Saving the nation – it’s a gas

In its heyday, North Sea oil did more than provide oil and fuel security; it spawned areas of technological expertise that were exported round the world. The development and exploitation of the technology behind exploration, drilling and production has created a very successful industry in its own right. While the principles of drilling and producing gas will be somewhat similar to the techniques used in oil, there are obvious differences. The principal one of these is that the production technique – of which 'fracking' is the most common – involves breaking the rocks to release the gas contained within them and then pumping water or other materials (like sand) in to force out the gas. Environmentalists say the chemicals used will pollute the water table, while home-owners say fracking will cause earthquakes due to disturbance to the rocks beneath their homes. For the sake of my argument, I will dismiss both of these – hopefully correctly – based on the fact that the American industry is a decade ahead of us and Americans are as disinclined to let their homes crumble and water be poisoned as we are. The unfortunate point from a UK perspective is that the only verifiable instance of earth movement as a consequence of this type of activity happened in Blackpool. So if we take the leap of faith and believe we will have the technical nous to avoid pollution and earthquakes, what are the rewards? Nobody really knows yet, partly because the surveys are incomplete and we also don't know how efficiently we can recover what is there. But if we were to start at the bottom end, then identified and recoverable reserves from areas in the UK with licenses stand at about 15 trillion cubic feet. The perspective here is that the UK uses about 3tr cubic feet of gas a year. So a five year bonanza with associated jobs and supply chain boosts would be a welcome boost, but transient and of little consequence to the future of energy supply. However, if we take top end predictions, then there might be 170tr cubic feet of gas available. Taking this further into the unexplored areas where gas is likely to be found – we know where the shale is – then we are talking about 500tr cubic feet and more. You can look at this in different ways. At current consumption, that reprsents around 170 years worth of fuel security. It would become a major UK industry and would need much electronics based technology. Another way of looking at it is via today's wellhead prices ($3 to $3.50 per 1000 cubic feet). That makes it equivalent to the £1.4tr debt that currently has a stranglehold round the UK's neck. Potentially, we have an industry under our feet that can save the British nation from its destitution and provide an exciting opportunity for our electronics industry that in recent years has excelled in industrial applications. This seems great, but going off on a further tangent, there is one fly in the ointment – the revenues from such endeavours will fall into the laps of the companies with the licenses – most of which are held by overseas companies. So, instead of having trillions of pounds rolling into Britain's coffers, what we have is the tax on operations that will undoubtedly, and mysteriously, be channelled through Barbados or some such location, and be diminished as a consequence. In a post capitalist environment, the ownership of a natural resource could be taken on by the state and the operational side contracted out. There would still be plenty of money to be made in that. Such a step back in time is simplistic and idealistic, I know, and what modern day government would dare to step on the toes of corporate giants, even if the prize was economic salvation? Makes you think though...