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What are the potential impacts of shale gas?

Tension exists between improved energy security and other potential benefits of UK shale gas development, and the environmental risks and possible adverse impacts of shale gas on achievement of a low carbon economy. At this early stage of development, it is difficult to predict the extent to which these impacts will affect the UK.

Greenhouse gas emissions

When natural gas is burned, the amount of carbon dioxide (CO2) emitted per unit of energy released is lower than any other fossil fuel (see table). Therefore, when used as a substitute for coal or oil for heat and power generation, it contributes to a reduction in CO2 emissions, assuming the life cycle emissions are lower for natural gas than for oil or coal. Source: Potential Greenhouse Gas Emissions Associated with Shale Gas Extraction and Use, MacKay and Stone, September 2013

Between 2008 and 2013, the CO2 emissions from electricity generation in the US fell by 321 MtCO2 (a 13.5% reduction), partly due to this change in fuels. The so-called ‘shale gas boom’ took off in 2008 and drove down US natural gas prices. Subsequently, the share of electricity generation from gas-fired power plants increased at the expense of coal-fired power plants. Source: Monthly Energy Review, US EIA, July 2014

This price-driven fuel switching is unlikely to occur in the UK (see page 10). However, the UK’s 2008 Climate Change Act includes a commitment to reduce UK greenhouse gas emissions to at least 80% lower than 1990 levels by 2050. To meet these climate targets, policy-driven fuel switching is likely to occur in the UK, followed by a reduction in the use of fossil fuels or by widespread use of carbon capture and storage by the 2030s. Natural gas may thus be used in the transition to lower-carbon electricity generation or for heating; however, the extent to which shale gas will impact on the UK’s climate targets is yet to be determined. Sources: The UK’s Global Gas Challenge, UKERC, November 2014; Meeting Carbon Budgets - 2014 Progress Report to Parliament, CCC, July 2014

Source: Digest of UK energy statistics (DUKES) 2013

Security of supply

Security of energy supply is an issue facing many countries. The UK situation is one example of how shale gas could help address security of supply challenges.

The UK is now facing a decline of domestic conventional gas reserves and a corresponding fall in production. Production of natural gas from the UK Continental Shelf (UKCS) has been decreasing by 9.2% on average per annum since 2000 (see chart below).

Since then, Liquified Natural Gas (LNG) and pipeline gas imports have been increasing and, by 2019, it is expected that they will account for 69% of UK gas supply. In 2012, about 65% of total gas consumed was imported.

Any indigenous energy source has the potential to enhance the UK’s self-sufficiency in energy, whilst also increasing the diversity of supply. Domestic UK shale gas production could potentially contribute to both of these aims.

This could also have implications for the economic aspects of supply security, such as minimising the import payments for fuel.

Source: DECC

Gas prices and potential effects on manufacturing

The graph below shows the evolution of natural gas and oil prices since 1998. Global prices have diverged since the late 1990s. This is due to a number of different factors. For example, the high Japanese LNG price is due to its reliance on imported gas. The low North American gas prices are closely related to low export capacity and high indigenous supply.

The UK and Europe have a high import/export capacity, making prices similar across Europe. This trading capacity limits the UK’s ability to price differently from the rest of Europe. For this reason, additional UK gas production is likely to only have a modest effect on these internationally-set gas prices. In addition, global demand for gas is expected to increase, which could further limit any reduction of the price of gas in the UK.

At this stage, not enough is known about UK shale gas resources to clearly define the impacts they would have across the economy. For example, the chemical composition of the natural gas can be important for petrochemical feedstocks and the industries that use them.

One example of a petrochemical with potential to be impacted by shale gas production is ethylene, a basic chemical used in thousands of everyday products such as plastic bags, milk cartons, insulating material, antifreeze, toys and car components. Ethylene can be derived from crude oil or natural gas through different chemical processes. Natural gas of the correct composition is a more efficient feedstock for ethylene production than other hydrocarbon feedstocks; therefore, increased supply could lower the cost of ethylene production. As yet, the composition of the UK’s shale gas is unknown, and therefore the potential impact on ethylene production and other areas of the manufacturing sector is uncertain.

Source: BP Statistical Review of World Energy, June 2014

Job creation

Job creation is likely to result from shale gas exploration and production stages in the UK. The number of potential jobs will vary depending on several factors, therefore figures are uncertain at this stage.

According to one DECC report, the number of full time equivalent positions created (including direct and indirect staff) would range from 1,100 to 4,200 during the first year, reaching a peak of between 2,600 and 32,000 after six or seven years. Other estimates put the peak figure above 64,000. This is projected to gradually decline over the following few years.

It is difficult to predict how many of these jobs would be sourced from local communities. The first hydraulically fractured shale gas well drilled in the UK, at Preese Hall in Lancashire, sourced approximately 15% of its workforce from its local community. However, this cannot be assumed to be consistent for all communities. Sources: Strategic Environmental Assessment for Further Onshore Oil and Gas Licensing, DECC; Getting ready for UK shale gas, EY for UKOOG, 2014

In the US, about 600,000 people were employed in the shale gas industry in 2010. This is expected to rise to 1.8 million by 2020. Source: The US Natural Gas Revolution: What it means for jobs and economic growth, IHS, 2014

Economic factors

The shale gas industry has the potential to generate substantial tax revenue for the UK. According to an independent study, shale gas development in the Bowland Basin could generate as much as £580 million in tax revenues per annum by 2020. Source: Potential Bowland shale gas development – economic and fiscal impacts, Deloitte, 2013

In the US, the shale gas contribution to the national Gross Domestic Product (GDP) was around $76 billion in 2010, and is projected to rise to $231 billion in 2035. The industry is expected to generate more than $930 billion in federal, state, and local tax and royalty revenues over the next 25 years. These revenues will be generated by natural gas producers, their employees, the supply chain, and other ancillary companies. Source: The Economic and Employment Contributions of Shale Gas in the United States, IHS, 2011, IHS, 2011

The UK government has proposed that local authorities should receive a large portion of business tax raised from shale gas projects. It is the government’s intention that operators will provide at least £100,000 of benefits per fractured well site during the exploration phase, and no less than 1% of overall revenues, to local authorities.

Induced seismicity

Small magnitude seismic events normally occur during hydraulic fracturing operations. With a few exceptions, they are too small to be felt, and none of them have been large enough to cause structural damage at the surface. Source: USGS 

Source: Energy Institute, 2014

The first UK hydraulic fracturing operation in Lancashire induced a number of small tremors (top local magnitude values of 1.5 and 2.3 - Source: BGS), but no surface damage was reported. Similar magnitude tremors occur during coal mining, oil and gas field depletion, filling of large water reservoirs, and deep geothermal energy projects. 

Further minor seismic events are expected in the UK during hydraulic fracturing operations. In order to accurately control this induced seismicity, the DECC plans to require operators to:

- conduct a prior review on seismic risk and submit a plan showing how this is to be addressed.

- monitor seismic activity before, during and after hydraulic fracturing.

- implement a ‘traffic light’ system to identify unusual seismic activity requiring the reassessment or halting of operations.


Site traffic

During the exploration and production stages the number of vehicle movements can be significant. This in part depends on the number of wells per well pad. Estimates are shown in the table:

Adapted from: Stategic Environmental Assessment for Further Onshore Oil and Gas Licensing, DECC

By way of comparison, a small UK supermarket receives approximately 3 - 6 deliveries per day, while a large supermarket may receive between 4 - 20 deliveries daily, depending on a range of factors. 

Pipeline network

The natural gas produced from shale needs to be transported from the well pad to a pipeline network. In the UK, existing network arrangements for gas entry to the National Transmission System and Distribution Network will apply.

If shale gas becomes a significant contributor to UK gas supplies, National Grid considers that this would need to be taken into account for future network investment. Source: The Economic Impact on UK Energy Policy of Shale Gas and Oil, House of Lords, October 2013

The vehicle movement numbers in the table include the number of water trucks needed to deliver water to the site. Instead of trucks, pipelines can also be used to transfer water to drill sites. This reduces the truck trips required, but could impact the cost.

Health and safety

The main hazard at every well site is the potential for uncontrolled release of hydrocarbon gas due to a failure of the well structure, which may then reach a source of ignition leading to a fire or explosion.

The level of risk varies, depending on how quickly and easily any release can be controlled, and on geological conditions. Where there is a loss of well integrity, there is also the possibility of fracturing fluids or produced water being released to the surrounding rock strata or to the surface, which may have health or environmental consequences depending on the location of water aquifers. A well-designed and constructed well will help to reduce the risks of a release of fluids or gas to as low as is reasonably practicable.

For shale gas operations, the UK Health and Safety Executive (HSE) regulates to ensure that wells are properly designed, constructed, operated, maintained, and ultimately abandoned to ensure that the flow of fluids in the well, including fracturing fluids and produced gas or water, are controlled and stay within the well.

Companies are also required by the HSE to employ an independent examiner (separate from the immediate line management of the well operator), to assess well design, construction, operation and maintenance. The well examination scheme and involvement of the well examiner continues for the complete lifecycle of the well, from design to final plugging and decommissioning.

Methane emissions

Methane is a much more potent greenhouse gas than CO2, but has a shorter lifetime in the atmosphere (a half-life of about seven years vs. more than 100 for CO2). International bodies calculate global warming potential (GWP) differently, but it is estimated that methane presents between 21 and 34 times more GWP than carbon dioxide. Source: IPCC

Potential methane emissions from exploration, production, transport and end use, have four main sources:

1. Intentional venting of gas for safety or economic reasons

Venting can occur during well completions, including post-hydraulic fracturing, flowback of fracturing fluids, and as part of equipment maintenance operations. However, this will not be permitted in the UK where all operators will be required to flare or capture any vented gas.

2. Fugitive emissions

This type of emission may occur as leaks in pipelines, valves, or seals, either accidentally (e.g. from corrosion or physical damage), or from equipment design (e.g. rotating seals).

Clear guidelines exist in the UK to control and minimise these emissions.

3. Incidents involving rupture of confining equipment

This equipment might include pipelines, gas processing plants, compressors, pressurised tanks, or well isolation equipment.

4. Incomplete burning

The effectiveness of burning gas in flares varies according to wind and other conditions, and is typically no better than 98% (a similar effect can be seen when starting a gas stove: it can take a few seconds before a steady flame is established). 

In the UK, flaring and combustion systems must be approved by the appropriate regulatory body.

The majority of potential methane emissions could theoretically be controlled by implementing improved industry-wide methane-capture technology. This includes safety procedures, applications and equipment (e.g. reduced emissions completions or ‘green completions’). These technologies are currently being installed by operators in the US. 

Conventional production methods also have to manage these potential emission risks. Processing, compression and transportation challenges are common to conventional and unconventional gas. 

Good practices for environmental management backed up by strong regulation and high quality data are necessary to understand background levels, set baselines for, and mitigate potential methane emissions.

Water management

When evaluating the potential impacts of shale gas development on water resources, the main aspects to consider are water resource requirements, water quality, and wastewater management. 

In the UK, the estimate of water needed over the lifetime of each well will vary depending on shale formation depth, geology and other parameters. This will range from 1.6 to 6 million gallons (7,250m3 to 27,000m3) (BGS estimates). As a reference, an Olympic swimming pool has a capacity of around 0.55 million gallons (2,500m3) of water.

To put this into perspective, for shale gas to meet 10% of the UK gas demand for the next 20 years (assuming a total gas demand of 3.20 tcf or 90 billion m3 per year), then 264 to 352 million gallons (1.2 to 1.6 million m3) of water would be required every year. Although this may sound like a large amount, it equates to less than 1/10th of 1% of total licensed water abstraction per year in England and Wales, which is about 2,770,000 million gallons (12,600 million m3). Potential water use is therefore low in national terms, but there could be local or regional consequences should a large industry develop which will have to compete against different users. Source: Shale Gas and Water, CIWEM

The risks related to water quality, particularly groundwater, arise from three main sources:

- surface spillages of chemicals, diesel, flowback fluids, and other materials at a drilling site.

- poor well design and construction with subsequent failure and subsurface release of contaminants.

- propagation of fractures during hydraulic fracturing. Note that the risk of fractures reaching overlying fresh water aquifers is extremely unlikely (Source: DEI Briefing Note No. 902, Durham Energy Institute). Maps showing the relative proximity of shale layers and aquifers are available from the BGS.

Flowback fluids may contain substances which are harmful to the environment if not properly managed. These substances may include natural gas and other hydrocarbons, minerals, salts, small traces of naturally occurring radioactive material (NORM) or heavy metals (if present in the shale formation).

These fluids must be monitored, handled, and treated properly to avoid surface pollution and to reduce methane emissions. In the UK, operators are required to store these fluids in surface tanks before re-using or transferring them to a treatment plant. Treated water can subsequently be used elsewhere.

The water cycle during the whole process is described as follows:

Adapted from: Unconventional gas and hydraulic fracturing: Issue briefing, BP

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