After watching the economic success of hydraulic fracturing in shale fields throughout the United States, many energy executives wanted to translate that success to other parts of the world.
But none more so than Lord Browne, the former chief executive for BP, who, in 2007, left the post and founded a small company called Cuadrilla Resources.
The sole reason he did it?
To bring hydraulic fracturing and horizontal drilling to the United Kingdom.
When Cuadrilla was granted permits for exploratory wells outside of Lancashire in England, all looked well, as the company was sitting in a modest corner of the behemoth Bowland shale formation.
The Bowland holds approximately 1,300 trillion cubic feet of gas in reserve and about 10 billion barrels of oil.
As Cuadrilla saw positive results from its first well, it started construction on the second. But locals claimed the drilling had caused tremors.
After a brief review, the operation was shut down by the government, and a moratorium was placed on fracking in the United Kingdom.
While the shale resources beneath the UK stayed untouched, drillers in the U.S. cranked out vast amounts of oil and natural gas, resurrecting manufacturing and job growth in North America and disrupting the balance of power in the world oil market.
Although the United Kingdom missed out on this first round of fracking success, things are changing…
The Moratorium Tug-of-War
Although the government in the UK banned fracking for quite some time, it wouldn’t be too long before the oil and gas industry helped make the case for resumed drilling.
Eventually, the moratorium would be ended with the appointment of a new Energy Minister in the Prime Minister’s cabinet. It also became excruciatingly clear that the UK’s conventional resources were in serious decline.
After many years of North Sea oil exports and a strong refining industry, the country became a net importer of all fossil fuels in 2013, a phenomenon not seen since the early 1980s.
The North Sea is a dying formation, and the United Kingdom’s natural gas reserves are dwindling as well, so it was only a matter of time before Parliament allowed drillers to explore shale fields in the United Kingdom again.
But now that drillers are looking to exploit new reserves with the same technology that has made energy a powerhouse in the U.S., many members of Parliament are working to ban drilling for good.
Today, the government is going to attempt to push a bill through the chamber to help reduce burdens on the oil, gas, and chemical industries in the United Kingdom. However, a bipartisan coalition has entered the fray and is attempting to shut down the bill and replace it with a new moratorium on fracking.
While industry executives see the economic opportunities to be had in drilling, as well as the possibilities for compromise on issues such a mineral rights, methane leaking, and safe logistics, the anti-fracking members of Parliament only see the potential for boosting carbon pollution and angering a voter base that doesn’t approve of the controversial drilling method.
Of course, as with most arguments, each side has a reasonable claim. But who’s going to have their way remains to be seen…
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Our Take
“This is profoundly undemocratic and parliament should protect the rights of citizens by throwing out these changes when they are debated later today,” said John Walley, chairman of the Environmental Audit committee.
After studying the possible impacts of hydraulic fracturing in the United Kingdom, the committee found that drilling for shale gas and oil would ruin all proposed and enacted limits on carbon pollution, while also hurting local wildlife and possibly contaminating groundwater.
And while this may be true of the UK, what’s the difference if you import your energy or produce it yourself?
Somewhere, carbon pollution will come as a consequence of the drilling activities done to supply energy.
But if the United Kingdom were to pass its own rules and regulations to prop up safe and efficient drilling for natural gas, couldn’t it be done more responsibly than, for instance, in Russia or Azerbaijan?
Plus, if the UK wishes to phase out dirtier fuels with cleaner energies, it would behoove the government to support the least carbon-intensive fossil fuels while the transition happens.
And the least carbon-intensive fossil fuel is natural gas, found in abundance in the Bowland shale.
Truly, this looks solvable. The two sides could come to terms and allow drilling with stringent regulations and oversight, while proposals could be added that require increased renewable energy as a part of the country’s grid.
In spite of this, it seems political tricks form both sides will help maintain the status quo of no growth and increased reliance on tenuous sources for fuel that ultimately harm the country’s carbon pollution goals anyway.
In the meantime, the United States will continue to lower its reliance on outside sources for oil and gas, and it will be able to control its own destiny in how it manages carbon pollution through a new wave of innovative solutions.
Good Investing,
Alex Martinelli
With an eye squarely focused on the long-term, Alex Martinelli takes the art of income investing to a higher level within the energy sector. His research has helped hundreds of thousands of individual investors identify well established companies that have a long history of paying out dividends to their shareholders. For more info on Alex, check out his editor’s page.
