The mood is downright gloomy at the Shale UK conference this week, where various stakeholders in the country’s fledgling industry are bemoaning a lack of progress in tapping the country’s estimated 1.3 quadrillion cubic feet of natural gas trapped in shale. Despite having some of the thicker—and therefore easier to drill—shale in Europe, faulted stratigraphy, stunted support infrastructure, and a byzantine regulatory environment are preventing Britain from imitating America’s shale success. The FT reports:
Exploration is expensive and it is easy to spend more on drilling a well than the value of gas that comes out of the ground. Drilling costs are significantly higher in the UK than the US. The nascent supply chain and long licensing process are largely to blame.
“It’s a lot slower than in the US,” says Francis Egan, Cuadrilla chief executive. “We have to apply for eight or nine permits for each exploration well.”
Geology is another factor. While UK shale gas reserves appear to be thicker than those in the US, the UK’s geological make-up is likely to prove more challenging. “The UK is highly faulted by comparison to a typical North American shale area like Marcellus or Eagle Ford,” says Joe Cartwright, Shell Professor of Earth Sciences at Oxford university. “Our areas are intrinsically more complex.”
America remains the sole state to capitalize on its shale oil and gas resources, and difficulties in countries like the UK and China remind us that the shale revolution was more than just the result of applying the dual techniques of hydraulic fracturing and horizontal well drilling to underground hydrocarbon reservoirs. Rather, the US energy revolution was the product of a mature oil and gas drilling industry, replete with robust supply chains. The boom depended on a unique set of mineral rights that provided landowners with a financial incentive to invite drillers on to their land, on a deep pool of capital, and on a variety of small wildcatting firms willing to take on the risk of drilling exploratory wells. And it couldn’t have happened without a bit of natural providence: US shale is neatly layered, like a “wedding cake,” making it easier to drill the requisite horizontal wells, and drillers weren’t hampered by water scarcity the way their Chinese counterparts have been.
This isn’t to say that shale can’t be tapped elsewhere, just that it’s going to be a more difficult process than many world leaders not named Obama might like. But the race to produce even a pale imitation of America’s experience is more important to European energy security now than ever, given the situation in Ukraine. Europe sources nearly a third of its natural gas from Russia, and that’s a lever Brussels is keen to rid itself of as it maneuvers against Moscow. Lawmakers in Washington have made the case that American LNG could help on that front, but so too could the continent’s significant domestic supply of shale gas. The Crimean crisis may be the strongest incentive yet for Europe to frack.