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Brexit uncertainty strengthens the case for UK shale

Gas flames
Britain's domestic gas will have higher priority amid the Brexit

The pending exit from the European Union strengthens the argument for the development of Britain’s currently untapped shale gas resources.

Britain’s energy security should be a concern whether it remains in the EU or not, though the vote to leave makes this an increasingly acute issue.

Quite simply Britain doesn’t produce enough gas of its own.

Currently around half of Britain’s gas demand is met by foreign supplies - most of which is piped into the country via Europe.

Immediately that gas became more costly with the Brexit verdict, as a result of the pound plummeting, because it is a dollar denominated commodity.

Britain depends upon foreign gas

In the past two year gas imports as a percentage of demand amounted to 48% and 44% respectively, and, according to forecasts from the UK Oil & Gas Authority imports will hit 50% this year. Ten years ago the figure was just 12%.

Moreover, as gas operations in the UK North Sea continue to mature and decline it is expected that the country will become increasingly reliant on imports.

Current government forecasts indicate that ten years from now gas imports will account for almost 70% of demand and by 2035 that is predicted to rise further to 80%.

Brexit uncertainties underscore importance of domestic resources

Even a cursory analysis shows significant longer term implications for energy markets as a result of the pending Brexit.

What about the country’s need for new power generation? 

Will Électricité de France – the power company owned by the French state more readily recognisable when anglicised as EDF Energy – back the already stalling £18bn development of a new nuclear power station at Hinkley Point?

The new plant is supposed to deliver 7% of the UK’s power, and it is already delayed. One senior academic, from University College London, this week described the chances of the nuclear project going forward now as “extremely unlikely” following the referendum result.

And then there’s Scotland’s latest calls for independence.

Seemingly, there’s a scenario whereby a substantial portion the UK’s current reserves could remain in EU territory, owned by an independent Scotland.

What would that mean for gas consumers in England and Wales?

Even if Scotland sticks with the Union it has been warned that Brexit uncertainties threaten new investment into what can already be described as a creaking North Sea oil sector.

As it stands the downturn triggered by lower crude oil prices has reportedly cost the UK North Sea around 120,000 jobs.

And industry lobbyists Oil & Gas UK described it as a “critical juncture” for the offshore industry, as it called on Westminster to make the coming period of transition “as smooth as possible” for the North Sea.

Shale may prove strategically important for independent Britain

England does, in theory, have vast resources of gas locked in shale deposits which span large areas through the north-west, across the midlands and up into Yorkshire.

For whatever portion of the current United Kingdom emerges from this historic phase of political upheaval, these domestic resources will have added importance strategically.

The shale industry has been stymied in recent years as exploration and appraisal ventures failed to get off the ground amid awkward and protracted local planning issues.

A recent approval - secured by Third Energy for a fracking programme in North Yorkshire – reinvigorated sentiments, but more tangible progress is now needed.

If programmes can get approved, and the engineers can prove and unearth the apparently huge gas resources locked in English shale there could be ample domestic supplies for decades to come – and let’s face it that would be one less thing to worry about.


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