Dispelling Shale Myths – Guest Interview

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ESGOS Interviewing Ken Cronin, Chief Executive of UKOOG

With UK offshore gas supplies declining and the UK becoming increasingly reliant upon gas imports, the establishment of a successful onshore oil and gas industry is now of growing importance. Generating a sustainable UK shale industry could be the answer to such problems, providing not only energy security, but also boosting the UK economy through job creation and investment. In light of the impending 14th onshore licensing round ESGOS sat down with Ken Cronin, Chief Executive of UKOOG, to discuss the next steps for the UK shale industry.

ESGOS: The shale industry has long fallen victim to a host of misconceptions, with community concerns over safety continually serving as a stumbling block to the development of the sector. What steps do you feel need to be taken to ease community concerns about shale?

Ken Cronin (Chief Executive, UKOOG): There have been a lot of unfounded myths put out there. The truth is that over 80% of our homes and industries are heated using gas, over 500,000 people are employed by the chemicals industry which uses gas as a raw material as the building block for products that are as varied as cosmetics, computers and medical equipment. By 2020 80% of that gas will come from outside the UK paying no tax and creating few jobs. We have a very good regulatory system and the industry has been reviewed by a number of independent bodies and all found the risks in a properly regulated are low. These are the messages we need to continue to communicate with local communities. That and the fact our industry has been operating safely for over 100 years. People are amazed when I say we have 250 operating wells in this country producing enough oil to power over a million family cars a year.

ESGOS: Progress within the UK shale industry to date has to a large extent remained stagnant. However with the results of the 14th onshore licensing round imminent, forecasters are predicting a kick-start to UK operations. How many wells do you expect to be drilled during 2015-2016?

KC: We have drilled 34 wells in the last two years albeit mainly conventional wells. 2014 was actually a better year than the previous 3. The number of future shale wells depends on a number of variables but I think we need to be thinking about 5 to 6 sites having activity by the end of 2016.

ESGOS: Ensuring the positive impact of the 14th onshore licensing round also depends upon overcoming a number of other industry hurdles, particularly with regard to the planning process. What steps do you feel need to be taken to ensure that the 14th onshore licencing round is as productive as possible?

KC: I think we need to see this as a nationally important resource as we did with the North Sea in the 70s. Planning and permitting needs to be made as efficient as possible and the overlaps between the two systems need to be eradicated. We also need to educate people why gas is so important not only to our energy security but also our economy.

ESGOS: Emphasis now is also moving toward increasing private investment in the UK shale industry. Do you expect to see an increase in private investment to help fund shale operations?

KC: We have already seen a lot of new investment in the last 18 months with new players such as Centrica, Total, GDF and Ineos coming in. As progress to proving the resources happens I expect to see more investment.

ESGOS: Kick-starting the UK shale industry also holds the potential to substantially boost the UK economy. With potential for job creation, increasing the level of skilled workers and growing UK trade and investment the shale industry could play a key role in redefining the UK economy. Do you feel the development of a successful shale gas industry will boost the UK economy?

KC: Absolutely – we commissioned a study by EY last year that showed £33bn would need to be spent on the supply chain to create the first 100 sites and alongside that 64,000 jobs would be created.

ESGOS: Successfully establishing a shale industry within the UK also has the potential to benefit a number of other sectors within the UK. What other industries do you feel can benefit economically from the development of a UK shale industry?

KC: I think the chemical industry will benefit significantly from a secure source of feedstock without the recourse of having to buy imported gas. The UK supply chain and in particular SMEs will also benefit from supply chain activities from sand production through to waste treatment facilities.

ESGOS: With the UK shale industry witnessing an increasing trend toward growth and progress, what are UKOOG’s plans over the course of the next 12 months?

KC: To continue to promote the industry with a strong focus on helping the industry move to exploratory drilling to allow us to ascertain the true extent of the gas under our feet.

Ken Cronin will be discussing the development of the UK shale industry and its role in the UK economy further at the European Shale Gas & Oil Summit taking place on the 15th-16th October 2015.

For further details visit the summit website www.esgos.eu