There is debate over how shale gas could affect UK prices, as we are connected to the European market.
Pöyry (the global consulting and engineering firm specialising in the energy sector), 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’ scenario1. 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.” John Williams, Senior Principal at Pöyry, told us that shale gas produced from fracking may lead to lower wholesale gas prices in the future, as the Poyry report found. However, he also made clear that any price reduction will not be significant as the country will still be dependent on some imported gas to meet its demand.
John Williams 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. However, 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.”
In a report produced for the Government, Navigant, a consultancy, said that gas prices could go down if there is a "significant expansion" of shale gas in Europe over the next couple of decades2.
The introduction of shale into the system will improve the liquidity of the gas market in Europe and will act as another source of energy other than the North Sea (UK, Norway, Denmark, Netherlands), LNG and gas from Russia via Continental Europe. As a result of this increased liquidity the price rises, forecast by many commentators, could be arrested and this could lead to potentially lower prices in the future.