UKOOG welcomes Written Ministerial Statement on Shale Gas

17 May 2018

(PDF STATEMENT WITH FULL REFERENCES HERE)

We welcome the Government's support and commitment to our industry as laid out in the Written Ministerial Statement today. The gas supply disruptions the country experienced this winter highlight the need to increase our homegrown sources of energy. Britain's physical energy production has decreased significantly over the last 18 years and is set to decline even further – this means ever higher imports, which will result in fewer jobs and tax revenues, are worse for the environment than our own production, and will weaken the UK's energy security.

We can reverse this trend. Onshore shale gas production will contribute to energy security, create jobs, pay local and national taxes, support our manufacturing industry and make a significant contribution to local communities.

A recent study commissioned by the UK Government stated that the UK has access to a diverse supply of gas and should be secure against most potential disruptions, but it warned this would only be the case "if GB consumers are willing to pay for it" .

The Government's own security of supply document stated: "Additional domestic sources (such as shale) would be beneficial to GB. They could reduce reliance on imports, have the potential to bring economic benefits by rebalancing the economy, and would increase the diversity of supply available to the GB market."

Ken Cronin, Chief Executive of UKOOG, said: "This country needs a diverse supply of energy which protects and secures UK jobs and UK taxes. Imported gas currently costs over £13 million a day – money that is not generating jobs or tax revenues in this country. To achieve greater homegrown energy production, Britain also needs a policy framework and a planning and permitting system that allows industries like ours to be able to get decisions within timescales that work for all concerned including the local communities we work in. Today's announcement goes some way to ensuring that our energy security is protected and the benefits we have already seen flowing into communities become much more widespread."

Contacts:
Newgate Communications: Deborah Saw /Andrew Turner
This email address is being protected from spambots. You need JavaScript enabled to view it. 0207 680 6548

Key Facts

Gas Usage in the UK

• Of electricity generated in 2017, gas accounted for 39.7 per cent.
• 84% of UK homes use gas for heating.
• Half a million jobs depend on gas as a feedstock.

Future Use of Gas
• UK economy-wide gas consumption is projected to decrease by less than 20% by 2035 from 2017 under the requirements of the Climate Change Act (2008).
• Under the National Grid '2°C' scenario, where the UK meets all carbon targets, almost 800 billion cubic metres (bcm) of gas must be imported by 2035 and over 1,300 bcm must be imported by 2050 .
• Even under the Committee on Climate Change's gas consumption scenario where CCS is not developed, the UK must still import 900 bcm to meet demand by the middle of the century .
• At a global level, gas is part of the solution to climate change – in the International Energy Agency's 450 parts per million scenario, global emissions are kept at a level that gives us a decent chance of avoiding more than 2 degrees warming. And in that scenario, global gas use is higher in 2040 than it is today.
• The UK's Industrial Strategy promises to explore: "the long-term options for clean heating and the many potential uses of low carbon technologies including CCUS and hydrogen." Given that the only affordable supply of hydrogen at scale is from methane, the requirement for methane could increase not decrease.

Energy Security in the UK and Europe
• A recent study commissioned by the UK Government stated that the UK has access to a diverse supply of gas and should be secure against most potential disruptions, but it warned this would only be the case "if GB consumers are willing to pay for it" .
• Oil and gas production levels in December 2017 were 21 per cent lower than in December 2016 due to the closure of the Forties Pipeline System for repair.
• Indigenous production of UK gas is set to fall to c.25% of demand by 2035.
• LNG supplies are set to increase significantly, potentially to 60% of demand in 2035.
• Norwegian imports currently run close to full capacity during the winter months. While there may be scope for expansion of capacity over existing infrastructure, significant expansion is likely to require high levels of investment, and therefore a sustained high gas price in GB, to be economic.
• Sustained high price differences, beyond current levels, between GB and the continent are a likely prerequisite of any further expansion of interconnector capacity – i.e. higher prices in the UK.
• Europe is also a net importer of energy: more than half of the EU-28's gross inland energy consumption in 2015 came from imported sources, while 28% of crude oil imports and 29% natural gas imports came from Russia.
• Norwegian gas production is forecast to decline by 25% by 2030 (122 bcm per year in 2017 to 90 bcm in 2030).
• European gas demand is projected to be 520 bcm in 2030 and EU gas production (i.e excluding Norway) is projected to be only 50 bcm in 2030.
o Norway can meet 17% of EU gas demand in 2030.
o EU supplies can meet 10% in 2030. (Note these projections do not account for a recently announced output reduction of Groningen).
o i.e. 75% of EU supplies will come from Russia, LNG or other long-distance pipelines.
• The overall Netherlands production surplus (over Netherlands demand) fell from 40 bcm in 2013 to 10 bcm in 2016. Netherlands could soon become a net gas importer.
• Imported gas currently costs over £13 million a day – money that is not generating jobs or tax revenues in this country.

Environmental Impact and Climate Change
• The Mackay and Stone report concluded that UK shale gas would offer a 50% pre-combustion emission saving over LNG. Compared with a UK economy reliant solely on LNG imports, production from shale gas wells drilled over the next 20 years could save 117 million tonnes of CO2e, equivalent to £2.8 billion at today's £24/tonne carbon price.
• The carbon footprint (emissions intensity) of shale gas extraction and use is likely to be in the range 200 – 253 g CO2e per kWh of chemical energy, which makes shale gas's overall carbon footprint 10% lower on average than the carbon footprint of imported Liquefied Natural Gas (233 – 270 g CO2e/kWh).
• The Committee on Climate Change in reports for both the Scottish Government and the UK Government addresses the issue of climate change and shale and states that the UK industry would need to meet three tests:
o Emissions must be strictly limited during shale gas development, production and well decommissioning. This requires tight regulation, close monitoring of emissions, and rapid action to address methane leaks.
o Overall gas consumption must remain in line with UK carbon budgets. The production of UK shale gas must displace imports, rather than increase gas consumption.
o Emissions from shale gas production must be accommodated within UK carbon budgets. Emissions from shale exploitation will need to be offset by emissions reductions in other areas of the economy to ensure UK carbon budgets are met.
• As an industry, we firmly believe that the regulations in the UK are fit for purpose and that the introduction of green completions, baseline monitoring, operational monitoring and post operational monitoring already committed to by the industry will have a significant impact on fugitive emissions as they have done in other countries. In the USA for example, the collaboration between regulators and operators through the Natural Gas 'Star program', has been a key vehicle for a 14% decline in oil and gas methane emissions nationwide . This is despite a 50% increase in natural gas production and a 14% increase in oil production and demonstrates the positive impact of cost effective emissions solutions for onshore energy . The UK will be replicating the use of these technological solutions and seeking to develop them further.

Public Perception
• The most recent BEIS attitude tracker shows
o The majority of people are in the 'don't know' category and this hasn't changed much over time (Wave 25; 51%).
o Levels of concern in relation to the UK's future energy security have increased since last year. This was most notable for 'the UK becoming too dependent on energy from other countries' (72% concerned at wave 25, compared with 66% at wave 21)
o Respondents who were concerned about the UK becoming too dependent on energy from other countries were asked to identify specific sources of energy that concerned them. Compared with the results at this time last year concern over gas has increased (from 47% to 57%)
• An alliance of leading trade associations in 2016 supporting 2 million jobs across the country joined forces to call for a much-needed national dialogue about gas uses and supply in Britain. The alliance's call followed research completed by ComRes in late 2015 which found that more than half of the UK population – 55% – want to prioritise gas produced in the UK, including shale gas produced by hydraulic fracturing, over energy imported from overseas.

Planning
• In the last five years we have seen a significant negative shift in the efficiency of the planning system. Decisions on drilling single exploration wells that used to take typically three months, often through delegated powers, are now taking up to 18 months at a local level.
• We believe that the planning process is not functioning as it is intended to do, and its current utilisation is restricting to our industry, local people and is resulting in large expense for all concerned including local councils.
• The experience of the most recent planning applications for shale gas exploration wells has shown a period between validation of a planning application to presentation to a planning committee ranging from 34 weeks to 54 weeks. A number of these applications were for simple data gathering exploration wells with no hydraulic fracturing involved, all of which received environmental permits from the Environment Agency.
• In the last two years planning officers determining 16 planning applications have made recommendations to approve 13 and reject 3 applications. Council members have rejected 11 and approved 5 applications.
• The planning system is one of five separate regulatory processes that the industry must satisfy. The other regulatory systems are operated by the Environment Agency (EA), The Health and Safety Executive (HSE), The Oil and Gas Authority (OGA) and The Department for Business, Energy and Industrial Strategy (BEIS). While there are many similarities between the onshore oil and gas industry and other sectors with respect to planning related issues, few sectors have as many regulatory regimes to traverse at the same time before any on the ground operations can commence.

 

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