On Monday I attended a briefing organised by OGP, the International Oil and Gas Producers’ Association, to introduce a major new study on the economic prospects for shale gas in Europe. The research was undertaken by the highly respected Finnish energy consultancy Pöyry (no, I can’t pronounce it either!) and Cambridge Econometrics, with inputs from the Oxford Institute of Energy Studies and the EU’s Joint Research Centre. So OK. Commissioned by the industry, but using some pretty heavyweight and reputable consultants and sources.
We’ve seen so many reports and press releases and caveats (many mendacious) about the supposed dangers of shale gas that it’s refreshing to see this first pan-European study of the macro-economic opportunity. There was, however, in March of this year, a UK study by the Institute of Directors, which reached conclusions consistent with the Pöyry study.
So let me run you by the key conclusions. They looked at three scenarios: (1) Baseline: No Shale; (2) Cautious: Some Shale; (3) Positive: “Shale Boom”. In fact the opportunities with shale are so extensive, and knowledge developing so rapidly, that I expect even the “Shale Boom” scenario will soon look cautious.
Employment: Shale gas could create between 400 and 800,000 jobs by 2035, and over a million by 2050. And (my comment) these would be real, value-added jobs that contribute to the economy, rather than vacuous green jobs leading to wealth-destruction.
Energy security/import dependence: On the no-shale scenario, the EU’s import dependence is set to reach an alarming 89% by2035. Shale could bring this down to between 62% and 78% — still far too high, but not quite catastrophic. And a bonus for the balance-of-payments.
Investment/taxation: Between 2020 and 2050, investment in Europe could be €191 billion higher, and while tax revenues could increase by €1.2 trillion.
GDP: Each year from around 2030, European GDP will be between 0.5 and 1% higher than it would have been.
Gas Prices: European shale gas will not achieve the massive reduction we have seen in the USA. This is because although there is great indigenous gas potential, we shall still be importing gas in substantial volumes, so imports and world prices will set the benchmark. Nevertheless, the report sees gas prices up to 20% lower, and electricity prices 10% lower, than they would have been in a “no shale” scenario.
As for the supposed risks of shale gas, I attended another event at breakfast this morning (it’s shaping up as an energy week), on safety of shale gas, with speakers from Halliburton and Veolia , on “How technology contributes to the safe extraction of shale gas”.
There have been tens of thousands of wells drilled, and not a single recorded case of groundwater contamination from fracking itself. (I am told that around the world, a new well is drilled, in effect, every five minutes – but Europe is being left behind). There have been a handful of cases where the integrity of the shaft has been compromised and allowed some leakage. But this can occur with any kind of drilling, whether for geothermal, or oil, or conventional gas, or coal mines, or even agricultural wells. It is not unique to shale gas.
Concerns have been expressed about water usage, and here it was interesting to hear from Veolia – it’s their specialist subject, both supply of potable water and treatment of waste water. The message was that the technology is developing rapidly, allowing less water to be used, and more to be recycled. The concerns expressed by green NGOs about water usage are largely out-of-date. This in turn reduces truck movements to fracking sites, Fracking sites/pads are also getting smaller, and larger gas fields can now be reached from fewer drill sites.
There have been particular criticisms of companies like Halliburton, who decline to declare the full recipe for their fracking fluid (although they do reveal the list to regulators in confidence). This is for reasons of commercial confidentiality and intellectual property. Exactly the same reasons which Coca-Cola gave for keeping their recipe secret – but we still drink the Coca-Cola.
I am a great critic of over-bearing EU regulation. But those concerned about fracking may be reassured to reflect that all the chemicals used in Europe are regulated by the REACH Directive, and are safe.
The bottom line is this: shale gas is a vast economic opportunity for Britain (and for Europe). And its safety compares well with other energy extraction technologies. We should be shooting ourselves in both feet if we ignored it.