One thing we have learnt this week – fracking

DSC_1715Fracking has been in the news again this week.  An anti-fracking camp has been set up near Blackpool, Ineos have announced they have bought all the fracking rights in Central Scotland and protesters glued themselves to DEFRA’s entrance in London amongst other things. Ineos a somewhat controversial company want the gas to run their oil refinery at Grangemouth.  Last year they got UK and Scottish government money (mostly UK money) to keep their refinery open.  The money is to be used to build an import terminal for cheap foreign gas.  The fracking is a means of hedging their bets.

Its not easy to find the wholesale price of gas in the UK but one of the small providers does put it up.   Natural gas prices projected one year in the future have fallen a lot since January being high and remarkably stable up until then.  Ineos are right to be worried though, the price falls over the summer and we had a mild winter.  Russia has cut gas supplies off to the Ukraine, this has little impact yet because of low summer demand and Ukraine’s declining indigenous production, but expect trouble this winter*.  With reserves being possibly at a peak even with shale gas, prices can only move up.  Where I think Ineos are wrong is to put their faith in fracking.  Its highly likely that trying to start fracking in the most crowded part of Scotland will not go down well and lead to mass protest.  The process will not be as easy as they think and as we outlined in our book the fact that wells deplete very fast only puts back the day a little when you have to manage without gas.

Neil

* much of the remaining production is both Crimea and Western Ukraine.

This entry was posted in energy costs, Fracking, gas. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>