Economic viability of UK shale gas and potential impacts on the energy market up to 2030

Abstract

The UK is in the early stages of developing a shale gas industry and to date six test wells have been drilled but none yet exploited commercially. Some argue that shale gas could reduce energy prices and improve national energy security. However, the costs of bringing commercial-size wells into operation are uncertain and the impact shale gas could have on the UK energy market is currently unknown. Therefore, this paper evaluates the economic viability of developing a UK shale gas industry and the impacts it could have on the UK gas and electricity markets and consumer energy bills up to 2030. The estimated life cycle (levelised) costs of shale gas production range from 0.47-56.74 pence/MJ (0.61-73 US$ cents/MJ), with an average value of 4.64 pence/MJ. The break-even price at which shale gas can be sold varies between 0.95 and 114.44 pence/MJ, averaging at 9.47 pence/MJ, depending on the volume of gas produced by a shale gas well. The latter is two times higher than imported liquefied natural gas, around 30% more expensive than UK natural gas and three times greater than the price of US shale gas. Electricity from shale gas is on average 17% more expensive than from domestic conventional gas but still more competitive than most other electricity options, including coal and renewables. However, the impact of shale gas on the energy market would be limited across the expected range of shale gas penetration into the gas and electricity mixes, suggesting that it would have little effect on energy prices. This is reflected in an almost negligible impact on consumer energy bills. The potential of shale gas to boost the UK economy is also limited, contributing 0.017%-0.033% to the GDP. This is an order of magnitude lower than the contribution of US shale gas to its GDP (0.2%), indicating that the economic success of shale gas in the US may not be replicated in the UK. These findings will be of interest to shale gas developers and policy makers not only in the UK but in other countries considering exploitation of shale gas resources.

Swelling of Shales by Supercritical Carbon Dioxide and Its Relationship to Sorption

“… 1 Shale gas is considered a promising energy source capable of providing more energy security. 2 , 3 The shale gas is extracted by hydraulic fracturing and horizontal drilling, both of which require large amounts of water, which, in turn, might cause damage, waste water resources, and pollute groundwater. 4 , 5 In addition, because of the high clay content in shale gas formations in China, 6 it is almost certain that drilling and hydraulic fracturing will be necessary.…”

New Challenge and Research Development in Global Energy Financialization

“…For example, the 'roller coaster' surge in oil prices in 2008 is considered to be the result of the widespread involvement of international financial capital in energy futures markets (Creti and Nguyen 2015). Games between new and old energy forces, the American shale gas revolution and disputes with Russia will all affect the reorganization of the energy market and cause sharp price fluctuations (Behar and Ritz 2017;Caporin and Fontini 2017;Cooper, Stamford, and Azapagic 2018). Energy financialization has become an inevitable trend, which will lead to the traditional commodity attributes (supply-demand relationship) that affect changes to energy risk no longer playing a leading role, and the characteristics of financialization will give new uncertainty and heterogeneity to market risk.…”

Economic effects in the UK periphery from unconventional gas development: Evidence from Wales

“…Unconventional gas exploitation in the UK is at an early stage, but with research already suggesting that the contribution of UK-produced onshore shale gas to energy markets and economic growth could be very modest in comparison with the US case (see for example, Cooper et al, 2018). However, there is still scope for an assessment of the likely effects of sector expansion on more regional economies.…”