Shale Production Costs in UK Double Than in US, Says Report

Production costs for shale gas in the UK could be up to twice the costs in the US, says a report by Bloomberg New Energy Finance, adding that indigenous production could not bring the prices down, but would have the positive impact of counterbalancing the UK Continental Shelf production declines. 

“The US shale boom has widened the gap between energy costs in that country and those in Europe, giving the US a competitive advantage in attracting industry. Unfortunately, the UK is unlikely to benefit in the same way,” commented Mike Lawn, head of gas and power for Bloomberg New Energy Finance (BNEF). 

According to the evidence submitted by BNEF to the House of Lords Economic Affairs Committee, the costs of shale gas extraction in Lancashire are ‘likely to be between $7.10 and $12.20 per MMBtu, compared to figures of $5-6 per MMBtu for large US fields such as Marcellus and Barnett in the US.’ 

The effects of shale gas exploration on gas and electricity bills are expected to be limited. Prices are estimated to remain on European levels rather than approach US benchmarks. The UK will also remain dependant on imports. 

“Our conclusion is that even under the most favourable case for shale gas production, with production reaching 4.5 bn cubic feet per day in the mid-2020s, and low demand driven by a power sector emissions target of 50gCO2/kWh, the UK will not be self-sufficient in gas,” said Lawn in a note released on Wednesday.