Urgent action is needed over the UK energy mix and import solutions as unconventional gas heads centre stage in the country’s energy debate, according to Alasdair Buchanan, chief operating officer and managing director of Senergy Energy Services.
With more than 50% of natural gas coming from more costly imports, Buchanan warns that we need to try harder to secure UK supply and drive costs down.
Imports, dominantly from Norway via pipeline and from Qatar via LNG, have increased the cost of natural gas, which has typically made up about 40% of UK power generation and about 75% of domestic and business heating.
“The offshore industry has ensured a domestic supply of natural gas since the 1970s but in 2011, the UK imported more gas than it produced from domestic reserves for the first time,” says Buchanan, who is on the committee of next month’s Unconventional Gas conference in Aberdeen (March 25-26).
“Importing gas reaps no tax rewards for the UK but when shale becomes profitable companies will be liable for 62% tax. Each site is also expected to deliver £5-10million worth of benefits each to local communities from the operators, and create numerous jobs.
“Shale has the potential to reduce UK import gas by 50% but action is needed over the role unconventional gas has to play in the future energy arena.”
As reported by Energy recently, the increased cost of imported gas not only impacts upon UK balance of payments and cost of energy to the consumer, but also caused a shift in the balance of coal and gas in the energy mix. In just one year, from 2011 to 2012, the proportion of gas to coal in UK energy mix reversed from 40:30 to 30:40.
According to Buchanan, combusting imported coal releases 25-50% more CO2 than domestic stock, meaning carbon emissions targets are slipping out of reach.
He claims that technological advances such as directional drilling, horizontal drilling and hydraulic fracture stimulation mean that domestic onshore gas resources have the potential to solve the energy challenges that now confront Britain.
However, bringing energy production back onshore has already changed the perception of hydrocarbon extraction from the out of sight and mind North Sea, not least because of the need for well fracturing.
But in the same way that the North Sea challenge was overcome, Buchanan suggests the same can be done for onshore shale and offer the opportunity for the UK to again become energy self-sufficient.
“Given early results from drilling and testing in the UK, suggesting the subsurface is favourable for shale gas and coalbed methane, success will depend upon operators winning hearts and minds of communities hosting extraction operations and proving the safety of these activities,” says Buchanan.
“Communicating the facts about onshore natural gas extraction is a crucial task. It is important to demonstrate that the ‘cost’ in terms of disruption and environmental damage is low and the benefits are significant.
“There are already hundreds of sites in the UK and most of these are around two hectares in size, about the same size as a football pitch and equating to only 0.1% of the UK’s entire landmass. The emissions footprint is also smaller than that of imported gas.
“Fracking is a contentious issue, but a Government report in 2012 found there was no risk to surface life through hydraulic fracturing. Fracking has taken place onshore in the UK for 50 years, and 2.5million hydraulic fractures have been carried out in the world with only a couple of seismic events.”
Buchanan calls for thorough understanding of stakeholders, their needs and modes of communication; and for the industry to develop a simple message which describes the processes, issues and benefits.
“Engaging with stakeholders to deliver this message in the most appropriate way is key,” he says.
“This includes social networking sites where it is also important to monitor communications and set the record straight where needed. There must also be a transparent relationship with government and other influencers to advance understanding of the facts.
“Ultimately, only track record will demonstrate that these resources will benefit the local and national economy and that they can be delivered without fuss and without incident.
“The UK has the skilled people needed to make this a success. Whether that is the transfer of oil and gas expertise into unconventionals or the wealth of young talent coming up through the universities and from other sectors, we have the energy and engineering pedigree to develop the resources on our doorstep.
“While building this track record we have to collaborate for a consistent message and accept that, just like the early days of the North Sea, there will be those saying it can’t be done.”