UK shale gas might not depress prices

Shale gas production in the UK, including supplies from a Fermanagh field, could improve the UK’s energy security and boost tax revenues, but it is too early to say if it would cut energy prices, a House of Commons committee has reported.

Urging ministers not to exaggerate the quantity of shale gas to be found, the Commons’ Energy and Climate Change Committee said they should speak only of “recoverable resources”, accepting that there is uncertainty about how much can be extracted.

Exploitation of the gas – which is brought to the surface by “fracking”, where water, sand and chemicals are used to break apart underground rock formations – has revolutionised the US gas market, leading to major falls in the price of gas there.

In Fermanagh and north Leitrim, an exploration company, Tamboran, claims that it could recover gas for 40 years from a cross-Border field, which has already become the subject of community opposition.

Noting local feelings, MPs said communities affected by the drilling should enjoy “substantial material benefits” so as “to encourage them to take a positive view of the prospect of commercial shale gas operations”.

Local councils
Meanwhile, local councils that agree to fracking should be allowed to keep business rates generated by the existence, perhaps, of hundreds of individual drilling points in their district, rather than being required to send revenues on to Whitehall.

It is too early to say whether domestic production of shale gas could result in cheaper gas prices in the UK. It is unlikely that the US experience will be directly replicated in the UK because of differences in geology, public attitudes, regulations and technological uncertainties.

Some of the claims made about the size of shale reserves are being “pushed largely by those who for ideological or financial reasons do not wish lower carbon energy technologies to become the norm”, said MPs.

Renewable energy still needs subsidies, even if their costs are falling, but investors may become wary about backing such schemes if shale gas is seen as a reliable, cheap future source.