By Lynda Williamson and John Miller
Chancellor George Osborne, in his Autumn Statement, announced the establishment of a single dedicated office for the unconventional gas industry. It is hoped the office will ensure a “simplified and streamlined” regulation process.
Plans to introduce tax rebates to encourage excavation of unconventional gas were also announced.
By Lynda Williamson and John Miller
Chancellor George Osborne, in his Autumn Statement, announced the establishment of a single dedicated office for the unconventional gas industry. It is hoped the office will ensure a “simplified and streamlined” regulation process.
Plans to introduce tax rebates to encourage excavation of unconventional gas were also announced.
The Chancellor is keen for the UK to follow the example of the USA where the price of gas has dropped by some 87%. The British Geological Survey estimates that there is significantly more gas in the form of shale gas and coalbed methane in the ground than in the North Sea. Mr Osborne believes that the unconventional gas industry will secure the UK’s energy supplies into the future and slash energy prices.
Opponents point out that European countries have tougher environmental regulation than in the USA and this will push up the costs of production. The USA 2005 Energy Policy Act gave specific exemption, for fracking, from the underground injection control provisions in the Safe Drinking Water Act.
In common parlance this is called the ‘Halliburton Loophole’ as Dick Cheney was running Halliburton at the time that they lobbied for the exemption. Later as Vice President, he went on to include it in the energy plan that he produced for the Bush administration.
Exemptions to the Clean Air Act have also been granted. Environmentalists point out that there are more paid oil and gas industry lobbyists in the USA than there are members of congress.
Estimates produced by the Deutsche Bank put the cost of producing unconventional gas in Europe significantly higher than in the USA. Gas is currently produced at less than $5 per unit in the USA, they estimate a figure of $8 per unit in the UK and $11 per unit in Ireland.
Some sites in Scotland have already been earmarked for development of coal bed methane extraction with the one at Letham Moss in Airth having the potential to stretch from Stirling to Linlithgow and into Fife. The company involved, Dart Energy International, has applied for permission to sink 14 new wells in the area but it is thought that they have big ambitions for their Airth field. A raft of new licenses covering most of Central Region will be up for grabs in the new year.
Opponents of the development complain that of the 18 community councils in the area only the three adjacent councils have been consulted.
Dart Energy has hosted five consultation meetings but fears that the issue has slipped under the radar have been expressed after only 43 people turned up for these meetings. In a statement read out by Isabel Fraser on BBC Radio Scotland’s Good Morning programme on 8th December, Dart Energy countered that:
“The company’s existing and future plans are focussed on the development of our coal bed methane production in Scotland. We are in daily communication with representatives from local communities, individuals, resident’s associations and businesses in order to help people understand the plans.”
Despite assurances from Dart Energy, fears still exist over possible environmental risks associated with unconventional gas extraction.
Coalbed methane is extracted from coal seams. A variety of means of extraction are used but in most cases the coal seam needs to be ‘de-watered’ before gas extraction can take place. De-watering involves pumping out water which may have been present in the coal for hundreds of years. The action of pumping out this water is sometimes enough to start the gas flow, if not then fracking is required.
Shale is a hard rock formation found deep underground, it is brittle and non-permeable. Due to the nature of shale, extraction of gas trapped within it often involves the injection, under high pressure, of a mixture of water, sand and chemicals such as benzene and formaldehyde. Known as fracking, this is a long established technique but it has not, up until now, been used extensively on horizontal bores. The extraction of shale gas almost always involves fracking.
Dart Energy have assured locals that they do not plan to frack any of their wells and that their wells are constructed in such a way that they cannot be fracked. They also say that they use only natural biodegradable products in their drilling operations.
Newsnet Scotland understands that Dart do however have permission to frack at sites in Scotland and their Australian website notes that the area “also contains shale gas potential in the Black Metal and Lothian (Broxburn) shale ones. Exploration of these shale zones are in the early stage. “
Further afield the company has encountered strong resistance to its operation in Fullerton Cove in Australia and it is thought that the resulting negative publicity is partly to blame for the 72% drop in its share price over the last year.
The company has not posted a profit for two years and its planned listings on both the Singapore and UK stock exchanges have been postponed, raising questions about investor support.
If the listing goes ahead, it will in effect separate the Australian and International assets leaving Dart International to concentrate on commercialising their Scottish, Chinese and Indonesian interests. The Airth field will require substantial investment which the company expects to finance principally through a credit agreement which it holds with HSBC.
The Airth coalbed methane project is among the most prominent in Dart’s International portfolio and may prove crucial to driving shareholder investment.
