Shale Gas in the UK: 50 Years of Natural Gas?

Yes, the UK has shale gas potential, but 50 years' supply may be a bit of an exaggeration.

According to the Oxford Institute for Energy Studies' Howard Rogers, Director, Natural Gas Research Programme, who worked in BP's upstream development business for nearly 30 years before joining the think tank, calculations of Britain's unconventional gas potential have been overblown by the press.

He explains, "I think they've reached for their calculators and devised the estimates of recoverable reserves, i.e. the kind of in-place estimate times 10 or maybe 15% and come up with a very large number, which they then divided by the UK's annual gas consumption and concluded that there's 50 years of UK gas consumption in just this part of the UK, in the Northwest near Blackpool.

"The problem is, that completely sidesteps the critical feature of shale gas and shale oil, or tight oil as it's now called, which is that there's a reason why this resource hasn't been exploited until relatively recently and that reason is that it's very hard to get high well flow rates because of the nature of the rock that the hydrocarbon is contained in."

To quell what he sees as some of the myths surrounding unconventional gas in the UK, Mr. Rogers recently published a short analysis entitled UK Shale Gas - Hype, Reality and Difficult Questions on the Oxford Institute's website that shows how directly applying the US shale gas experience as a template for success Britain is likely not that simple.

"It's potentially very very exciting," he says of UK shale, "they're just two provisos: The first is the fact that the experience in the US has been that on a shale gas play area such as the Barnett and others the well flow rates vary quite a lot by location and it was trial and error that allowed people to hone in on what are called the 'sweet spots' on the play, but even on those the well flows vary between each other. This means you've got to drill a number of exploration wells before you can get a reliable average well flow rate. So that's the big uncertainty."

The second factor, he explains, is the reality of how many producing wells one has to drill and how long it will take to build up to a meaningful production flow rate. "Both those factors seem to be overlooked," he notes.

To contrast unconventional gas development in America versus that in the UK, he calls the shale gas E&P in the Marcellus shale in Pennsylvania, a "gold rush."

"In the first year you had 27 wells drilled and then it went up to 1,000, then 2,000. I just find it very difficult to fathom that in the UK you could see that kind of acceleration in the number of wells drilled. Just from a planning and consent point of view, let alone a public acceptance point of view."

Now, he reports, companies that would like to explore for and develop shale gas in the UK are focused on drilling exploration and appraisal wells to determine whether the well flow rates will be high enough to make development viable.

Mr. Rogers explains, "That would be your focus, because some of these companies are not huge, they're not the majors. We've seen Centrica plc move in recently, which is a big player, but IGas Energy Plc and Cuadrilla Resources Ltd are not multinational, supermajor oil and gas companies, so they have a budget set aside for exploration drilling. Depending what the results are of that will determine whether they move ahead to economically viable to production or not."

In his critique, he writes that the exploratory phase alone would take around two years, followed by about a decade of intensive drilling to build up production levels. So the gas would only really start flowing in around 12-15 years' time.

Is Britain ready for shale gas? According to Mr. Rogers, the UK's experience so far with the oil and gas industry has been mainly offshore oil and gas production, conventional oil and gas from sandstone reservoirs with very good flow rates. He says while the UK has had some onshore gas production, it's nothing memorable. "Because the majority of it is offshore, it doesn't figure hugely in the psyche of the nation."

Given that, is the public in the UK prepared to deal with what appears to be fairly significant industrial activity - huge water ponds, equipment and a steady stream of trucks - until the placement of a well head?

Mr. Rogers opines that while there is a green, anti-shale movement, he doesn't believe it is organized enough to completely block shale gas drilling. "The people in the localities, especially the northern ones where they economy is not as vibrant as it is in the southeast, there I think they'll be an interesting split between people who are in secure employment and maybe who have retired, who will be resistant to anything that visibly intrudes on the landscape and introduces higher traffic. I think they'll be an interesting polarization between those folks and people with teenage children who are worried about employment for those children. I do think the compelling offer is the ability to offer training, jobs and local economic stimulus as being commented on in the US in respect of shale.

"I don't think it's insurmountable, but there's a big question mark as to how many wells drilling and visible will the public tolerate," he says.

The UK government's support for developing unconventional gas appears to be strong, with the Conservatives being a bit more keen to develop shale than the Liberal Democrats within the governing coalition.

Rogers comments: "Having said that, Ed Davey, the Energy Minister, is a Liberal Democrat and he's been increasingly positive about shale gas and he's cottoned on to the point I've been making for three years: the more wind generation you build, the more gas-fired generation you need to back it up when the wind speed varies."

Some of the overly-enthusiastic estimates regarding how much shale gas is recoverable and its possible effects on price may be fueled by what Mr. Rogers explains is a worry in the UK about its dwindling supplies of indigenous natural gas. A slight paranoia about importing gas, he says, is understandable.

"From the 1990s onward the UK came to rely on gas in the power generation sector quite significantly, although at the moment it's kind of on a par with coal burn in the UK in the power sector. But I think the trauma has been going from self sufficiency in natural gas as late as 2004, to the present situation where the UK has to import about half its gas requirement. That's a fairly short period of time: 8-9 years. It's a consequence of the North Sea province being quite prolific but limited in geographical size, so it was developed reasonably quickly but has declined quite rapidly since 2001."

Despite the UK being in the European Union, he says it is still physically an island. "Even though we have two very large subsea pipelines connecting the UK to Belgium and the Netherlands, and two significantly sized pipeline to supply the UK with Norwegian gas. But there's still this worry about relying on imports, borne of this kind of island mentality, which is kind of paradoxical because in any other commodity you'd care to think of the UK has a psychology of a global trading nation; for gas, it's different."

France and Germany, he points out, have been reliant on imports for 90% of their gas requirements for decades, while this change for Britain is rather recent and has happened quite quickly.

As to whether Poland's trials and tribulations in developing its shale gas basins provide any food for thought for the UK, Mr. Rogers delves back into his upstream experience at BP. He explains: "Everyone gets quite excited when a new hydrocarbon province opens up, and if it's a success you generally hear about it in 2-3 years depending on how long it takes to actually get the rigs to drill the wells. After three years if you haven't heard anything, it kind of drifts off the radar screen so I'm wondering whether that's going to happen to Poland.

"In shale plays in the US they're drilling wells in 17 days, so whether it's a technical factor or whether it's an above-ground, bureaucracy factor the bottom line is, the dynamics are not as fast as they are in the US and therefore the outcome won't be as spectacular as it has been in the US unless things drastically change."

Despite his critique, Mr. Rogers says he's convinced the shale gas potential is present in the UK, it will take a while to build up to meaningful production levels. "A lot hinges on public acceptance, and the jobs training and local economy stimulus is the part of the offer the industry should focus on.

"I hope shale gas in the UK is a success story, but we shouldn't underestimate how long it will take to, firstly, prove it's viability and, secondly, build up to meaningful levels of production. So we've got to be more patient than the media news cycle is generally accustomed to."