Shale gas is only in the very early stages of development, so we don’t yet know what the full economic picture will be. It is therefore much too early to say anything detailed about how different communities in different parts of country will be affected or helped.
What we do know is that gas heats over 80% of our businesses and homes, provides 30% of our electricity and is a major feedstock to industry producing everyday items such as toothpaste, fertilisers and lipstick. By 2030 most of our gas will come from outside the UK and we will need to think hard about what the implications of that will be.
Jobs and industry
We can, however, estimate how many jobs shale gas development could create and what industries will benefit the most. Getting ready for UK shale gas, a report by Ernst & Young (EY), said shale gas could have a positive impact on a wide range of industries. It estimated that 64,500 jobs will be needed by the industry at peak, from energy engineers to manufacturers and office support.
Beyond operations to extract shale gas, it is also interesting to note that it could have a positive impact on other industries that use gas. For example, substantial shale gas production in the UK could help retain and develop energy intensive industries and provide feedstock to petrochemical plants. In fact, the House of Lords Economic Affairs Committee’s report on the economic impact of shale gas states that “If there is no prospect that the UK’s shale gas resource will be developed within a reasonable timescale, energy intensive industry is likely to move elsewhere.”1
The House of Commons Energy and Climate Change Committee has also noted that “in the US, the shale gas revolution has had a transformative impact on the manufacturing sector especially the energy intensive industries and in particular the chemicals industries.”2
Beyond industry and employment, you may also be interested to note that there will be direct benefits to communities where shale gas exploration and development takes place. The industry has committed to paying £100,000 to the local community living near to each exploratory well site where hydraulic fracturing takes place, together with a £20,000 community benefit payment per unique horizontal well over 200 metres in length and below 300 metres in depth. This will be paid by the operator, regardless of whether or not recoverable deposits are found. In addition, the industry has committed to paying communities 1% of the value of the shale gas that is produced – for a site of 40 horizontal wells, this could be worth £5-10 million in total. Finally, operators will pay business rates on their sites – 100% of which will go straight to the local authorities in the area.
There are also broad economic and environmental benefits that could help all UK communities.
Many people believe the primary benefit of shale gas development for the UK is having a more dependable source of energy that doesn’t require the UK to import as much of its energy from abroad. In addition, John Williams, Senior Principal at Pöyry, a global consulting and engineering firm, told us that “shale gas produced here in Great Britain could have other significant economic benefits in terms of job creation, tax revenue and improving the balance of trade.”
Pöyry carried out a study to see the effects that the production of natural gas from shale could have on energy prices in Europe, including the UK. They modelled three scenarios based on the amount of shale gas that might be produced in the UK and Europe. These scenarios were based on ‘no shale’, ‘some shale’, and ‘shale boom’. The model projected that wholesale prices could be lower by 6% in the ‘some shale’ scenario and 14% in the ‘shale boom’ scenario3. However, they added that “most people now agree that Great Britain would not experience a price reduction similar to that which has been seen in the US over the past few years.”
Finally, the Department of Energy and Climate Change says that UK shale gas would have a lower carbon footprint than the imported liquefied natural gas it would replace. It also says that gas is the cleanest fossil fuel and has half the carbon footprint of coal when used to generate electricity.4 In addition, using coal to produce energy produces significantly more harmful particulates in the air than burning gas does, so there are also benefits to the quality of the air over other sources of energy.5