Shale gas development has potential for £33bn investment in UK economy – Ernst & Young

Shale gas

Shale gas development in Britain has the potential to provide investment opportunities of GBP 33bn, London -based professional services firm Ernst & Young (EY) reported on Thursday.

UKOOG, the representative body for the UK onshore oil and gas industry including exploration, production and storage, commissioned a report that was prepared by Chris Lewis, Partner Advisory Services at EY, which showed that shale gas development could also create more than 64,000 new jobs in the UK.

EY said the report was commissioned to answer three important questions: what will it take to build a shale gas pad in the UK in terms of supply chain and skills; what are the capabilities in the UK to do so; and what would be needed in order to fill the gaps and to stimulate the supply chain and skills the UK already has.

The study is titled ‘Getting ready for UK shale Gas’. It predicts that the industry will need to spend approximately GBP33bn in supply chain activities in order to drill up to 4000 horizontal wells over 18 years. The report also forecasts that new job will be created by this supply chain directly linked to shale gas exploration sites, indirectly in the supply chain or supporting services as a result of this new investment activity.

However, the author of the report said industry and Government need to take action to lay foundations in the UK for the necessary infrastructure, supply chain standards and skills requirements.

UK shale gas industry potentially includes investment of GBP17bn in specialised equipment and skills for hydraulic fracturing, such as pumps, trucks and blenders, which are currently supplied to the industry by some UK third parties. According to the report, this sector provides an opportunity for UK-based oilfield service and manufacturing companies to get involved.

The study predicts that there will be a requirement for investment of GBP4.1bn in waste, storage and transportation, with further investment needed as the industry grows. The UK steel industry is expected to need investment of around GBP2.3bn, with the need for approximately 12,600km of steel casing of specific diameter and quality. There is also potential for a new GBP1.6bn rig manufacturing industry, which the study revealed will be needed to supply up to 50 landward rigs at peak drilling activity and several workover rigs.

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Existing UK businesses that provide cement, sand, drilling fluids and transportation will also be provided with investment opportunities in shale gas development.

EY’s report also recommends that industry groups, developers and government should to work together to prevent constraints in shale gas supply chain and skills.

Chief executive of UKOOG, Ken Cronin, commented: “We are building an industry in this country which will not only potentially give the UK energy security and make a big contribution in tax revenues but will also bring immense benefits to other industries and create sustainable, well-paid jobs.”

Cronin added: “The industry and the Government will need to work together in order that the recommendations of this report are fulfilled. If the UK takes advantage of this opportunity many of its companies will be in a favourable position as other countries in Europe develop their own shale gas industry. It is early days and we have a lot of work to do in terms of working with the communities involved, understanding geology, flow rates and the cost base. Keeping the economic benefits in the UK of the supply chain is not a given, but the potential level of benefits as highlighted in this report should make it an economic imperative that we should.”

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