UK Might Crack The Energy Supply Dilemma
By Cynthia Taylor
The UK could be on the cusp of a major boom similar to the North Sea Oil supplies of the past few decades. However, there are fears that extracting the potential of huge reserves of shale gas could possible threaten development.
A report was released by the The Institute of Directors (IoD) last month, which has stated that getting the shale gas working, could be a ‘new North Sea’ boom, and could create tens of thousands of jobs in Britain, but its still exploring the viability of recovering this unconventional fuel.
The people pleading for shale gas say that the UK faces long term energy problems that shale gas can help to resolve. The three major problems are jobs security, energy security and tax problems.
Claims by the IoD say that shale gas could create about 74,000 jobs at the same time provide, ultimately, 1/3rd of the energy needs of the UK. This will drastically reduce the growing dependency of import gas for the country.
What is significant, is that exploiting shale gas could be creating jobs in parts of the country that there is a greater need for work. Areas identified are the North East, where unemployment is high at 15% compared to 9% in the South East of the country. It is also noted that it could generate a pretty significant tax revenue – just like income from North Sea gas and oil – which is declining from £6.7 billion a year.
In the City of London there are concerns about the direction of energy policies, and a respected analysis of energy, Peter Atherton, at the Liberum Capital, warned recently about moving from a mostly fossil fuel based power system to a system that is dominated by nuclear and renewables in 1-½ decades, while trying to keep the lights on and consumer bills affordable, may just be impossible. He stated his fears that investors could possibly refuse to fund the £430bn decarbonisationprogramme, he continued, in a worst case scenario, the government might be forced to re-nationalise companies in this sector.
Against this background, the IoD report that was sponsored by Cuadrilla, the largest company in the UK’sfracking sector, says that the shale production in Britain could peak at 1,121 billion cubic feet annually, this is based on extimates from exploration companies, with regard to the size of the recoverable resources.
The UK’s gas demand is predicted to remain flat for the next 2 decades, in 2011 it was 3,055bn cu ft–its predicted that shale gas could possibly meet approximately one-third of the country’s annual demand.
If this level of production is correct it could help reduce dependency on imports from 76 to 37% by 2030. Thecosts of net imports during 2030 could fall from £15.6bn to £7.5bn (based on prices of last year).
It is also reported that shale gas could generate tax revenues which will make up for the decline in receipts from production from North Sea.
The UK wishes to follow the USA’s example where their shale gas discoveries led to a decrease of prices by 75%, which is about 1/3rd of Europe’s, at the same time it created tens of thousands of jobs over a 6 year period.
The boom in shale gas has received accreditation of kick-starting the US economy and that the country energy could be self sufficient by the year 2030.
Experts in shale gas believe that Britain may have comparable resources of shale as the United States.
The former chief executive of the BG Group, Frank, Chapman says that the UK is approximately 10 year behind the USA in its exploration and exploitation of shale gas potential. As a result he said whether this will change the cost of gas for consumers and the economic outlook its difficult to say.
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