Britain’s energy-hungry population is highly dependent on oil and gas, which powers around two thirds of the UK’s energy needs. The Department of Energy and Climate Change (DECC) projects that by 2030, this proportion will not have changed much.
But the source of that oil and gas is changing, and changing fast. In 2005, the UK was self-sufficient in both oil and gas, but now imports about one third of both. With North Sea production in steady decline, dependency on overseas suppliers is increasing: by 2020, three quarters of gas will be imported, mainly from Norway and Qatar. It is sobering that the journey from self-sufficiency to dependence on overseas suppliers will have taken the UK only 15 years, barely the time it takes to school the country’s citizens.
The recent discovery and commercial exploitation of shale gas reserves has changed the petroleum landscape – at least, in the US. Over just the last twenty years, a blink of a geological eyelid, horizontal drilling combined with hydraulic fracturing (“fracking”) of shale rocks underground has transformed the US petroleum landscape. In 2010 the US became a net exporter of petroleum products for the first time since World War II, with shale gas and oil contributing around US$100 billion per year to the US economy. Currently, the US is expanding its gas liquefaction facilities so that it can export more as liquid natural gas (LNG) to lucrative European and Asian markets.
Slim pickings for onshore oil
This is the backdrop to the two recent reports by the British Geological Survey (BGS) which give initial estimates of the amounts of shale oil in the Weald of southern England and shale gas in the Bowland shales of northern England.
The Weald study covers parts of Kent, Sussex, Surrey and Hampshire, from where small amounts of conventional oil have been produced for decades. The BGS estimated that there might be between 2.2-8.5 billion barrels of oil in place, with a central estimate of 4.4 billion barrels.
A much more important question is how many of those 4.4 billion barrels might be recoverable. Experience from the US suggests that only 5% of the oil may be recoverable, even where the geology works well.
But the Weald is not like the US best case scenario. Most of the rocks are richer in clay, which makes them difficult to frack effectively. They are also more highly faulted, which makes the geology more complicated. And most of the oil targeted in the US is very light, and so flows quite easily. In contrast, oil in the Weald is likely to be heavier, more viscous, and harder to extract.
Since neither the rock nor the oil is of optimal quality in the Weald, we might estimate that only 1-2% might be recoverable. This would equate to 0.05-0.1 billion barrels, enough to meet just a few months of Britain’s energy demand. With 40 billion barrels already produced from the North Sea and another 20 billion still to come, the onshore prize seems very small.
A potentially significant Bowland gas haul
The gas story shows rather more promise, although we need more data before the true potential is understood. The BGS’s central estimate for total gas within the upper Bowland Shale, the most prospective unit, is 260 trillion cubic feet (tcf). If gas recovery rates are closer to 15%, as early US data suggest , the 39 tcf equates to 13 years of UK gas consumption – a more worthy prize.
However, recovery of these volumes of gas rests on the very unlikely assumptions that all areas of the Bowland are as equally gas-rich and easily accessible for drilling. And it would require a huge escalation of onshore drilling. Production data over the past decade from the Barnett Shale in Texas suggests that an average of 1 billion cubic feet is produced from each well. Production of the full 39 tcf would thus require around 30,000 wells, unless average recovery rates can be improved. The industry’s ability to drill up to ten wells from a single site means that 3,000 sites would need to be scattered around the north of England. In comparison, the UK has drilled around 20 onshore oil and gas wells per year over the last century.
Unlike the rest of Europe, the UK government has stated that it is determined to “go all out for shale”, with a package including tax incentives, changes to the trespass laws and financial benefits for local communities. But the required level of drilling can only occur if the legitimate worries of local communities are met. This will require strong and effective government regulation, together with an open and meaningful dialogue between industry and the communities in which it hopes to operate.