Dawn of a new energy age? It won’t be that easy

So it’s official. Let’s tear down the wind turbines, switch off the nuclear reactors and pull the blinds down on solar power. The UK is sitting on more untapped natural gas than anyone had ever thought possible.

“A new frontier in energy,” according to the Chancellor George Osborne, who announced the figures this morning, to power Britian’s homes and industry long into the future.

And on the face of it, he appears to be right. A gas resource of 1,300 trillion cubic feet (TCF) for the UK’s Bowland shale (which is the largest, but just one, of the UK’s many shale formations) is more gas than is estimated to remain in all of the shale gas rocks in the US put together.

But are we really at the dawn of a new energy age? A 21st century dash for easily recoverable, conflict-free natural gas right beneath out feet? Well, no. Not exactly.

With the very mention of the words “natural gas resource” we encounter the dark arts of the oil and gas industry. A resource represents the maximum possible amount of gas or oil that might reside in the ground. The actual amount a company can extract — called a “reserve” is an entirely different thing altogether. It can vary from year to year, and it’s dependent on a host of factors totally independent of geology.

It’s why Mr Osborne concluded only 10 per cent or so of this 1,300 TCF would ever be recovered. That’s not to be sniffed at – the remaining total US recoverable shale reserves are estimated at 97 TCF. But will 10 per cent of the Bowland shale’s gas ever come out of the ground?

Experience from the US suggests very little – some estimates say around 4 per cent – of shale gas resources are actually recovered. The precise amount depends first on the geology itself. The Bowland shale – in places three miles thick – is one of the largest lumps of gas-bearing shale yet discovered in the world. But no one has yet recovered more than a faint whiff of gas from it. It may turn out to be extremely hard to frack – and there are already some indications that it might be.

On top of that is the economic and regulatory situation above ground. Small changes in a company’s costs or risks can make a large amount of gas completely unrecoverable. Mr Osborne has pledged to help companies surmount some of these challenges. Today he promised royalties for communities living adjacent to fracking pads.  There have been hints that the planning and environmental red tape currently preventing Britain’s only shale gas frackers Cuadrilla from expanding operations in Lancashire will also be eased.

But the American experience has also shown the environmental and social impacts of fracking are not insignificant – and will be far more immediate and complex in a country as densely populated as the UK. It’s hard to “drill baby drill” in a suburb of Blackpool or Liverpool.

Even supposing the Bowland shale is easy to frack and the regulatory framework for the companies to operate in is overhauled, the contribution of shale may never be huge. Large oil companies like Chevron piled into Poland several years ago, lured by large shale deposits there. But most have now quit the country because the gas simply wasn’t coming out of the ground quick enough.

The development of more fracking wells there is moving forward very slowly. Many people seem to forget the first fracking wells were being drilled in the US in the 1990s. It took 20 years for the shale gas boom to take hold there.

It’s likely even if companies can recover the 130TCF of gas beneath central England, it may end up seeping out over decades rather than gushing out to revolutionise or redefine our energy landscape. As one of the most expensive ways of obtaining natural gas, it’s also very sensitive to changes in world gas prices and environmental legislation like the UK’s climate change act which will require successive governments to rely less on fossil fuels.

Getting gas out of rock isn’t as hard as getting blood out of stone – the American experience has taught us that. But here in one of the most crowded and tightly regulated countries in the world it isn’t going to be easy.

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