Eric Gordon (pictured), Energy Analyst at Brown Advisory on what the UK can learn from the US to successfully implement fracking to build energy reserves and cut costs…
In the US, fracking technology has revolutionised the energy market where it has seen a stunning surge in the volume of oil produced in the last three years to the point where it is remarkably accounting for the majority of global oil production growth. The process has caused much controversy and debate over its environmental and economic impact. However, in the US, fracking remains regulated by individual states rather than the federal government which has largely supported growing activity.
It is likely that eventual drilling and production of shale gas will take place in the UK, assuming the government and population determine that the economic benefits outweigh any potential environmental impact. However, it will undoubtedly be a very different environment and process in the UK to that of the US.
The lessons to be learned are that of infrastructure. To sustain increased production, the infrastructure needs to be in place, from the producers that discover and develop prospects and sell the raw product, to the refiners that take the commodity and convert it to marketable products. In the US, oil production ramped up so quickly that the companies that transport the oil by pipeline, rail, truck or barge, the midstream companies, weren’t ready or equipped to handle the volumes.