

“Based on all the research we’ve done, speaking with Cuadrilla, engaging quite extensively with its supplier base, and doing similar on those suppliers, we estimate that the jobs impact will peak at around 5,500 jobs at the UK level,” he says. “That reduces to around 1,700 jobs when you look at the impact over the county of Lancashire.”

Cuadrilla and Regeneris estimate that, of the 5,500 jobs that will be created in the UK, around 50 per cent will be in direct employment with the company—“working with the lead operator which may or may not be Cuadrilla at the end of the day,” Mr. Wisher says. Approximately 35 per cent of the rest of the job roles available would be in the subsequent supply chain with the final 15 per cent expected to be taken “induced” roles.

However, these figures are on the top end of possibilities, with the expected average figures a little lower than heralded in the press.

“It will take some time to build up to the peak,” Mr. Wisher says. “In that 10-12 year period, there’s probably only a four/five year period when operations are ongoing at peak intensity.

“So we also looked at the average job count around the whole drill programme. And that’s probably a more meaningful statistic to look at. And on that basis, the average number of jobs which would be created on that 400 well scenario will be around 4,200 on a UK level, reducing to 1,300 at the Lancashire level.

“Big numbers in there but, you have to bear in mind, it’s potentially a huge capital investment which is underpinning that. So big numbers underpinned by a big capital investment.”

Lancashire, which is heavily dependent on public sector employment, Mr. Wisher says, will see some massive investment into the area from the discovery, with the benefits rippling through the community.

“If that 400 well scenario did materialise in Lancashire, it would represent a gigantic injection of private sector investment.

“We did the maths last year on that report, and it’s basically equivalent to building nearly 4 Wembley stadiums over a decade in Lancashire, or constructing 100 secondary schools, so it’s a big sum of money to be injected into the domestic and local economy.”

While the effects of the Bowland Basin exploration and production is expected to last between 10 and 12 years, he says there are longer-term impacts that will be seen from the find.

“I think it’s important to mention that the jobs which will be generated from that injection of expenditure, we estimate that the 400-well scenario might take 10-12 years to develop out. They are fixed term jobs. They are tied around that drilling and fracking activity.

“Having said that, there are some important longer term impacts, not least the longer term maintenance requirements, so [a] whole group of skilled engineers are needed to maintain and update and monitor that equipment when it’s on the ground. And also, what I call the long term clustering effects.

“And this is something the partners in Lancashire are keen on—the degree to which you can retain the supplier base after the drilling and fracking has been completed and use that as a base to export service elsewhere in the UK and elsewhere in Europe.”

This effect is already felt elsewhere in the UK, he explains, to the benefit of many.

“It’s a bit like what happens in Aberdeen in terms of the oil and gas sector,” he says. “Only a small proportion of the oil and gas employment base in Aberdeen is actually servicing the operational fields. A lot of it is guys going around the globe exporting their expertise. So there is an idea about maintaining a longer term shale cluster relationship.”

The possibilities for employment go beyond bringing in interloping experts from outside the local area, he says, something which Cuadrilla has focused on from the beginning of its operations in the region.

While many gas and oil players have been previously criticised for bringing in outside help to carry out its operations, Cuadrilla appears to be committed to keeping it local.

So far, the company has taken on five or six skilled engineers from the Lancashire area to act as apprentices in the exploration stage, Mr. Wisher explains. Though not all who applied could be chosen, their interest in the company has still been beneficial.

“There was a great response to that [recruitment drive]. Some of the unlucky applicants have been passed to the supply chain partners and they found their way into the shale industry one way or another.”

To maintain this local involvement, the company is encouraging education in the area, building a steady source of income for the community.

“Cuadrilla just embarked on a core piece of research with one of the local universities in Lancashire to look at the skills implications of these numbers,” Darren says. “So they’re keen to understand what sorts of occupations will be required and when and they’re using that to go and have a dialogue with the local schools and education sector to ensure that they are gearing themselves up should the commercial scenario emerge and equipping future generations with the right skills to get access to the jobs industry.”

It’s a confident approach from a company which has occasionally found its operations marred by unforeseen difficulty. Last year, the company was forced to stall operations following a tremor which measured 2.6 on the Richter scale.

However, in April this year, the Department of Energy and Climate Change (DECC) gave Cuadrilla its permission to continue its operations in Lancashire, with a series of recommendations forwarded by the DECC which the company must follow.

CEO of Cuadrilla Mark Miller said at the time that it was happy with the decision and had already implemented much of the DECC’s directives of its own accord.

Given the controversy following the tremors experienced by Cuadrilla, it would seem prudent to contribute as much as possible to the community, if even to reassure local people that the company is invested in the security of the area.

In fact, Mr. Wisher offers two pieces of advice to anyone involved in shale at industry level.

“One: don’t underplay the sheer scale of the investment which a commercial shale gas scenario could yield and the sort of job numbers which are attached to that, because they are big numbers.

“And then secondly, don’t forget the tools which you as an English speaker can make in terms of maximising the degree to which those benefits can flow to local areas.”

Those big numbers, he says, could be a major “game-changer” for the Lancashire community. 

Darren Wisher was a presenter at the recent SMI Shale Gas Environmental Summit