Shale Gas

Lord MacGregor of Pulham Market Excerpts

Tuesday 7th March 2017 Lords Chamber

[Lord MacGregor of Pulham Market (Con)]

My Lords, I congratulate the noble Lord, Lord Truscott, on obtaining this debate and on his introduction to it. However, I shall come to some very different conclusions from those that he reached.

I chaired the Economic Affairs Select Committee, which reported on this subject in May 2014. According to our own press department’s survey, that committee’s report obtained one of the widest levels of attention of any Select Committee report produced at that time. That was partly, of course, because of the concerns of environmental groups but it went much wider than that.

Given the wide-ranging background and knowledge of the members of the Select Committee—on the environment, climate change, economic issues; we had all these things—I had thought that it would be very difficult to reach agreement. In fact, we had a unanimous report, having heard from a very wide range of expert witnesses. Therefore, my main conclusion remains, as was the conclusion in the report, that the benefits far outweigh the risks, and the risks can be controlled. My main concern is that it is still far from certain that the benefits will be realised and achieved.

What have been the developments since our report was published? First, the Government have made some beneficial changes to legislation. Senior Ministers, past and present, have confirmed that in principle they are strongly in favour of shale gas exploration and production as a major contributor to our energy mix, employment, import savings and other benefits.

Secondly, it is widely recognised that our regulatory and other environmental requirements are fit for purpose. Thirdly, the Government have made some helpful changes to planning and tax legislation and offered community benefits to those affected. All this is very commendable but progress is just too slow, there is no clear drive and few results have been obtained so far. The history to date is of limited progress and no real awareness among the wider public of the benefits of shale gas as compared with the media attention given to protesting local and environmental groups. Since 2004, government and Parliament have striven to meet all the environmental, planning and other concerns, as have the industry and regulators, and compensatory benefits have been given to local communities. All that is now in place. Yet still no exploration drills have been drilled since 2011, so we still do not know the full potential or can fully cover all the risks. So shale gas drilling is still at a pre-exploratory stage, no commercial operations have been authorised and a lengthy application process must be completed before drilling can take place.

Meanwhile, the world is passing us by. Only this week we learned that shale output from the Permian Basin in Texas is expanding faster than the world thought possible. The founder of Pioneer Natural Resources there said:

“People just don’t seem to realise how big the Permian is. It will eventually pass the Ghawar field in Saudi Arabia, and that is the biggest in the world”.


He also says:

“We have had such efficiency gains that break-even cost in the Permian are close to $25. It took us 40 days to drill a well in 2014. We’re already down to 20 days”.


Meanwhile, we in the UK have not even started. The US will get all the benefits, unless we get a move on.

The companies involved in the UK are running out of money quite quickly. The economic valuation is less favourable because the gas price has fallen considerably. The US is finding much more shale gas than originally anticipated and companies there are reducing costs dramatically. There could be a wave of imports in the next few years, making it less favourable for companies to develop here, at a cost to the balance of payments, to employment possibilities and to security of supply. I have not dealt with the wider security aspects, but they are there too.

The Government are committed to shale gas development in the UK. In our report we called for a Cabinet committee to be set up to get the right mix of incentives, to remove or substantially reduce obstacles, and to give a strong steer to all the departments, local authorities and others to make real progress. It has not yet happened. The benefits are likely to far outstrip the costs and the risks, and the latter can be controlled. Yet the benefits are still far from certain to be realised. In my view, swift progress to shale gas production needs greater public and political recognition and support—and we need to get on with it.