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Thursday, 1 August 2013

Issue 3. Shale gas exploitation will provide jobs and stimulate the economy

Yes on both counts. 

On the 19th of July 2014 the Chancellor George Osbourne said:

I want Britain to be a leader of the shale gas revolution – because it has the potential to create thousands of jobs and keep energy bills low for millions of people.

There is no doubt that shale gas will provide a boost for jobs. It has been pointed out that currently there are insufficient rigs and trained workers to exploit Europe’s shale gas resources. However, that will change in accordance with market pressure. Although the oil and gas industry is global, using expertise that travels around the world routinely, most of the new jobs will be sourced within the UK.

Estimates of the new job numbers are difficult to calculate. However, a detailed study by the Institute of Directors recently concluded (Infrastructure for Business: Getting shale gas working, 2014,
full report, summary report) that investment (capex and opex) could reach £3.7 billion a year, supporting 74,000 jobs. These jobs would include geologists, engineers, construction workers, business analysts, truck drivers and public relations staff as examples of the people needed by the industry directly. There would also be jobs in the supporting industries, including in cement and steel manufacturers, equipment manufacturers, drilling services companies and water treatment specialists, which form important parts of the supply chain. Furthermore, there would also be a positive impact on local jobs and a benefit to local businesses, including restaurants, shops, pubs, theatres and hotels through the spending of those directly employed and employed in the supply chain.

Additionally, and just as importantly, shale gas would support jobs in the chemical industry and wider manufacturing by providing secure energy and important feed-stocks, helping the UK to manufacture more, and ultimately leading to an improvement in exports and the balance of payments.

By contrast in the USA,
PWC have estimated that at least 1 million new manufacturing jobs could be created over the next decade, while CNN Money reports that 500,000 new jobs could be created from the export of US shale gas in LNG form to Europe and the far east where prices are 3 to 5 times higher than the USA.

As a filip for the economy Reuters have calculated (21 July 2014) that production of 8-10 bcm/year of gas, which amounts to 10% of current demand, will bring 3 to 4 billion dollars into the UK economy. The figures are fairly robust, but ignore the fact that such a level of production would take at least ten years to achieve.

Returning to the grass roots, it is the local benefit that will be key to convincing the general public that shale gas is not to be feared as a toxic unknown, but to be welcomed as an opportunity to improve the local community – national financial advantages are not important on this level.

In the USA, perhaps the most important driver for shale gas development was and is the fact that the land owners benefit financially from each well in a very direct fashion. In the UK, that is not the case, but a return of equity to local communities may make the responsible development of shale gas a good thing. It has been suggested that benefitting communities might improve their police forces and local education as a result. It has also been pointed out by some communities, who do not live on top of shale gas, that such a sharing of benefit to local communities would be unfair.

The trick is to ensure that everyone, whether locally, nationally or globally, benefits in a just manner.

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