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Consultancy casts doubt on viability of UK gas

Wood Mackenzie, a leading authority on the energy industry has cast doubt on the viability of the UK’s gas reserves, and the prospects for a shale gas revolution.

Analyst Niall Rowantree says that “it is not possible to accurately predict the ultimate recoverable volume of shale gas in the UK and therefore any estimates of the ultimate impact on UK gas supply are premature”.

à‚  Wood Mackenzie estimates that in order to develop UK shale reserves, potential operators would need a gas price of $9.68 per million British thermal units (mbtu) for the project to make economic sense. This is considerably more than this year’s average UK spot price of $8.69 per mbtu and the $8 per mbtu that Bloomberg forecasts it will hover around between 2015 and 2020.

Jamie Spiers, a researcher at London’s Imperial College, said: “These figures suggest that the cost of extracting UK shale gas reserves will exceed the price. This is a big issue that hasn’t been addressed very much.”

According to the report, “a commercially viable UK shale gas development will only be possible if the subsurface is as good as the very best shale plays in North America. The commercially viability of the UK’s shale resources is yet to be proven.”

Chancellor of the Exchequer George Osborne is hoping that Britain can replicate the shale gas revolution in the US, where fracking has knocked about three-quarters off the price in the past four years, taking it to about $3.30 per mbtu.

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