UK Government Splits Over Shale Gas Potential
Ed Davey, the energy secretary, has played down the potential importance of shale gas in the UK’s energy mix in a move likely to put him at odds with coalition cabinet colleagues including Owen Paterson, the Conservative party environment secretary.
Mr Paterson has been widely reported to favour the rapid exploitation of UK shale gas, also known as unconventional gas, which is produced by the contentious “fracking” process and has prompted sharp falls in gas prices in the US, the first country to extract shale gas in large quantities.
George Osborne, chancellor, is also keen on a big role for natural gas, which some analysts argue is a cheaper alternative to the costly nuclear and low carbon electricity plants that Mr Davey, a Liberal Democrat, is trying to encourage in the energy bill making its way through parliament.
But in prepared comments to a CBI meeting of senior business executives on Monday night, Mr Davey said he wanted to knock down the “myth” that the bill’s reforms were unnecessary “because a global glut of cheap gas will solve our investment and carbon problems”.
Though gas would continue to play an important role in coming years, and was much cleaner than coal, its price was still volatile, he said, with global gas prices rising 40 per cent last year.
“Yes, prices can go down, as well as up. And yes, unconventional gas can make a difference, although perhaps not as big a difference as some sections of the press would have me believe,” he said.
“Analysts think shale gas extraction in Europe will be more expensive than in the US, and probably won’t happen at scale until the end of this decade,” he said, adding shale gas was forecast to double its share of the market by 2035, but “that will still account for barely a third of global demand”.
“And we’re competing with fast-growing economies which are hungry for gas. Demand in the Middle East is rising steeply . . . China alone is expected to double its demand by 2017. No wonder the consensus is that gas prices will either remain high, or go higher.”
There were four other myths about the energy bill that Mr Davey said he wanted to take on, namely that the legislation was too complicated; too statist; a disguised nuclear subsidy and was only going to make the six largest energy companies even bigger.