Early action on shale crucial to creating Northern Powerhouse – says Peel Group

UK, Angel of The North
Source: DollarPhotoClub

If shale gas is to have a role in the northern economy, action needs to be taken early to create a supply chain and hub for the emerging industry, according to Myles Kitcher, Peel Gas & Oil Managing Director. Speaking at the Shale World UK conference in Birmingham last Wednesday, Mr Kirtcher explained that even though creating the supply chain in the north of the UK, when there’s no shale industry there yet, might seem counter-intuitive, a recent report commissioned by Peel shows that a hub activity of concentrated input into the Bowland shale area will result in 13,000 new jobs. If no action is taken, the economists predict only 5,000 jobs.

The report, Shale Gas – Creating a Supply Hub for the Bowland Shale, is published by AMION Consulting and commissioned by Peel Gas & Oil.

The figures are based on the development of 100 well pad sites in the Bowland Shale, covering the Midlands and North of England. It is estimated that developing the sector will generate a spend of around £30 billion up to 2048. The development of a co-located supply chain could see the Bowland Shale area retain twice the amount of this expenditure in the region than without a supply hub.

The report also identifies that the Bowland Shale, and in particular the Ocean Gateway area stretching from the port of Liverpool to Manchester, could become a UK and international ‘centre of excellence’.

“It is a fact that if you create that hub activity the level of expenditure you retain is almost twice the level you get if you don’t create that hub,” said Mr Kitcher.

Mr Kitcher acknowledged that creating the business hub will be a challenge as there’s no industry to support the supply chain at this moment, so it’s very difficult to encourage businesses to relocate. But this drawback comes with a silver lining – the fact that the UK is in early stage development cycle, with only four exploratory shale wells drilled since 2012, also presents it with an opportunity; giving the business community time “to get this right and make it work properly”.

“We need to be prepared for when the industry does want to come to the UK. We heard again earlier, about the opportunity we missed with onshore wind. We have a big onshore wind industry and we import our turbines from overseas, we shouldn’t let this happen with gas,” he warned.

Mr Kitcher argued that the Northern Powerhouse, which almost entirely coincides with the Bowland shale, has many features which make it particularly suitable for an energy hub. These include:

  • the proximity of the Port of Liverpool which is the gateway to the Bowland shale. Early stage investment would be bringing imported steel etc., from overseas,
  • the Manchester Ship Canal which connects the Liverpool-Manchester area, allowing heavy road traffic to be replaced with a barge service on the ship canal for moving heavy goods,
  • the proximity of two international airports,
  • the presence of two key educational and skills developments – Thornton Science Park and Blackpool College,
  • Ince Park which is an energy lead development, 200 acres of development focused on energy and on low-carbon energy,
  • the presence of upstream companies like iGas, INEOS, and Cuadrilla, who all have licences within the Bowland shale.

The area is already primed for investment but in order to make it work, there are several steps that need to be taken. These include: attracting tier 1 suppliers to the UK at an early stage. Trying to create an environment that encourages some early stage investments and providing the opportunity to properly invest in a larger scale when the time is right. Engaging with SMEs, and ensuring a timely delivery of key infrastructure projects like connectivity of the gas to private pipeline solutions hooked into the national transmission system.

“All that needs thinking about because if we don’t it’ll just be a piecemeal industry,” Mr Kitcher said.

It is important, he said, that we talk within the industry about what the requirements are, so that we plan the supply chain accordingly, as well as ensure that there is a private and public sector collaboration at an early stage.  It is, therefore, vital that the two sectors engage with each other and we have a sensible conversation about what we need to do to deliver. What is  also needed is a national college of onshore oil and gas, to get people trained ready to feed the industry.

“That’s going to need political and economic support, public and private sector co-ordination,” he said, adding: “It’s difficult to get investors to invest in an industry that doesn’t exist. But it’s possible and if we can prove concept as far as production is concerned at an early stage, we believe the supply chain should follow, and can follow, very quickly thereafter.”

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