It passed without a peep of controversy but last month the government’s Infrastructure Act gained Royal Assent.
Not the sort of news to normally set hares racing or even hairs standing on end, but this particular bill, like many, has passed unnoticed but carries with it significant implications for the lives of Britons and the future UK energy market.
Indeed the Infrastructure Bill enshrined the rules for fracking in the UK.
The final bill provided:
- safeguards around onshore drilling,
- the removal of Labour’s earlier amendment to ban fracking in national parks,
- provision for local communities with the right to buy a stake in renewable energy infrastructure projects.
But it also gave shale explorers and authorities greater rights over accessing private property in search of shale.
Welcoming the assent, Transport secretary Patrick McLoughlin said:
“This Act will hugely boost Britain’s competitiveness in transport, energy provision, housing development and nationally significant infrastructure projects. Cost-efficient infrastructure development is all part of the government’s long-term economic plan, boosting competitiveness”.
But the roadmap it was intended to drive for fracking, and its inherent controversies including its environmental impact and threat to private property being strangled before they can begin by the continued faltering oil price.
With the Saudi led supply surplus tactics slowing down US shale activity it is also rendering uneconomic the prospect of UK based shale extraction. With the oil price having collapsed from $110 to $45 it had recovered to the low $60s, still some $20 dollars below the economic level of most fracking activities, however in recent days the price has again softened and seen falls. That’s bad news for investment in any new form of oil exploration and drilling, not least fracking.
Indeed BP believe fracking is as far off as ever with BP’s chief economist, Spencer Dale claiming:
“We don’t see any shale production of any great significance in Europe and the UK by 2035,”
That contrasts greatly with the US situation where BP predict that they will be self sufficient in oil by the 2030s. Yet Dale warned:
“After three years of high and deceptively steady oil prices, the fall of recent months is a stark reminder that the norm in energy markets is one of continuous change.
“It is important that we look through short-term volatility to identify those longer-term trends in supply and demand that are likely to shape the energy sector over the next 20 years and so help inform the strategic choices facing the industry and policy makers alike.
“Reports of Opec’s demise seem to be greatly exaggerated.”
Yet businesses are still taking a punt on the apparently stillborn UK fracking market with Ineos again taking the lead. Having acquired a 50% stake in iGas 7 licences with a view to drilling activities in North West England, Ineos are planning to exploit the shale opportunity, albeit that it is unlikely to happen before 2017 at the earliest.
That uncertainty remains the biggest threat to shale extraction and not the voluble environmental campaigners.
Whether the measures passed in the Infrastructure Act and the investments made to date to deliver a UK shale revolution become a reality remains to be seen.
What the latest events mean however means that the political and commercial will is behind fracking and all that is now awaited is an economic oil price level for the revolution to begin.
Two steps forward, one step back, and no-one is any where nearer to winning the argument – to frack or not to frack.