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Shale Gas

Thank you, Mr Gale, for calling me to speak. In several contributions, the term ““balanced”” has been used, both about the Select Committee's report and the tone of the speeches. My remarks might be a little less balanced, because I think that shale gas production is a very positive development and that we could be on the verge of something significant. I apologise in advance for using the term ““shale gas”” interchangeably with ““unconventional gas””. The report does that and several Members have also done it in their contributions. In my constituency, we have a fair bit of coal gas. IGas has found coal gas in Warrington. I will not talk further about the environmental issues around shale gas production; they are genuine and they need to be sorted out. A number of Members have already spoken well about them. I will just say that there is no form of energy—and no choice that we have for sorting out energy—that does not have some kind of environmental issue. We have to make choices. I want to talk for a minute or so about gas in general, before I get into shale gas in particular. I want to put into context where we are in our decarbonisation targets. In 2010, 2.5% of the UK's energy came from renewables and 90% came from fossil fuels. Of that 90%, the majority is still coming from what we would call the ““dirty”” fossil fuels, which are coal and oil. We have a long way to go. There was a debate on this subject recently and it was pointed out that the UK is 25th out of 27 countries in the EU in uptake of renewables. It is my judgment that gas has a role to play in decarbonising the economy. We may debate the matter later, but I believe that we have wrongly placed some efforts by confusing ““decarbonisation”” with ““renewables””. Decarbonisation is necessary and it is a legal requirement. Some of the renewables targets might not always lead to us making the right decisions about how we decarbonise, and at what rate. Right now, 50% of the UK's energy still comes from oil and coal, and although it would not be easy to replace them with gas because that would mean transport being sorted out, if we did so we would have a carbon reduction of 30% or 40%, depending on the precise ratio used. I have mentioned the decarbonisation of transport, and there is a lot of emphasis on electrification and the need for electric cars. That market is moving ahead in a way that this country might not have noticed, with well in excess of 10 million gas-powered cars in the world. Interestingly, the leading countries are some of the developing ones, such as Pakistan, which is making a big effort to decarbonise. Probably the single most important observation about shale gas—unconventional gas—is that we do not have much of it in the UK compared with other types of energy. I heard the remarks of my hon. Friend the Member for South Suffolk (Mr Yeo), and I agree that it is a fluid thing. I have here a report by the United States Energy Information Administration, which states that the UK has something like one tenth of 1% of the total technically recoverable reserves of unconventional gas. Although the UK might have a lot—the numbers are significant—it is the impact on the gas market in the world around us that will affect us. We have talked a little about the US experience. The hon. Member for Southampton, Test (Dr Whitehead) said that five or 10 years ago the US was building liquefied natural gas terminals to import the gas, and it is now talking about applying for licences to change them into export terminals. That is because of shale gas; we have already mentioned that unconventional gas prices in the US are now 50% of gas prices in Europe. There is a great phrase in the Select Committee report: ““The tyranny of distance””. Gas prices are regionally based, and what happens in the US does not have to happen in Europe or Asia. It is worth my giving my perspective on what really drives gas prices. I worked in the industry for a large part of my life and I never wholly understood how gas got priced. Gas used to just come off when the oil came off and was then burnt and sold. The truth is that gas has historically been priced under long-term contracts as a percentage of oil price, which is why the gas and the oil prices are linked in the various regions. Oil has gone up and therefore gas has gone up with it. That relationship needs to be decoupled and, notwithstanding the comments that we heard earlier, I postulate that shale gas provides the opportunity for that to occur, whether or not we exploit the gas in the UK. If such decoupling does occur, there will be a set of impacts. We are at the end of the Russian gas pipeline. Poland and France are the big places for shale gas in Europe, apparently with many times the reserves that we have.