Infrastructure Bill [HL]

Debate between Lord Turnbull and Lord Truscott

Monday 9th February 2015 Lords Chamber

[Lord Truscott]

No, because that would be a short-term benefit. We should look at the long-term planning. That is the difficult thing with shale at the moment: it is destabilising the market for oil and gas, with the majors cutting back quite dramatically. You can have shale production, but it is short term. If, for example, you invest in a major field, it can take 10 or 20 years to develop—Kashagan in Kazakhstan, for example—it needs billions of dollars of investment, and takes many years to develop, sometimes decades. Companies have to be able to plan ahead, as that gives medium to long-term relative stability to the oil price. If you are talking about shale, you are talking about a two to three-year timescale for the development of a field, which does not provide the sort of stability we are talking about.

Of course, we should also look at increasing investment in renewables as well. Shale is one thing you can look at, but you can also look at investing more in renewables.

[Lord Turnbull]

The noble Lord may be confusing two different things: a well, which may have a short life, and a field. I can see that wells might run out quite quickly, but then other wells will be drilled, so that does not mean that the field runs out in the period as he is explaining.

[Lord Truscott]

What tends to happen is that in the United States, for example, a shale oil rig—a well—may cost $1 million to develop. You then drill in that well for a couple of years, and then you have to invest further in the next well in the same field. A number of shale oil companies in the United States at the moment face not getting the funding to invest in the next well, because it is very cash-flow intense. Therefore if you want energy security, shale oil and gas is not the way to achieve it. It is a very expensive short-term hit, and it adds to the volatility of the price of oil and gas. In a way, the success we are seeing in the United States is already unravelling. I therefore wonder whether it is worth the cost as regards the overall benefit.

We are also seeing the impact on businesses, both large and small, in the hydrocarbon sector. Ask any of the majors at the moment whether they are happy about where they are as regards medium to long-term planning, or go to Saudi Arabia and ask people what they think about the impact of shale oil and gas development in the United States and on the global market. You can say that they are game-playing, but nevertheless, it is destabilising. Is that the way we want to go? Is that a great success story? I am not so sure that when we look back on the development of shale in the United States it will look as successful as we all initially thought it would be. Therefore from that point of view, is what happened in the United States the right way for the United Kingdom to go? I am not so sure.