UK Shale Gas Will not Impact Wholesale Gas Prices, says Report

The Oxford Institute for Energy Studies (OIES) found that UK shale gas development would not impact significantly the price of wholesale gas, but it would be still beneficial for the country.

“It should be noted that it is unlikely that UK shale gas production … would materially reduce wholesale gas prices, especially given the lead time to reach plateau. The UK is linked to the European regional market and Russian supply via pipeline infrastructure and to the Asian LNG market and future North American LNG suppliers by arbitrage,” explains the report released by the Oxford Institute for Energy Studies on Tuesday.

In the last 2 years, natural gas lost ground in Great Britain. In 2012 it accounted for 35% of the UK’s primary energy consumption, down from 42% in 2010. UK is increasingly dependent on imports as the conventional gas production in the North Sea is slimming down.

Recently, the British Geological Survey (BGS) doubled its estimate of shale gas resource (gas-in-place) in part of central Britain, with a central estimate over 1,300 trillion cubic feet (tcf). Cuadrilla Resources is moving ahead with its shale gas program, while the UK government stated its support to this nascent industry. 

According to the Oxford Institute for Energy Studies, the increased fiscal contribution and balance of payments impact of shale gas would be beneficial at a national level. The OIES explains that the major hurdle for shale gas is opposition coming from local communities. 

“The real challenge will be that of gaining public acceptance in the locales where shale gas development will have a visual and traffic impact during the drilling phase.  In the event that exploratory activities confirm the viability of UK shale gas plays the industry will need to engage in a public acceptance campaign based mainly on an offer of training, jobs and local economic stimulus if it is to succeed,” concludes a note released on Tuesday.