Building bridges on shale gas

Given the potential for a change of guard in Washington, now might be a good time to develop an alliance of shale gas producing countries

Could shale gas be the sexy subject to get the US and UK back in bed?
Przemek Skwirczynski
On 30 August 2012 15:13

It is a shame that we have spent the better part of our almost forty-year membership of the EEC and then EU on the back foot, fighting for concessions as opposed to dictating the policies to suit our needs.

Perhaps due to being historically aligned with the US, Britain has always felt torn between the ‘special relationship’ and immersing ourselves in the first emerging (and now dwindling) European Union.

These two relationships have, at times, been at odds with one another, especially as the EU continues its transfiguration from an economic to a political union.

We now find ourselves arguably closer than ever to leaving the EU on the back of public discontent with how our membership has developed.

To make matters worse, we are not doing great on the US front either, with its current president preferring to call the Falklands “Las Malvinas” despite us fighting alongside US troops around the world.

The wind may just be turning though. However clumsy Mitt Romney has been throughout his campaign, it is now increasingly likely that he could dethrone Barack Obama.

Romney's international tour seems to point towards policies of rebuilding the bridges with traditional allies. Bridges that were seemingly burned by Obama - hence the visits to the UK, Poland and Israel.

It is a positive that with a new US president on the horizon, we might just slot back into the historic allegiance which has mostly worked for at least a century.

Interestingly, other than military, there is another possible level of cooperation between the modern Phoenicia and Carthaginian Empire: energy production.

As we know from observing OPEC, an organisation centred on producing energy can be a very resilient one. Surely we could even forgive and forget Obama's unfortunate finger pointing towards "British” Petroleum, as source of the problem in the joint UK-US oil exploration venture.  

As of recent, the US has been doing very well out of shale gas, which has helped boost its economy in trying times by halving the price of gas over four years and creating some 600,000 jobs over a similar period.

This successful industry will surely outlive Barack Obama's tenure.

As it happens, we also have significant shale gas reserves in the United Kingdom; as estimated by the British Geological Survey, we have some 150 billion cubic metres, which is enough to serve our gas needs for two years, and there are further shale gas fields in our offshore locations.

On an on-going basis, shale gas could make up to 10 percent of British gas consumption, and its exploration would fulfil our government's policy of energy source diversification.

Greater still, the BBC quotes another source of information in claiming that the UK has at least 200 trillion cubic metres of shale gas. This would be sufficient for the UK to sell its gas to other countries and not just cover internal demand.

Just one of the potential exploration sites in Lancashire could create some 5,500 jobs with an average salary of GBP 55,000, which seems like just the ticket for the otherwise "lost decade".

Interestingly, Poland also sits on a considerable shale gas field of ca. 22.45 trillion cubic metres with 5.3 trillion available for immediate extraction. Exploration in Poland would create an estimated 155,000 jobs over 10 years and turn Poland into a net gas exporter.

At the moment, similarly to the UK, Poland relies heavily on importing its gas from the very temperamental Russia and, given the historic relationship between these two countries, it would be in Poland's strategic interest to free itself from that marriage of inconvenience. 

Given the potential for a change of guard in Washington, it might be a good time to develop an alliance of shale gas producing countries, in order to rebuild the special relationship on additional economic, as opposed to solely military, principles.

Working with Poland, which seems to be on the Republicans' "friendlies" list, and in any case has been a traditional ally of both UK and USA, could provide a common front to push through gas exploration-friendly policies in Brussels.

Both the United Kingdom and Poland will have to fight their corner in the face of the growing demands from the euro-bloc whose members still largely stick by the economically unviable green energy policies.

Importantly, when it comes to the duumvirate ruling the European Union, France officially suspended its exploration efforts in May 2012 and Germany can be considered Russian Gazprom's man in the EU when it comes to energy.

Hence, both are stumbling blocks on way to shale gas exploration on our continent. After all, despite all the popular sentiment, it is unlikely that we will fully leave, or repatriate powers from the EU, and so the best course of action would be to create alliances to push through our interests. 

Przemek Skwirczynski is an economist, banker, and Conservative

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