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Blog: UK set for shale consumption

05 August 2015

Cuadrilla has announced it will appeal Lancashire County Council’s decision to refuse planning permission for both its shale sites in the Fylde.  The decision is widely regarded as a defining moment for the industry on British shores, but a fact being overlooked is that the UK is likely to be consuming shale gas as soon as the end of 2015.

As National Grid issues increasing concerns over capacity margins this winter, advanced plans to transport US shale to the UK are already underway.  The first cargo of the USA resource may reach Milford Haven or the Isle of Grain Liquefied Natural Gas (LNG) terminals once the Sabine Pass terminal in Louisiana is completed, which will turn shale gas into a transportable liquid form.

BG Group, Total and Centrica have all booked firm capacity rights in the Sabine Pass project and will be able to bring liquefied shale gas to European – including British – regasification terminals.

The move is seemingly proof of the oft-touted ‘shale gas revolution’ in action.  Only a decade ago the USA had over 50 applications for LNG import terminals to feed its spiralling energy requirements.  Now, with development of numerous shale gas basins, the US is able to confidently export gas globally, driven by higher global gas prices than in the USA (around half those in Europe and a quarter of some Asian markets).

These latest developments will see the USA reap the rewards of unprecedented LNG investment.  Having satisfied domestic demand, the federal authorities have approved export through six terminals under construction and a further eight facilities in the planning and approval stages.

So what does this mean for the UK?  One thing is for sure, the British will be heating their homes and cooking their meals using shale gas.  Consumers will also be relying on electricity generated using such imported methane via combined cycle turbine power stations. 

Grangemouth will also be accepting liquefied ethane in 2016 as INEOS unveils its fleet of transatlantic ‘dragon’ ships (imports to the company’s Norwegian facilities will happen in 2015).  Ethane is the primary component for the production of many chemicals including plastics, pharmaceuticals and construction materials. 

So for Britain, it’s not a question of if we should consume shale gas as part of our energy mix, but whether the UK can and should produce its own.  Of course, UK production delivers greater rewards.  The UK would derive benefits from tax receipts to the Treasury; increase energy security and stability; and create and safeguard a significant number of jobs.

Many across the industry often point out that there are no sensible scenarios for the UK’s energy supply that do not feature gas as a bridging fuel to a decarbonised future.  Of the four scenarios produced by National Grid, all put gas as a major primary energy source to 2035 and beyond – including the ‘Gone Green’ option.  This coincides with warnings that spare electricity capacity is likely to be just 1.2% this winter – the worst for a decade.

The question therefore is not ‘if gas’, but ‘which gas’?  Whilst imported shale gas may contribute to our energy supply very soon, it’s unfortunate that the financial benefits of this will mostly be reaped across the pond until such time as UK shale gas exploration can determine potential benefit to the UK.

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