From Stratfor
Hydraulic fracturing has long been a controversial subject in the United Kingdom, but could be the key to countering falling natural gas output elsewhere in Europe. On Oct. 6, the British government approved plans to begin horizontal hydraulic fracturing at Preston New Road, a site in Lancashire belonging to British energy firm Cuadrilla Resources. The government has not made a decision on similar proposals for Cuadrilla’s Roseacre Wood project.
The ruling marks a coup for Cuadrilla, which for several years has been trying to obtain permission to develop British shale resources. The decision overturns a ban on hydraulic fracturing passed by the local government in June 2015. Nevertheless, the practice still presents risks for Cuadrilla and its peers in the energy business. Though the Conservative Party administration is fairly supportive of hydraulic fracturing, its Labour Party opponents are not. Should the latter lead the next government, the ban on hydraulic fracturing could easily be reinstated. This political uncertainty, coupled with protests over the environmental impact of hydraulic fracturing, has discouraged many companies from operating in British shale plays.
Many experts believe the United Kingdom’s shale potential to be quite high. But in recent years, low oil prices and political risk have reduced the economic feasibility of its development. Even if companies like Cuadrilla were to begin producing the natural gas found in the country’s shale basins by next year, output would not rise appreciably until the early 2020s. Given the upsets in government that could occur before then, particularly if the process of the United Kingdom leaving the European Union proves rocky, most firms are likely to conclude that the risks of beginning a long-term shale project far outweigh the potential gains.
Even so, within Europe, the United Kingdom is likely the furthest along in its shale development. Tapping into the Continent’s shale gas will be crucial in the long run to boosting flagging production in the North Sea and maturing natural gas basins. But environmental groups, particularly in Continental Europe, have put up enough of a fight to ensure that bans on hydraulic fracturing remain in place in many countries. Until those bans are lifted and shale production notably increases, Russian natural gas will continue to be vital to European consumers — and by extension, to Moscow, which has long tried to use its energy supplies as a means to its political ends.
