Fracking: US sets a pace that is hard to match

THIS summer, the English village of Balcombe became an unlikely battleground in the increasingly polarised debate over hydraulic fracturing (fracking). Opponents of the technique converged to protest against plans by energy company Cuadrilla for exploratory drilling for hydrocarbons in the area. Cuadrilla was forced to suspend operations.

The events underscored the challenges facing any energy company trying to export the US shale revolution. Shale gas is present in huge quantities in many parts of the world. The US Energy Information Administration says China, Argentina and Algeria have bigger reserves than the US.

But the bare statistics tell only part of the story. In many cases, these resources will be far harder to extract and market than they have been in the US. The US shale industry grew up in areas that have been producing oil and gas for decades. Early pioneers benefited from the presence of a well-established oilfield-services sector, with large fleets of drilling rigs, sophisticated financial markets and a favourable fiscal regime.

Another key factor was the private ownership of reserves: in most other countries, oil in the ground is owned by the state, giving residents little financial incentive to consent to drilling on their land. And learning how to extract the gas is just part of the battle: companies have to figure out how to ship it.

Strong environmental opposition can also slow things, as has been seen in France and Bulgaria. As a result, no one is expected to challenge the supremacy of the US in shale gas for the foreseeable future.

One country that could potentially see a US-style shale boom is Russia: its Bazhenov shale in western Siberia is thought to contain 100-billion barrels of recoverable oil. It lies in an area where oil has been extracted for decades. That part of Siberia is crisscrossed by roads, pipelines and other infrastructure, there is a trained workforce, and the Russian government has introduced tax breaks. But the geology is complex and poorly understood, and recovery is much lower than in conventional reservoirs.

Meanwhile, the drive to exploit China’s shale resources too has turned out to be harder than initially thought. The government is supporting the industry, in the hope that it could reduce Beijing’s dependence on dirty coal and imported gas. But early results are not encouraging. Royal Dutch Shell has found the geology tough going and there have been protests. In another country that had high hopes of becoming a big shale gas producer, Poland, the outlook is deteriorating too.

Then there is the UK. Here, the stage appears to be set for a boom of sorts. The government has promised substantial tax breaks. Locals should benefit, with companies pledging £100,000 to every community situated near an exploration well, as well as 1% of the revenue if gas is extracted. Prime Minister David Cameron has lobbied hard for shale, saying it could bring down fuel bills. But despite that, it is still unclear that the UK’s shale industry will ever take off on the kind of scale seen in the US.

Companies will have to do a lot more to reassure locals that fracking is safe; otherwise drilling sites across the UK might have their own version of the Battle of Balcombe.