The great trick with shale is to proceed logically. If there is as much UK potential as Cuadrilla and IGAS believe (and they really, really do: they wet themselves every time they think about it which is a dead giveaway), let them play 'put yer money where yer mouth is'. Ever-thrusting INEOS* has just made a sensible move; offering 6% of revenues to landowners and locals: a kind of voluntary royalty that starts to create the same kind of favourable dynamic you get in the USA where real royalties are payable. 'Bribes and bulldozers' ? Sounds good to me. Trying to develop trillions of cubic feet of onshore gas on the cheap, in a densely populated area, is just, well, silly.
Sniffing the air - it's diesel fumes from drilling rigs, BTW - I'd say the path is fairly clear for the UK shale explorers now. The man in the street (falsely believing we get our gas from Russia, it seems) is pretty much minded to let them go ahead. Swampy and his friends are looking forward to scrimmages in country lanes, which is their democratic right. The Old Bill is looking forward to plenty of overtime, and private security firms to deploying a lot of cheap-labour patrols and barbed wire. Local authorities are looking forward to some extra revenues: and land-owners will get a bit of the action, too. Water companies will sell a lot of water, and put a bunch of land to more productive use. University departments from geology to chemical engineering are angling for lucrative projects. A raft of service industries will make hay selling shovels to the gold prospectors. The PR industry will be conducting community outreach projects on a scale beyond their wildest dreams. And not a subsidy in sight !
Funnily enough, in the end it is probably 50:50 at best as to whether there's anything to be done by way of large-scale development in the UK because, quite objectively, the production costs will be high here and gas prices are seriously declining across the globe. In a race between developing, say, Algerian shale (they have astronomic potential in their Big Open Spaces) and UK shale, my money is on Algeria. And - of course - Russian pipeline gas is cheaper still! But hey, so long as it's not public money ...
A final word on 'bribes'. A lot of lefty-greenies hold up Norway as a paragon of how oil and gas development should be done: tax it big, and create a SWF. Well OK, with a population of 5 million that's probably right. But do they know how licences are awarded in Norway ? The bidders put their money on the table at the Ministry of Petroleum, on top of which they offer creative ideas like we will also sponsor this little fishing village (which, needless to say, is otherwise completely unviable). "Bribery" ? Well, if you must.
ND
* I've always liked INEOS (and BTW have no
shareholding or other interests in it). Emerging as did several
companies from the bloated, decaying corpse of once-glorious ICI, it
represents the 'creative destruction' that is capitalism. In their
final years the management of ICI were a disgrace. They held the
stewardship of unique and fabulous assets from Chesire to Teesside;
became fat and lazy; and as their indolence and lack of imagination led
inevitably to decline, they concentrated on seeking special treatment
from government, threatening job losses if they didn't get their way.
Darwinian dynamics brought the story to its conclusion.
6 comments:
Completely agree. Except Jim Ratcliffe of INEOS, have met him - sadly a typical greedy so and so. Sharp as a knife though!
Ineos may well pay "6% of revenues to landowners and locals" to sweeten extraction, but wait until they also have to buy off the local council as builders have to do. Shale here will not be as successful as in the USA - the corruption (= socialism, same thing) here is just too high.
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