What Could Shale Mean for UK Economy and Employment?

What Could Shale Mean for UK Economy and Employment?

By JAMIE FERGUSON, Vice President US and Latin America, Maxwell Drummond

Last week, December 13th, the UK Government announced that it will permit shale gas exploration, including horizontal drilling and hydraulic fracturing, effectively making shale gas development economically viable. 

Ed Davey, the UK’s energy and climate change secretary, said the government will allow shale development to resume, but that any fracturing activity would be subject to new controls aimed at mitigating the risk of seismic activity (i.e., earthquakes) in the surrounding area.

Exploratory fracking has been suspended in the UK since May of 2011 after two small seismic tremors were detected near the country’s only fracking operation in the Bowland Basin, east of Blackpool in northern England. The British Geological Society recently reported that the area around Blackpool may hold as much as 300 trillion cubic feet of gas, at least 50% more than was previously thought.

In his announcement, Davey said that shale gas represents a promising new potential energy resource for the UK and could contribute significantly to the nation’s energy security and reducing its reliance on imported gas.

 Despite efforts and public support to introduce renewables and other low carbon technologies, a significant portion of the electricity generation capacity that will be needed to meet the increase in UK power demand is likely to be gas- fuelled.   The National Grid recently predicted that 27% of the UK generation fleet will still run on gas by 2030 in their ‘Gone Green’ scenario.

Since 2004 the UK has been an importer of gas, largely through supply agreements with Norway, LNG imports and supplies from Continental Europe. This trend is set to increase with over 80% of UK gas anticipated to come from overseas sources by 2030. A new easily accessible domestic reserve would clearly be of significant benefit to the UK when energy demand is increasing substantially worldwide.

But what does this mean for the UK economy in terms of employment?  Estimates have shown that over the life of a shale gas project in the UK, about 95 full-time equivalent (FTE) jobs could be created per well.  This is particularly important in those regions such as the North-West of England, where job opportunities are needed in the face of a shrinking public sector employer that underpins the local economy. Similarly, the proposed Tamboran project in Northern Ireland is expected to run through to 2050 and produce 600 local jobs from direct employment, 2,400 associated jobs across the UK, and yield some £6.9 billion in tax revenues. Additionally, there are substantial economic benefits if the gas can be exploited safely and effectively. 

A key characteristic of the employment opportunities is that they would be highly skilled. Although individual exploration and production programmes would last about a decade, the skills, knowledge, equipment and supplier base developed would position the UK for ongoing participation in worldwide shale gas activity through a supply chain. There is evidence of this already with Aberdeen’s respected oil and gas community already beginning to focus their North Sea expertise on the international shale markets.  As this is a new industry requiring specific technical skills, there is an opportunity for the creation of apprenticeship programmes and enhanced Further Education and Higher Education opportunities. 

However, like most energy exploitation projects, shale gas needs significant capital investment. It is estimated that about £6 billion is needed to realise Tamboran’s proposed Northern Ireland project. It is vital that Government supports the development of a UK shale gas industry through creating a policy framework that removes barriers, encourages growth and allows local communities to see the benefits of a new sector of industry through job creation. 

This post originally appeared on PennEnergy. Posted with permission of the author.

Photo Credit: gotsetters via Flickr CC