UK Edging Closer To Shale Gas Development

  • Date: 07/01/14

The UK is continuing to edge closer to realising the potential of its domestic shale gas resources.

In mid-December 2013, the UK government published a report, known as the Strategic Environmental Assessment for Further Onshore Oil and Gas Licensing (the SEA), as part of the UK’s procedure for assessing the environmental effects of future onshore oil and gas licensing.

The SEA was commissioned by the UK government and carried out in preparation for the next licensing round for onshore oil and gas exploration and production (being the 14th such round) in the UK under a “Draft Licensing Plan.” Pursuant to the Draft Licensing Plan, the UK government is considering a total area of 100,000 square kilometres for future licensing. The SEA sets out the potential environmental and economic effects of further onshore oil and gas exploration and production activity in the UK, including shale oil and gas production, by comparing a “low activity” and a “high activity” scenario.

The “high activity scenario” assumes that a considerable amount of shale gas (4.32 to 8.64 trillion cubic feet) would be produced during the 2020s; a level of production which would satisfy around 25% of the UK’s estimated demand for natural gas for the decade. Under this scenario, up to 2,880 wells would be drilled each year and the SEA envisages “likely significant positive effects” for the economy, jobs and communities, with boons for both employment (an estimated 16,000-32,000 full-time jobs may be created, representing an increase of 3.5 to 7% in employment supported by the UK oil and gas sector) and local economies (which will benefit from initial contributions of £100,000 per fracking site and a further 1% of the revenue from each well over its lifetime, meaning a total of £1 billion could be paid out to local communities across the UK).

The SEA envisages “likely significant negative effects” under the high activity scenario, though there are potential mitigants for each of these. The negative effects include:

  •  Contribution to climate change.  However, if an increase in the UK’s domestic natural gas supply acted as a substitute for imported LNG there would be a negligible effect on overall greenhouse gas emissions.
  • Increased production of wastewater.  The SEA highlighted “flowback” as generating up to 108 million cubic metres of wastewater that will require treatment. The SEA suggests that this additional volume could place a significant burden on existing wastewater treatment infrastructure but that this pressure would be reduced if onsite treatment and recycling is employed. The SEA also makes specific reference to the Memorandum of Understanding signed in November between UK Onshore Operators Group and Water UK (which provides for co-operation between licence operators and the water industry throughout the fracking process), pursuant to which the SEA assumes that such co-operation will ensure that these effects will not be unacceptable in a local context.
  • Local community disturbance and health.  This could include an increase in traffic congestion, noise and air pollution, increased pressure on water resources, clearance of vegetation and loss of soils. However the SEA also notes that existing regulatory controls, including the planning system, should ensure that any adverse impacts are minimised. Under the high activity scenario, fracking would require 9 million cubic metres of water annually, which would increase the current water consumption of the energy, water and waste sectors combined by 18.5% but still account for less than 1% of total UK water consumption.

In contrast, under a “low activity scenario” only 180 to 380 wells would be drilled each year. In this scenario the SEA envisages that the positive effects would be reduced, with just 2,500 to 5,000 jobs being created, and that the negative effects would also be reduced, although the SEA highlights that up to 13.5 million cubic metres of wastewater from flowback would be created and this is still expected to have “significant negative effects.”

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