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UK lifts moratorium on shale gas fracking as part of domestic energy push

Highlights

De facto ban in England was put in place in November 2019

Onshore industry sees boost for UK energy security

Opponents say no short-term fix for energy price crisis

The UK on Sept. 22 formally lifted its moratorium on hydraulic fracturing -- or fracking -- for the development of shale gas as part of a new domestic energy security push.

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The new UK government under Prime Minister Liz Truss sees shale gas as a potential tool for improving energy security and making the most of the UK's domestic resources against the backdrop of record-high international gas prices.

Platts, part of S&P Global Commodity Insights, assessed the UK NBP month-ahead gas price at an all-time high of 598 pence/therm ($70.44/MMBtu) Aug. 26. It was last assessed at 280 p/th Sept. 21.

The UK put in place a moratorium on fracking in England in November 2019 after an analysis of the environmental impact of work at Cuadrilla Resources' site at Preston New Road.

Cuadrilla was forced to suspend work at the site after a magnitude 2.9 tremor occurred in August 2019.

However, there have been growing calls for the government to lift the de facto ban on fracking following Russia's invasion of Ukraine in February and the risk of supply shortages this winter.

"In light of Putin's illegal invasion of Ukraine and weaponization of energy, strengthening our energy security is an absolute priority," Business and Energy Secretary Jacob Rees-Mogg said Sept. 22.

However, opponents say shale gas is not a quick fix and would not help bring down wholesale prices in the UK even if it is proven to be geologically feasible to develop a large-scale shale gas industry.

Necessary approvals

The government said Sept. 22 that it was formally lifting the pause on shale gas extraction and would consider future applications for hydraulic fracturing consent.

"Developers will need to have the necessary licenses, permissions and consents in place before they can commence operations," it said.

The Sept. 22 decision came alongside the publication of the British Geological Survey's scientific review into shale gas extraction, which was commissioned earlier this year.

"The review recognized that we have limited current understanding of UK geology and onshore shale resources, and the challenges of modelling geological activity in relatively complex geology sometimes found in UK shale locations," the government said.

There have only been three test wells that have been fracked in the UK to date.

"It is clear that we need more sites drilled in order to gather better data and improve the evidence base and we are aware that some developers are keen to assist with this process," the government said.

"Lifting the pause on shale gas extraction will enable drilling to gather this further data, building an understanding of UK shale gas resources and how we can safely carry out shale gas extraction in the UK where there is local support."

Shale gas potential

The BGS submitted its report to the UK Department for Business, Energy and Industrial Strategy in July.

It is estimated that the northern Bowland Shale gas formation in England alone holds as much as 37.6 Tcm of shale gas. Just 10% of that volume could meet UK gas needs for 50 years, according to Cuadrilla.

However, several academic studies have suggested the true resource is much lower.

In 2019, research from Nottingham University said resources within the Bowland Shale formation could be up to five times lower than previous estimates suggested.

The research, supported by the BGS, said economically recoverable reserves of Bowland shale gas could be less than 10 years of current UK gas consumption -- implying a ceiling of around 800 Bcm.

There are also growing doubts about whether the geology in the UK is suitable for a large-scale shale gas industry to develop.

Industry reaction

The UK onshore industry group UKOOG, however, said it stood ready to act following the lifting of the moratorium on providing additional data on shale gas potential.

"The BGS report clearly states that more data collection is needed in the UK and we are ready to provide proposals to the government to do just that," Charles McAllister, UKOOG Director of Policy, Government and Public Affairs, said.

"The BGS report also notes that the regulatory framework on seismicity applied to shale gas was inconsistent with wider regulation of extractive industries," McAllister said.

"It is therefore pragmatic for the government to redress this unjustified discrepancy," he said.

Shale gas developer IGas also said it would "gladly" provide the government with detailed proposals for accelerated development of the sector.

"This is a significant statement from the government and we welcome the commitment to pursue secure and affordable supplies of domestic energy," IGas executive chairman Chris Hopkinson said.

"The development of IGas' shale gas assets has the potential to provide secure and affordable energy for the UK in the near term, helping to decouple the UK from volatile and competitive international gas markets," he said.

Cuadrilla CEO Francis Egan added: "Lifting the moratorium will help the shale industry unlock UK onshore gas in quantities sufficient to meet the UK's needs for decades to come."