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Shale gas: how does the hype stack up against robust analysis of the evidence?

Bob Ward
Policy & Communications Director

1 May 2012 - page 1 of 2

A strident campaign has been mounted over the past couple of years to promote shale gas as a ‘game-changing’ new source of energy that can be extracted readily and in plentiful amounts, can reduce fuel bills, and can also help the UK to reduce its emissions of greenhouse gases.

For example, a report| written for Lord Lawson’s Global Warming Policy Foundation by Matt Ridley, the science writer and former chairman of Northern Rock, suggested that a surge in the production and use of shale gas "may prove to be both the cheapest and most effective way to hasten the decarbonisation of the world economy".

But how does this hype stack up against robust analysis of the evidence?

What is shale gas and ‘fracking’?

Shale gas refers to an unconventional source of methane which can be extracted from deposits of a fine-grained rock that is rich in organic material. Although shale deposits have been known for some time to contain large amounts of natural gas, they have been difficult to exploit because of the relatively impermeable nature of the rock|. However, recent advances in drilling and extraction techniques have made such stores of natural gas easier to withdraw. In particular, the process of hydraulic fracturing, or ‘fracking’|, can be used to shatter the rock with pressurised water to allow the gas to be extracted.

Production and consumption of shale gas in the United States

Proponents of shale gas point to the United States, where annual dry production of natural gas increased by 14.0 per cent between 2006 and 2010 to 759.9 billion cubic metres, according to the Energy Information Administration (EIA)|. Much of the increase over this period has been achieved through horizontal drilling, combined with fracking, to boost the annual production of shale gas| nearly fivefold to about 141.3 billion cubic metres in 2010).

The EIA estimates that there are 23,418 billion cubic metres of natural gas, equivalent to 36 years of current annual consumption, which are recoverable from shale in the United States using current technology. It has projected that annual dry production of shale gas could reach 384 billion cubic metres by 2035|, growing from about 23 per cent of dry natural gas production to 49 per cent over the next 25 years|.

However, the significant increase in supply over the past few years has been accompanied by weak demand in the United States, due to a combination of the economic downturn and relatively mild winter weather. Consumption of natural gas| in the United States fell from 659.1 billion cubic metres in 2008 to 648.7 billion in 2009 before rising to 673.2 billion in 2010. The volume of imported natural gas as a percentage of supply also decreased from 16.7 per cent in 2007 to 13.1 per cent in 2010.

As a result of the increase in production and weakening of demand, the average price for natural gas| at the well-head fell by more than half over 12 months from a high point in 2008, and was 63.7 per cent lower by January 2012. Spot prices for natural gas in the United States approached a 10-year low| at the end of March 2012 due to continued high production levels, robust storage and weak demand arising from the mild winter (according to the United States National Oceanic and Atmospheric Administration, the traditional cold season in the United States between October and March in 2011-12 was the second warmest since records began in 1880|).

The substantial reduction in the price of natural gas after its peak in 2008 has provided a cost advantage for gas-powered electricity generation plants over those fuelled by coal. The amount of electricity generated from natural gas reached a record 24 per cent| by the end of 2010.

Impact of increased shale gas on greenhouse gas emissions in the United States

As gas is a more efficient source of fuel, the switch from coal also helped to reduce annual emissions of carbon dioxide from electricity generation in the United States| by 214.5 million tonnes between 2008 and 2009. More than half of this reduction can be attributed to the switch from coal|, driven by increased production of shale gas, according to Xi Lu and colleagues at Harvard University. As overall carbon dioxide emissions in the United States were 423.8 million tonnes, or 7.2 per cent, lower in 2009 compared with 2008, the switch from coal to gas may have been responsible for about a quarter of the overall cut in greenhouse gas emissions by 440 million tonnes of carbon-dioxide-equivalent that was recorded by the Environmental Protection Agency. It should be noted that overall carbon dioxide emissions in the United States increased by 205.9 million tonnes in 2010, primarily due to an increase in economic activity.

These facts provide a very different picture from that presented by Matt Ridley in an article in ‘The Times’| on 18 April 2012 where he wrongly suggested that the work of Dr Lu and colleagues show "the surprise fall in America’s carbon emissions – by 7 per cent in 2009, probably more since – was caused largely by a switch from coal to shale gas". And injecting even more hype, he added that shale gas in the United States "has lowered the price of gas to a quarter of that in Europe, thus slashing the cost of energy, reviving manufacturing, creating jobs, halting the expansion of expensive nuclear power and cutting carbon emissions".

The EIA’s projections, which assume a rapid increase in shale gas production over the next 25 years, indicate that emissions of carbon dioxide from electricity generation in the United States would be 112 million tonnes, or 4.9 per cent, higher in 2035 compared with 2010, while energy-related emissions| would be 172 million tonnes, or 3.1 per cent, greater. Such figures are hardly compatible with emissions reductions of 80 per cent by 2050 that would be required if the United States is to play its part in helping the world to have a reasonable chance of avoiding global warming of more than 2°C.

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Photograph of Bob Ward, Policy Communications Director