Brexit and UK shale industry. What will happen now?

Brexit
Source: StockPhotoSecrets

While most eyes in the UK are currently trained on 10 Downing Street awaiting the new Prime Minister Theresa May to take office, many within the oil and gas sector wonder what the post-Brexit world will mean to the industry.

The Conservatives are still in power and, one would hope, their commitment to the development of domestic shale gas industry in Britain still stands.

UK fracking and climate change

The past week brought the publication of a report by The Committee on Climate Change (CCC) which was simultaneously interpreted as a “cautious green light for fracking” (by BBC News) and as meaning that “fracking [is] not compatible with climate change targets” (by Yorkshire Post).

What the CCC said in fact was that shale exploration and production in the UK will be compatible with the government’s climate change commitments if three key tests are met. These are:

Test 1: Emissions must be tightly regulated and closely monitored during well development, production and decommissioning in order to ensure rapid action to address leaks.

Test 2: Unabated fossil fuel usage must be reduced over time within levels previously advised to be consistent with carbon budgets. This means shale gas production must displace imported gas rather than increasing domestic consumption.

Test 3: Additional production emissions from shale gas wells will need to be offset through reductions elsewhere in the UK economy.

According to Lord Deben, Chair of CCC, “If those conditions are met, then shale gas could make a useful contribution to UK energy supplies, including providing some energy security benefits.”

Professor Jim Skea – another member of the CCC – told BBC News that with best practice, UK shale gas may have a lower carbon footprint than much of the gas currently imported, which has to be compressed at great energy cost.

“The CCC accepts that the government plans are mostly on track but wants more detail. Our recommendation is to monitor what government does because we are making the assumption that we have a very well regulated industry and we need some details filled in on that,” he said, adding that he would like to get more detail on the rules governing the completion of wells and decommissioning of abandoned wells.

Permissions – how soon can we frack?

A lot has been made within the oil and gas sector of the permission North Yorkshire county council’s planning committee gave to the first in five years fracking operation in the UK. In May, Third Energy was given a green light to search for shale gas on a site just outside the village of Kirby Misperton, near Pickering. Now, Friends of the Earth (FoE) and members of a local residents group, Frack Free Ryedale, have applied to the high court for a judicial review of the decision.

FoE said it would argue that the decision was unlawful because the councillors did not properly consider the environmental impact of burning any gas extracted to create electricity. It said it would also argue that the council failed to secure long-term financial protection against environmental damage.

Meanwhile, energy firm Cuadrilla is appealing against Lancashire County Council’s refusal to let it extract shale gas at Little Plumpton and Roseacre Wood. The government is to make a final decision on whether to allow fracking at the two sites in Lancashire by 6 October.

Brexit – what will change?

So is it “business as usual” for shale companies – despite the Brexit upheaval?

Jon Mainwaring – the Editor-in-Chief of Rigzone believes that there are reasons to be optimistic. Doing away with EU-generated red tape might make the life easier for the British oil and gas industry as it will not have to comply with all the EU-invented regulations. Also, opting out of the freedom of movement agreement might paradoxically make it easier to source highly skilled staff from around the world.

“With the present EU free movement of labour system in place, it is far easier for a burger flipper from another EU country to enter the UK than it is for a highly-skilled oil and gas technician from a non-EU country,” he argues, adding: “if no longer being signed up to free movement of labour means fewer workers come to the UK from Europe overall, then obtaining a visa in order to do essential work should present few difficulties no matter where the worker comes from – as long as that worker possesses the requisite skills and experience.”

Lastly, Jon Mainwaring believes that “going at it alone” might make the UK more committed to energy independence rather than relying on gas imports. This would be great news for the industry if it means “incentivizing oil and gas explorers and producers to keep bringing hydrocarbons up from under the seabed or – as with the country’s burgeoning shale gas industry – from under the ground beneath our feet.” Let’s hope he’s right.

The full Jon Mainwaring’s blog post can be read here.

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