Fracking Nora! Years worth of shale gas found right 'ere in Lancashire

Caudrilla Resources who have been using a site in a small Lancashire village for testing purposes announced on the 21^st September that it had discovered 200 trillion (yes trillion!!) cubic feet of gas beneath the ground in Lancashire’s Bowland basin. This amount of shale gas could provide enough gas to meet the entire UK demand for 66 years (although it is debatable how much of this can actually be recovered, with the final amount recoverable likely to be around 10-20%).

So what is Fracking, how does it work and why does it have such an awesome name?

Fracking is short hand for hydraulic fracturing and refers to how the rock is fractured apart by a high pressure mixture of water sand and chemicals. Experts also like to refer to a ‘frac job' (oo er!) and a ‘frac unit’.

It is a process in which giant drills are used to dig deep into the earth whilst creating tiny explosions to shatter shale rocks, releasing the gas inside. The ‘mixture’ is injected into the rock at very high pressure which causes the gas to flow out to the head of a man made well.

Fracking does have a few enemies and as with most things to do with any ‘non green’ energy is thought of as controversial. Much of the water used in the process is collected and then filtered and cleaned. There are concerns that potentially carcinogenic chemicals can sometimes escape and end up in drinking water. However the industry itself vigorously denies these claims. The other hot topic you will see people protesting about is climate change and global warming, although shale gas emissions from natural gas are much lower than those from coal and oil. 

There are major advantage to this Shale gas discovery, it will boost overall worldwide gas supplies and could help to reduce the overall market cost (yey!) as well as a present a potential £6 billion boost to the UK economy.

Maintenance on Qatargas infastructure causes spike in UK energy prices

So, the past fortnight’s energy prices plotted on a graph look like the south side of Mount Everest. October 11 power prices have risen by around 6% in the past two weeks whilst Brent Crude oil reached a four week high, despite weak economic data. So the sudden upturn in prices we hear you ask?

Last Friday, Qatargas, the world’s largest LNG export terminal decided to shake things up by announcing that they would be carrying out maintenance on 3 of their 5 production trains between now and November. This could potentially mean that LNG deliveries to the UK are stunted in the short term future. The news has coincided with colder than seasonal norm forecasts for the start of winter.

Qatar gas claims the news is in anticipation of a downturn in the global economy, meaning less demand. However, it is likely that they were playing a tactical game, keeping the news quiet until the last minute. Prices had been moving lower until Qatargas’s news so it is possible it had been strategically kept hush hush until now so that panic ensued and the price for LNG rocketed. Yey for Qatargas and their profits, boo for UK energy markets!

It is possible that the market has over reacted to the maintenance on Qatargas’s infrastructure and the spike in prices shouldn’t be maintained due to other bearish factors, i.e. weak economic data...

·         US employment figures are down

·         European and US consumer confidence levels have dipped

·         The Canadian economy has shown no growth for the first time since the recession in 2009.

All these indicators should signify a dip in prices if stock market values lower and industrial energy demand ends up taking a hit.