Interview with Paul Stevens: UK Government Staggers to Foster Shale Gas
David Cameron has vowed to be ready to do what it takes to exploit shale gas in the United Kingdom, even as North East’s Conservative MPs are at odds over fracking. With political muscle driving the UK's "dash for (shale) gas," Natural Gas Europe had the pleasure to interview Professor Paul Stevens, Distinguished Fellow, Energy, Environment and Resources at Chatham House about the prospects of shale gas development in the UK and Europe. Prof. Stevens recently published the Chatham House Programme Paper, Shale Gas in the United Kingdom.
Herein, Professor Stevens expresses some scepticism over the government's ability to reassure investors. He also hypothesizes that green groups could be voicing loudly their concerns about shale gas to solve their financial problems. Stevens does not dismiss serious environmental challenges and argus that shale gas will seriously start only if the industry will be able to “persuade them it’s in their interest.”
Apart from geology and environmental legislation, the UK differs from the US also in terms of geography. Its proximity to Continental Europe makes Britain less of an energy island. In this sense, could shale gas production impact on energy prices?
If gas supply increases because of shale gas production, then obviously that will have potentially an impact on price.
Do you think it would be possible for the UK to find new allies in Europe, especially in a moment British people are not really held in high regard in Brussels?
What do you mean by allies?
Other European governments willing to foster shale gas production on a central level, from Brussels.
I don’t think that anybody particularly wants Brussels to be centrally controlling anything, to be perfectly honest. But are you speaking about regulation or market control?
I mainly refer to regulation. But not only. A real impact on prices would become apparent in case more than one country went for shale. Let’s say the United Kingdom, Poland and France in 5-10 years time. That would increase energy supply, and probably would have an impact on prices as well. In this sense, is it not in Britain's interest to find other players to cooperate with? Other governments, but not only.
But what is the point of the cooperation you are referring to?
So I refer to allies on a political level, but especially on an operational level. For example, I refer to sharing expertise.
That could be part of it. Certainly if you look at the experience of the United States, something like the Marcellus Shale Coalition, which consisted of a large number of producers and operators that would meet regularly to exchange information. So clearly that has advantages. But you don’t need the legislation for that, you don’t need regulation. You don’t need governments for it. You just need the operators and the producers to sit down around a table and exchange ideas.
Unlike American investors, their British peers are less prone to pour money into high-risk projects. Do you think that the British government is able to create the confidence needed by investors in projects that could require up to 20 years?
No. This is sure. I don’t think that British government can give confidence to anybody, to be quite honest, at the moment. Particularly, given the very strong popular opposition to shale gas operations.
In this sense, can the push for shale gas also have a negative impact on Conservatives? In case, when would this become evident?
What negative impact on the conservatives?
Some commentators hypothesized that some parts of the Conservatives’ electorate, especially in North-East England, could turn their back on the party in case of shale gas exploration.
That is always a possibility.
Last week, the EU’s competition commissioner Almnuia said that Brussels would investigate the British plans for incentivising shale gas production. Do you think that it could pose an additional risk for the industry?
Well, it could do. If Brussels starts to get involved, then it is always a risk, cause you will never know what kind of stupid things they will do next.
As shown in a recent poll by law firm Pinsent Masons, industry players expect shale gas hunt to take at least 10 years to have a significant impact on national energy supplies. In this context, do you think that shale gas could still give a positive contribution? Or don’t you think that the looming energy crisis requires additional short-term measures?
I don’t understand what you mean by the looming energy crisis. But leaving that aside, the United States’ shale gas revolution was 25 years in the making, I don’t expect to be very different in Europe. But the starting point that you began with - saying that there is not is not likely to be much impact within ten years - I would completely agree with.
Do you think that the United Kingdom needs any additional short-term measures to increase energy security?
It is such a big, vague question, that I don’t want to get into that.
Ok. Lord Deben stepped in the shale gas debate, arguing that unconventional gas could be an effective instrument to tackle climate change. The Chairman of the committee on climate change accused some green movements of Trotskyite politics. In other words, he suggested that strongly opposing fracking is nonsensical. Do you agree? Do you think that green groups can be branded as extremists?
I think some of them can be. I think part of the problem is a lot of the green groups are facing funding problems and they need a crusade to get people to put their hands in their wallets and give them money. And that crusade is very much the whole shale gas operation. Fracking is a gift to them - even the word is ugly. I suspect that they are using that in order to, as I said, solve their financial problems. Having said that, and this is important, there are real genuine concerns over the environmental consequences of developing shale gas that need to be addressed. So, I am not dismissing environmental concerns, I am saying that some of the green movements are overstating their case. I think that there are a number of dimensions to this. First of all, there is concern over the fact that fracking may damage water supplies. I think that there is a growing body of scientific evidence that says that this is simply not the case. Providing the process is regulated properly, providing the wells are completed properly, then fracking is very unlikely to damage water supplies. Another concern is over earthquakes. And again, I think that this is grossly overstated because there have always been earthquakes associated with mining. And the sorts of earthquakes we are speaking about are so small and so minor that most people would not even notice them. But there is also a risk of disruption. You have got a lot of very large lorries driving around with fracking fluid in them, but again this tends to last for a few weeks or a month or so and then it goes.
Other risks?
More serious concerns are to do with the relationship between shale gas operations and climate change. I think there are two issues here. The first is that shale gas operations generate fugitive methane emissions. In other words, methane leaks into the system, into the atmosphere. The problem with that is: we simply don’t know what the levels of these are. There are various estimates of it, but basically there is need to have more research done to try to establish the level of methane emissions from shale gas operations.
Who should fund this kind of research? The government or the industry?
These [researches] should be done by governments. It should be independent. You don’t want to have the burglars doing their own assessment of burglary, if you see what I mean. This work has to be done by independent bodies so that they are not biased.
How serious is this aspect? How dangerous fugitive emissions are?
If you think in terms of say the Russian gas pipeline network, there are probably far more fugitive methane emissions from that, than the ones that might arise from shale gas operations.
You mentioned two serious concerns. What’s the second?
The second environmental concern in this context is the fact that at the end of the process, you are producing natural gas. Natural gas is a hydrocarbon. If you burn it, obviously you have got CO2 emissions. And that is bad if you are concerned about climate change and greenhouse emissions. Of course, the CO2 emissions from shale gas are much less than from coal. But if shale gas starts to push out renewables, then this is more serious. There is a danger that energy consumers objecting to high bills would say why do we need this expensive renewables, if we have access to a lot of cheap gas, which can act as a transition fuel? These are genuine concerns than need to be addressed, I think.
In a sense, you pointed out that consumers need some guidance. In this context, do you think that community engagement is a good investment for the shale gas industry?
It would be an absolutely essential investment for the shale gas industry, because at the moment, communities are mostly vehemently opposed to shale gas operations. And unless the shale gas industry can persuade them it’s in their interest, then shale gas is just not going to happen.
In general, how can industry players obtain the so-called social licence to operate? How can they increase public acceptance?
Buy it. In other words, make sure that the communities get a lot of money as a result of the shale gas operations, which is what happens in the United States, of course, where the property rights are different.
Do you refer to any threshold? Do you think that 1% of the profit is too little money?
I don’t know. It is a good question. I think that all the sorts of numbers that have been put out by the British government are far too low. The problem is as well that the British government has been really vague about what it is talking about. It talked about money to they local communities, but how are they defining the local communities? Are they talking about the county councils/town councils/village councils. How is that actually going to work? And until all these sorts of things are sort of made clear, then you are going to face problems of community opposition, I think.
In this context, do you also see problems with local MPs?
Well. Obviously, if the constituency of the MP objects to shale gas, then it would be very difficult for the MP to not support the community. Otherwise, they will not going to get elected next time. You eluded to this a little bit earlier, I think, talking about the Conservatives’ side. Yes. That could present a problem. But we are not talking about a huge numbers of MPs here.
Sergio Matalucci