Understanding Cuadrilla's Shale Gas Predictions

Cuadrilla has had a confusing week in the media. Yesterday's announcement that Centrica would buy a stake in the shale gas company's Bowland shale licenses has prompted new assertions of the benefits a shale gas boom could bring to the UK. But earlier in the week, a Cuadrilla representative appeared less than convinced that the resource would bring down UK energy bills. We look at the sometimes tricky business of predicting the future of a new energy source. 

Cuadrilla's predictions   

Cuadrilla is only gas company the UK to have built test wells for shale gas. It claims the Bowland shale - to which Cuadrilla has the rights - in Lancashire contains 200 trillion cubic feet of gas. 

Cuadrilla's data has now formed the basis of two consultancy reports, which assert that in a scenario where the UK shale gas industry boomed, the country would see comparatively lower energy bills and a reduced dependence on foreign imports.  

In the first, respected energy consultancy Poyry released analysis in December 2011 suggesting that UK shale gas could reduce the country's gas prices by between two and four percent from 2021, relative to what they might be otherwise. The work was based on figures provided by Cuadrilla for how much shale gas it might be able to drill in the future.

Then last Thursday, consultancy Deloitte released new analysis, commissioned by Cuadrilla. Itclaimed Bowland shale gas could generate £580 million of tax revenue a year, reduce gas import needs by 14 per cent by 2020, and create thousands of new jobs. It concludes that "under certain circumstances", shale gas could deliver significant benefits to the UK.

Media confusion 

Then things got a bit more confusing. According to this week's Private Eye, a representative of Cuadrilla's public relations firm, Bell Pottinger, recently told a meeting for local residents that shale gas would have a tiny effect on consumer energy bills. Members of Greenpeace secretly filmed the representative saying:

"We've done an analysis and it's a very small…at the most it's a very small percentage…basically insignificant."  

The Independent, which also carries the story, points out that this analysis is, in fact, the Poyry report.  

Cuadrilla's chief executive clarifies the company's position in an interview in today's Telegraph. He says that creating a creating a shale gas industry would lead to consumer energy bills being lower than they otherwise would have been - but they won't go down absolutely.   

No contradiction  

So has Cuadrilla contradicted itself? Not technically. Cuadrilla is keen to highlight that its earlier statements and studies refer to hypotheticals - based on ideal conditions - not hard and fast predictions. A spokesman told the Independent: 

"Cuadrilla's never said it [shale] will bring down prices…We don't think it will bring down prices, although it does have the potential to." 

Caveats  

There's another important caveat to this: Poyry's research is based on the assumption that Cuadrilla's estimates are accurate. Richard Sarsfield, a senior principal at Poyry told Carbon Brief earlier this year that the consultancy didn't interrogate Cuadrilla's projections when putting together the report, stating: 

"it's for other to judge whether or not they're accurate". 

Experts agree that it's early days to be making these kinds of predictions. Dr Nicholas Riley, an unconventional gas specialist at the British Geological Society explains it is difficult to know how much companies will get out of the ground. He says: 

"There's not enough data from drilling & testing UK shales yet . So  we don't really know what the impact of shale gas will be. Companies are increasing the amount of exploration they're doing, but until that starts yielding more information, much of this analysis is speculative." 

Neither consultancy's report goes into detail about the assumptions behind Cuadrilla's estimates. We have contacted Cuadrilla to ask it to back up the figures that go into both the reports, but have not yet received a response. We will update our work if we hear more. 

It's worth noting that other studies from the International Energy Agency, Oxford Institute of Energy Studies Energy and Climate Change Committee have been less optimistic about shale gas's potential to reduce gas prices due to the political barriers that are likely to hold up development. Poyry and Deloitte's analyses recognise these factors, too, pointing out the biggest barriers to shale gas recovery are likely to be political. 

Professor Paul Stevens, senior research fellow at Chatham House, tells Carbon Brief: 

"Huge barriers remain to any shale gas recovery, no matter what the technically recoverable resources are. It's important to recognise Cuadrilla's statements on technically recoverable resources take no account of these extra hurdles." 

Unknown assumptions 

Of course, it's not unusual for oil and gas companies to guard the data on their resources and reserves carefully, given that the information can affect the market. Cuadrilla may also have been careful about giving over this kind of information while it was negotiating the Centrica deal. But it can be hard to disentangle statistics and media statements when the assumptions behind them are not made public. 

Although Cuadrilla never made any solid claims about shale gas's potential to boost the UK economy - and displace expensive imports - its statements have stoked the flames of a now-familiar dispute about the potential for UK shale gas. On one side, there are shale gas cheerleaders who say the UK is sitting on a cheap source of fuel, and on the other those who are concerned shale gas could prove an expensive distraction from low carbon sources of energy. 

Riley says: 

"Companies must be fairly confident that shale gas is a good investment - otherwise the Centrica deal and the new drilling plans would not have gone ahead. But gas in place figures are always speculative - you just need to be clear about what the assumptions behind them are. Newspapers could help their readership understand this better if they explained how these figures are arrived at".

This article was published by the Carbon Blog