On this page we are going to answer some of the questions that are frequently asked by people finding out about fracking.
So what IS fracking all about?
Answer ...
This question gets answered pretty well on this TED talk video
Is fracking necessary for UK energy security?
Answer ...
No.
The UK Government commissioned research in domestic energy security, and the Department of Business, Energy and Industrial Strategy (BEIS) produced this report: Gas security of supply: a strategic assessment of Great Britain’s gas security of supply.
The report concluded that, even taking into account highly unlikely events and excluding any possible contribution from shale gas, “We are secure now, and the GB gas system is well placed to continue to be secure and robust in a range of supply and demand outcomes over the next two decades.”.
The idea that gas from shale gas fracking is in any way necessary for security of supply in the UK in the short to medium term is simply not supported by the facts.
Even the “perfect storm” of events in early December 2017, when Ineos’ pipeline closure near Aberdeen occurred at the same time as the explosion at an Austrian gas plant, left the government and analysts quite unruffled as far as security of supply is concerned. The Guardian reported on 12th December 2017 that”
“Mahoney [Mike Mahoney, associate director at the analysts Cornwall Insight] said that security of supply was not an issue but the pipeline shutdown had highlighted the UK’s exposure to price swings after the country’s biggest gas storage site, Rough, closed earlier this year.
and
A government spokesperson said: “There is no security of supply issue for fuel or gas supplies as a result of the repairs needed to the Forties pipeline.” Richard Harrington, the energy minister, spoke to Ineos on Tuesday morning.
Should we worry about fracking and our health?
Answer ...
The industry and its supporters say no but we suggest that you read this letter, published in the British Medical Journal, take note of who has signed it, and then make you own minds up.
Public Health England’s draft report on shale gas extraction
Dear Editor,
We write as concerned health professionals who seek to draw the public’s attention to the dangers associated with hydraulic fracturing (fracking) and shale gas extraction in the United Kingdom, as highlighted by a recent report published by Medact.
Fracking is an inherently risky activity that produces hazardous levels of air and water pollution that can have adverse impacts on health. The heavy traffic, noise and odour that accompanies fracking, as well as the socially disruptive effects of temporary ‘boomtowns’ and the spoilage of the natural environment are additional health hazards.
Such risks would be magnified in the UK where fracking is projected to take place in closer proximity to more densely populated communities; and where there are concerns about the effectiveness of the regulatory system for onshore gas extraction.
But in addition to this, shale gas is not a clean source of energy. Methane is a potent greenhouse gas in its own right, and when burnt, produces carbon dioxide. Shale gas extraction would undermine our commitment to reducing greenhouse gas emissions and be incompatible with global efforts to prevent global warming from exceeding two degrees centigrade.
The arguments against fracking on public health and ecological grounds are overwhelming. There are clear grounds for adopting the precautionary principle and prohibiting fracking.
Yours sincerely,
Dr Robin Stott, Co-Chair, Climate and Health Council
Professor Sue Atkinson CBE, Co-Chair, Climate and Health Counci
Professor Hugh Montgomery, UCL
Professor Maya Rao OBE
Professor Martin McKee, LSHTM
Dr Clare Gerada, GP and former Chair of RGCP
Dr Christopher Birt, University of Liverpool and Christie Hospital, Manchester
Professor John Yudkin, Emeritus Professor of Medicine, UCL
Dr Sheila Adam, former Deputy Chief Medical Officer
Professor Klim McPherson, Chair of the UK Health Forum
Dr John Middleton, Vice President UKFPH
Professor Alan Maryon-Davis, KCL
Helen Gordon, Board Member, Climate and Health Council
Dr Frank Boulton, Medact and Southampton University
Dr Sarah Walpole, Academic Clinical Fellow
Professor Allyson Pollock, QMUL
Dr Julie Hotchkiss, Acting Director of Public Health at City of a York Council
Professor Jennie Popay, Lancaster University
Competing interests: No competing interests
If you wish to see a round up of the hundreds of peer-reviewed papers and journalistic articles on the subject from the USA where fracking has been established for some years, please take a look at The Compendium Of Scientific, Medical, and Media Findings Demonstrating Risks And Harms Of Fracking (unconventional Gas and Oil Exploration)
Is fracking going to affect the value of my house?
Answer ...
Probably.
The UK Government produced a heavily redacted report called “Shale Gas Rural Economy Impacts“. Subsequent FoI requests revealed that it stated that “House prices in close proximity to the drilling operations are likely to fall”. The report analyses impacts on property prices elsewhere and concludes that there may be up to 7% reductions in property values within 1 mile of an extraction site.
A study from the University of Bristol “using evidence from two minor earthquakes near Blackpool, caused by exploratory fracking, …estimated a reduction of house prices of 3-4%. This equates to a cumulative cost of £111-160 million for houses sold in this area.”
Meanwhile, in November 2017 a surveyor in Yorkshire concluded that “homes in areas close to shale gas extraction sites could be devalued by between 15 and 20 per cent due to the risk of earthquake, water pollution and the number of lorries on the roads near fracking sites.
If you are still not convinced, just ask yourself “Would you want to live in a gasfield?”
Is shale gas a bridge fuel to a carbon free future?
Answer ...
No.
Oil Change International produced a briefing report: Burning The Gas ‘Bridge Fuel’ Myth in November 2017.
This briefing discusses five key issues which mean the myth that gas is a viable bridge fuel to a low carbon economy just can’t be maintained:
1. No Room for New Fossil Gas:
Climate goals require the power sector to be decarbonised by mid-century. This means gas use must be phased out, not increased.
2. New Gas is Holding Back Renewable Energy:
Wind and solar are now cheaper than coal and gas in many regions. This means new gas capacity often displaces new wind and solar rather than old coal.
3. The Wrong Gas at the Wrong Time:
Claims that gas supports renewable energy development are false. The cheapest gas generation technology (CCGT) is designed for baseload operation, not intermittent peaking. In any case, most grids are a long way from renewable energy penetration levels that would require back up. Storage and demand response will be ready to step in by the time they are really required.
4. New Gas Locks in Emissions for 40+ Years:
Companies building multi-billion dollar gas infrastructure today expect to operate their assets for around 40 years. Emissions goals mean this expectation cannot be met.
5. Too Much Gas Already:
The coal, oil, and gas in currently producing and under construction projects is enough to exceed climate goals. Opening up new gas fields is inconsistent with the Paris goals.
The idea that gas from shale gas fracking is a credible bridge fuel is simply not supported by the facts.
Is fracking economically viable in the UK?
Answer ...
The short answer is no.
We can see from the US experience that even over there the fracking companies are struggling to attract investment. In 2017 the Wall Street Journal tell us that “about $800 million flowed out of energy-focused equity funds for the year through November, compared with inflows of more than $6 billion in 2016, according to data from fund-data tracker EPFR Global.” The reason for this was that investors have become fed up with the frackers focussing on production volume and not on profit. The results of this blind rush to produce more and more regardless of profitability have been stark for investors. With negative cash flow over almost all of the last 7 years, oil and gas shares have grossly under-performed the market average.
So what about the UK situation. Well, on the one hand things look better for the frackers here because the price of gas per therm is higher here than it is in the USA. However, costs over here are also considerably higher – UKOOG state on their web site that they may be 3 times higher than in the US. Greenpeace’s analysis confirms this
In a 2013 submission to Parliament, Bloomberg said it would cost between 47 and 81 pence per therm to extract shale gas in Europe (using USD-to-GBP conversion rates).
The Oxford Institute for Energy Studies said in its 2010 report “Can Unconventional Gas be a Game Changer in European Markets” that shale extraction would likely be even more expensive, costing between 49 and 102 pence per therm.
EY, in its 2013 report “Shale Gas in Europe: Revolution or evolution?”, went further still, saying it would cost between 53 and 79 pence per therm.
And Centrica, which backs UK fracking firm Cuadrilla, said it would cost at the very least 46 pence per therm to frack, according to stats referenced in this 2012 EU report.
So with extraction cost estimates ranging between 46 pence a therm and 102 pence a therm how does that look compared to what the market sees as the future for gas prices in the medium term? Not good.
As you can see above , using even the lowest published estimate would mean that extraction cost more than revenue for at least half of the time.
As Mr Micawber tells us “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”
It certainly looks as though there is a lot of misery ahead for the UK frackers!
This question gets answered pretty well on this TED talk video
Answer ...
No.
The UK Government commissioned research in domestic energy security, and the Department of Business, Energy and Industrial Strategy (BEIS) produced this report: Gas security of supply: a strategic assessment of Great Britain’s gas security of supply.
The report concluded that, even taking into account highly unlikely events and excluding any possible contribution from shale gas, “We are secure now, and the GB gas system is well placed to continue to be secure and robust in a range of supply and demand outcomes over the next two decades.”.
The idea that gas from shale gas fracking is in any way necessary for security of supply in the UK in the short to medium term is simply not supported by the facts.
Even the “perfect storm” of events in early December 2017, when Ineos’ pipeline closure near Aberdeen occurred at the same time as the explosion at an Austrian gas plant, left the government and analysts quite unruffled as far as security of supply is concerned. The Guardian reported on 12th December 2017 that”
“Mahoney [Mike Mahoney, associate director at the analysts Cornwall Insight] said that security of supply was not an issue but the pipeline shutdown had highlighted the UK’s exposure to price swings after the country’s biggest gas storage site, Rough, closed earlier this year.
and
A government spokesperson said: “There is no security of supply issue for fuel or gas supplies as a result of the repairs needed to the Forties pipeline.” Richard Harrington, the energy minister, spoke to Ineos on Tuesday morning.
Should we worry about fracking and our health?
Answer ...
The industry and its supporters say no but we suggest that you read this letter, published in the British Medical Journal, take note of who has signed it, and then make you own minds up.
Public Health England’s draft report on shale gas extraction
Dear Editor,
We write as concerned health professionals who seek to draw the public’s attention to the dangers associated with hydraulic fracturing (fracking) and shale gas extraction in the United Kingdom, as highlighted by a recent report published by Medact.
Fracking is an inherently risky activity that produces hazardous levels of air and water pollution that can have adverse impacts on health. The heavy traffic, noise and odour that accompanies fracking, as well as the socially disruptive effects of temporary ‘boomtowns’ and the spoilage of the natural environment are additional health hazards.
Such risks would be magnified in the UK where fracking is projected to take place in closer proximity to more densely populated communities; and where there are concerns about the effectiveness of the regulatory system for onshore gas extraction.
But in addition to this, shale gas is not a clean source of energy. Methane is a potent greenhouse gas in its own right, and when burnt, produces carbon dioxide. Shale gas extraction would undermine our commitment to reducing greenhouse gas emissions and be incompatible with global efforts to prevent global warming from exceeding two degrees centigrade.
The arguments against fracking on public health and ecological grounds are overwhelming. There are clear grounds for adopting the precautionary principle and prohibiting fracking.
Yours sincerely,
Dr Robin Stott, Co-Chair, Climate and Health Council
Professor Sue Atkinson CBE, Co-Chair, Climate and Health Counci
Professor Hugh Montgomery, UCL
Professor Maya Rao OBE
Professor Martin McKee, LSHTM
Dr Clare Gerada, GP and former Chair of RGCP
Dr Christopher Birt, University of Liverpool and Christie Hospital, Manchester
Professor John Yudkin, Emeritus Professor of Medicine, UCL
Dr Sheila Adam, former Deputy Chief Medical Officer
Professor Klim McPherson, Chair of the UK Health Forum
Dr John Middleton, Vice President UKFPH
Professor Alan Maryon-Davis, KCL
Helen Gordon, Board Member, Climate and Health Council
Dr Frank Boulton, Medact and Southampton University
Dr Sarah Walpole, Academic Clinical Fellow
Professor Allyson Pollock, QMUL
Dr Julie Hotchkiss, Acting Director of Public Health at City of a York Council
Professor Jennie Popay, Lancaster University
Competing interests: No competing interests
If you wish to see a round up of the hundreds of peer-reviewed papers and journalistic articles on the subject from the USA where fracking has been established for some years, please take a look at The Compendium Of Scientific, Medical, and Media Findings Demonstrating Risks And Harms Of Fracking (unconventional Gas and Oil Exploration)
Is fracking going to affect the value of my house?
Answer ...
Probably.
The UK Government produced a heavily redacted report called “Shale Gas Rural Economy Impacts“. Subsequent FoI requests revealed that it stated that “House prices in close proximity to the drilling operations are likely to fall”. The report analyses impacts on property prices elsewhere and concludes that there may be up to 7% reductions in property values within 1 mile of an extraction site.
A study from the University of Bristol “using evidence from two minor earthquakes near Blackpool, caused by exploratory fracking, …estimated a reduction of house prices of 3-4%. This equates to a cumulative cost of £111-160 million for houses sold in this area.”
Meanwhile, in November 2017 a surveyor in Yorkshire concluded that “homes in areas close to shale gas extraction sites could be devalued by between 15 and 20 per cent due to the risk of earthquake, water pollution and the number of lorries on the roads near fracking sites.
If you are still not convinced, just ask yourself “Would you want to live in a gasfield?”
Is shale gas a bridge fuel to a carbon free future?
Answer ...
No.
Oil Change International produced a briefing report: Burning The Gas ‘Bridge Fuel’ Myth in November 2017.
This briefing discusses five key issues which mean the myth that gas is a viable bridge fuel to a low carbon economy just can’t be maintained:
1. No Room for New Fossil Gas:
Climate goals require the power sector to be decarbonised by mid-century. This means gas use must be phased out, not increased.
2. New Gas is Holding Back Renewable Energy:
Wind and solar are now cheaper than coal and gas in many regions. This means new gas capacity often displaces new wind and solar rather than old coal.
3. The Wrong Gas at the Wrong Time:
Claims that gas supports renewable energy development are false. The cheapest gas generation technology (CCGT) is designed for baseload operation, not intermittent peaking. In any case, most grids are a long way from renewable energy penetration levels that would require back up. Storage and demand response will be ready to step in by the time they are really required.
4. New Gas Locks in Emissions for 40+ Years:
Companies building multi-billion dollar gas infrastructure today expect to operate their assets for around 40 years. Emissions goals mean this expectation cannot be met.
5. Too Much Gas Already:
The coal, oil, and gas in currently producing and under construction projects is enough to exceed climate goals. Opening up new gas fields is inconsistent with the Paris goals.
The idea that gas from shale gas fracking is a credible bridge fuel is simply not supported by the facts.
Is fracking economically viable in the UK?
Answer ...
The short answer is no.
We can see from the US experience that even over there the fracking companies are struggling to attract investment. In 2017 the Wall Street Journal tell us that “about $800 million flowed out of energy-focused equity funds for the year through November, compared with inflows of more than $6 billion in 2016, according to data from fund-data tracker EPFR Global.” The reason for this was that investors have become fed up with the frackers focussing on production volume and not on profit. The results of this blind rush to produce more and more regardless of profitability have been stark for investors. With negative cash flow over almost all of the last 7 years, oil and gas shares have grossly under-performed the market average.
So what about the UK situation. Well, on the one hand things look better for the frackers here because the price of gas per therm is higher here than it is in the USA. However, costs over here are also considerably higher – UKOOG state on their web site that they may be 3 times higher than in the US. Greenpeace’s analysis confirms this
In a 2013 submission to Parliament, Bloomberg said it would cost between 47 and 81 pence per therm to extract shale gas in Europe (using USD-to-GBP conversion rates).
The Oxford Institute for Energy Studies said in its 2010 report “Can Unconventional Gas be a Game Changer in European Markets” that shale extraction would likely be even more expensive, costing between 49 and 102 pence per therm.
EY, in its 2013 report “Shale Gas in Europe: Revolution or evolution?”, went further still, saying it would cost between 53 and 79 pence per therm.
And Centrica, which backs UK fracking firm Cuadrilla, said it would cost at the very least 46 pence per therm to frack, according to stats referenced in this 2012 EU report.
So with extraction cost estimates ranging between 46 pence a therm and 102 pence a therm how does that look compared to what the market sees as the future for gas prices in the medium term? Not good.
As you can see above , using even the lowest published estimate would mean that extraction cost more than revenue for at least half of the time.
As Mr Micawber tells us “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”
It certainly looks as though there is a lot of misery ahead for the UK frackers!
The industry and its supporters say no but we suggest that you read this letter, published in the British Medical Journal, take note of who has signed it, and then make you own minds up.
Public Health England’s draft report on shale gas extraction
Dear Editor,
We write as concerned health professionals who seek to draw the public’s attention to the dangers associated with hydraulic fracturing (fracking) and shale gas extraction in the United Kingdom, as highlighted by a recent report published by Medact.
Fracking is an inherently risky activity that produces hazardous levels of air and water pollution that can have adverse impacts on health. The heavy traffic, noise and odour that accompanies fracking, as well as the socially disruptive effects of temporary ‘boomtowns’ and the spoilage of the natural environment are additional health hazards.
Such risks would be magnified in the UK where fracking is projected to take place in closer proximity to more densely populated communities; and where there are concerns about the effectiveness of the regulatory system for onshore gas extraction.
But in addition to this, shale gas is not a clean source of energy. Methane is a potent greenhouse gas in its own right, and when burnt, produces carbon dioxide. Shale gas extraction would undermine our commitment to reducing greenhouse gas emissions and be incompatible with global efforts to prevent global warming from exceeding two degrees centigrade.
The arguments against fracking on public health and ecological grounds are overwhelming. There are clear grounds for adopting the precautionary principle and prohibiting fracking.
Yours sincerely,
Dr Robin Stott, Co-Chair, Climate and Health Council
Professor Sue Atkinson CBE, Co-Chair, Climate and Health Counci
Professor Hugh Montgomery, UCL
Professor Maya Rao OBE
Professor Martin McKee, LSHTM
Dr Clare Gerada, GP and former Chair of RGCP
Dr Christopher Birt, University of Liverpool and Christie Hospital, Manchester
Professor John Yudkin, Emeritus Professor of Medicine, UCL
Dr Sheila Adam, former Deputy Chief Medical Officer
Professor Klim McPherson, Chair of the UK Health Forum
Dr John Middleton, Vice President UKFPH
Professor Alan Maryon-Davis, KCL
Helen Gordon, Board Member, Climate and Health Council
Dr Frank Boulton, Medact and Southampton University
Dr Sarah Walpole, Academic Clinical Fellow
Professor Allyson Pollock, QMUL
Dr Julie Hotchkiss, Acting Director of Public Health at City of a York Council
Professor Jennie Popay, Lancaster University
Competing interests: No competing interests
If you wish to see a round up of the hundreds of peer-reviewed papers and journalistic articles on the subject from the USA where fracking has been established for some years, please take a look at The Compendium Of Scientific, Medical, and Media Findings Demonstrating Risks And Harms Of Fracking (unconventional Gas and Oil Exploration)
Answer ...
Probably.
The UK Government produced a heavily redacted report called “Shale Gas Rural Economy Impacts“. Subsequent FoI requests revealed that it stated that “House prices in close proximity to the drilling operations are likely to fall”. The report analyses impacts on property prices elsewhere and concludes that there may be up to 7% reductions in property values within 1 mile of an extraction site.
A study from the University of Bristol “using evidence from two minor earthquakes near Blackpool, caused by exploratory fracking, …estimated a reduction of house prices of 3-4%. This equates to a cumulative cost of £111-160 million for houses sold in this area.”
Meanwhile, in November 2017 a surveyor in Yorkshire concluded that “homes in areas close to shale gas extraction sites could be devalued by between 15 and 20 per cent due to the risk of earthquake, water pollution and the number of lorries on the roads near fracking sites.
If you are still not convinced, just ask yourself “Would you want to live in a gasfield?”
Is shale gas a bridge fuel to a carbon free future?
Answer ...
No.
Oil Change International produced a briefing report: Burning The Gas ‘Bridge Fuel’ Myth in November 2017.
This briefing discusses five key issues which mean the myth that gas is a viable bridge fuel to a low carbon economy just can’t be maintained:
1. No Room for New Fossil Gas:
Climate goals require the power sector to be decarbonised by mid-century. This means gas use must be phased out, not increased.
2. New Gas is Holding Back Renewable Energy:
Wind and solar are now cheaper than coal and gas in many regions. This means new gas capacity often displaces new wind and solar rather than old coal.
3. The Wrong Gas at the Wrong Time:
Claims that gas supports renewable energy development are false. The cheapest gas generation technology (CCGT) is designed for baseload operation, not intermittent peaking. In any case, most grids are a long way from renewable energy penetration levels that would require back up. Storage and demand response will be ready to step in by the time they are really required.
4. New Gas Locks in Emissions for 40+ Years:
Companies building multi-billion dollar gas infrastructure today expect to operate their assets for around 40 years. Emissions goals mean this expectation cannot be met.
5. Too Much Gas Already:
The coal, oil, and gas in currently producing and under construction projects is enough to exceed climate goals. Opening up new gas fields is inconsistent with the Paris goals.
The idea that gas from shale gas fracking is a credible bridge fuel is simply not supported by the facts.
Is fracking economically viable in the UK?
Answer ...
The short answer is no.
We can see from the US experience that even over there the fracking companies are struggling to attract investment. In 2017 the Wall Street Journal tell us that “about $800 million flowed out of energy-focused equity funds for the year through November, compared with inflows of more than $6 billion in 2016, according to data from fund-data tracker EPFR Global.” The reason for this was that investors have become fed up with the frackers focussing on production volume and not on profit. The results of this blind rush to produce more and more regardless of profitability have been stark for investors. With negative cash flow over almost all of the last 7 years, oil and gas shares have grossly under-performed the market average.
So what about the UK situation. Well, on the one hand things look better for the frackers here because the price of gas per therm is higher here than it is in the USA. However, costs over here are also considerably higher – UKOOG state on their web site that they may be 3 times higher than in the US. Greenpeace’s analysis confirms this
In a 2013 submission to Parliament, Bloomberg said it would cost between 47 and 81 pence per therm to extract shale gas in Europe (using USD-to-GBP conversion rates).
The Oxford Institute for Energy Studies said in its 2010 report “Can Unconventional Gas be a Game Changer in European Markets” that shale extraction would likely be even more expensive, costing between 49 and 102 pence per therm.
EY, in its 2013 report “Shale Gas in Europe: Revolution or evolution?”, went further still, saying it would cost between 53 and 79 pence per therm.
And Centrica, which backs UK fracking firm Cuadrilla, said it would cost at the very least 46 pence per therm to frack, according to stats referenced in this 2012 EU report.
So with extraction cost estimates ranging between 46 pence a therm and 102 pence a therm how does that look compared to what the market sees as the future for gas prices in the medium term? Not good.
As you can see above , using even the lowest published estimate would mean that extraction cost more than revenue for at least half of the time.
As Mr Micawber tells us “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”
It certainly looks as though there is a lot of misery ahead for the UK frackers!
No.
Oil Change International produced a briefing report: Burning The Gas ‘Bridge Fuel’ Myth in November 2017.
This briefing discusses five key issues which mean the myth that gas is a viable bridge fuel to a low carbon economy just can’t be maintained:
1. No Room for New Fossil Gas:
Climate goals require the power sector to be decarbonised by mid-century. This means gas use must be phased out, not increased.
2. New Gas is Holding Back Renewable Energy:
Wind and solar are now cheaper than coal and gas in many regions. This means new gas capacity often displaces new wind and solar rather than old coal.
3. The Wrong Gas at the Wrong Time:
Claims that gas supports renewable energy development are false. The cheapest gas generation technology (CCGT) is designed for baseload operation, not intermittent peaking. In any case, most grids are a long way from renewable energy penetration levels that would require back up. Storage and demand response will be ready to step in by the time they are really required.
4. New Gas Locks in Emissions for 40+ Years:
Companies building multi-billion dollar gas infrastructure today expect to operate their assets for around 40 years. Emissions goals mean this expectation cannot be met.
5. Too Much Gas Already:
The coal, oil, and gas in currently producing and under construction projects is enough to exceed climate goals. Opening up new gas fields is inconsistent with the Paris goals.
The idea that gas from shale gas fracking is a credible bridge fuel is simply not supported by the facts.
Answer ...
The short answer is no.
We can see from the US experience that even over there the fracking companies are struggling to attract investment. In 2017 the Wall Street Journal tell us that “about $800 million flowed out of energy-focused equity funds for the year through November, compared with inflows of more than $6 billion in 2016, according to data from fund-data tracker EPFR Global.” The reason for this was that investors have become fed up with the frackers focussing on production volume and not on profit. The results of this blind rush to produce more and more regardless of profitability have been stark for investors. With negative cash flow over almost all of the last 7 years, oil and gas shares have grossly under-performed the market average.
So what about the UK situation. Well, on the one hand things look better for the frackers here because the price of gas per therm is higher here than it is in the USA. However, costs over here are also considerably higher – UKOOG state on their web site that they may be 3 times higher than in the US. Greenpeace’s analysis confirms this
In a 2013 submission to Parliament, Bloomberg said it would cost between 47 and 81 pence per therm to extract shale gas in Europe (using USD-to-GBP conversion rates).
The Oxford Institute for Energy Studies said in its 2010 report “Can Unconventional Gas be a Game Changer in European Markets” that shale extraction would likely be even more expensive, costing between 49 and 102 pence per therm.
EY, in its 2013 report “Shale Gas in Europe: Revolution or evolution?”, went further still, saying it would cost between 53 and 79 pence per therm.
And Centrica, which backs UK fracking firm Cuadrilla, said it would cost at the very least 46 pence per therm to frack, according to stats referenced in this 2012 EU report.
So with extraction cost estimates ranging between 46 pence a therm and 102 pence a therm how does that look compared to what the market sees as the future for gas prices in the medium term? Not good.
As you can see above , using even the lowest published estimate would mean that extraction cost more than revenue for at least half of the time.
As Mr Micawber tells us “Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery.”
It certainly looks as though there is a lot of misery ahead for the UK frackers!
