Britain Drills Its First Shale Well Since 2011

Six years ago, exploratory drilling in Lancashire, England was blamed for two small earthquakes, and the British government put a quick stop to shale operations. It’s been a long road back, but Cuadrilla began drilling the vertical component of what will eventually be a shale well near that fateful Lancashire site.

The stakes are high for Britain. The country’s most important source of domestic oil and gas, the North Sea, is maturing as a resource—companies are having to slash costs to stay competitive in today’s low-price environment, and are all the while coping with decreasing yields as fields pass their prime. The British hydrocarbon industry is bracing for decommissioning costs of offshore rigs in the North Sea that are expected to rise to £17 billion over the next decade, while 10 Downing will be more concerned with a drop in domestic energy production, and the broader concerns that come along with an increased reliance on imports. In that context, shale would seem to be a bright spot in the British energy landscape.

It’s true that there’s plenty of shale gas to be had, too: according to the British Geological Survey, the UK is home to some 1,300 trillion cubic feet of natural gas trapped in shale rock (for reference, Britain consumes roughly 3 trillion cf). And, over the past decade, the United States has demonstrated just how transformative a resource shale can be. Cuadrilla is hoping to start production on part of that resource by the end of the year, and two other companies—iGas and Third Energy—plan to join it. Right now, that trio is playing the part of trailblazer for a shale industry that is, at the moment, bereft of momentum. They’ll also be running up against some tall hurdles, many of which aren’t found here in the United States.

Public opinion may be the biggest challenge for fracking’s future in the UK. As of last October, just 37 percent of Brits aware of what shale gas was said they supported fracking, compared to 41 percent who were against the controversial drilling process. Much of that opposition stems from a peculiarity of British property rights: unlike the U.S., the UK doesn’t afford mineral rights to landowners. Because British property owners don’t also own the oil (or in this case natural gas) that may lie beneath their land, they lack the financial incentive to accede to the extraordinary disruption that accompanies commercial hydrocarbon production.

One year ago, Theresa May created the Shale Wealth Fund as a way to address this compensation problem. It taxes fracking firms and pools that money (targeted to be somewhere in the region of £1 billion), to be used by those affected by shale operations either in the form of direct payments or local infrastructure improvements. That’s better than nothing, but it’s still a far cry from the direct negotiations shale firms in the United States are able to make with property owners in order to access the oil and gas they’re after. Combine that with the higher population density of the UK, and you’ve got yourself a serious NIMBY problem.

But even if the public were to cooperate fully with the fledgling UK shale industry, there’s no guarantee that the geology will. By stroke of luck, the layers of rock comprising America’s major shale formations are relatively ordered, stacked neatly atop one another like layers of a cake. In the UK, seismic activity has crunched those underground rock layers into a tangled mess that makes it difficult for companies to identify the locations of suitable, sizable shale reserves, and harder still to drill into those shale layers the horizontal wells that are required for fracking.

Britain’s shale struggles serve to highlight just how unique the U.S. energy renaissance has been. London knows it’s playing catch-up to Washington, and it will hope Cuadrilla’s new well will be the start of a smaller but still significant boom of its own. Still, it’s a long road ahead for UK frackers.

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