A leaked government report predicting the size of the UK’s shale gas industry has cast further doubt on the fracking industry’s own predictions for the future.

The confidential document, seen by the Greenpeace Unearthed investigations team, shows that the government expected 155 shale gas wells by 2025, compared to forecasts of up to 4,000 wells by 2032 made earlier this decade.

This 4,000-well forecast appeared in a 2013 report from the Institute of Directors (IoD), which outlined the UK’s future shale gas potential. With such a discrepancy between this and the government’s own figures, it raises the question as to why the prediction was so wrong, but also why numbers from it continue to be used.

Recycled numbers

The IoD report received widespread media coverage and drove much of the narrative around development scale. But at the time, the numbers were flagged as unlikely, and report authors were unable to clarify the metrics behind them. The fact the report was sponsored by fracking company Cuadrilla Resources raised further questions about its credibility.

Report author Corin Taylor subsequently worked in communications for gas company Centrica, and is now a director at the UK Onshore Operators Group (UKOOG) which represents oil and gas companies. UKOOG’s chief executive Ken Cronin joined in 2013, and was previously at communications firm Kreab Gavin Anderson where he was responsible for energy companies including shale gas firm IGas Energy.

Despite questions raised about the IoD forecast, the 4,000-well figure reappeared in a 2014 report written by accountancy firm EY, commissioned by UKOOG. The report also estimated there could be over 64,000 jobs by 2032, based on the original IoD well estimate. The EY report featured a foreword by then minister of state for business and education Michael Fallon, who went on to use the 64,000-jobs figure in a speech given at a conference where he set out why the UK needs to develop shale.

Despite little progress in the shale sector, in 2016 communities secretary Sajid Javid also used the 64,000-jobs figure in justifying why he overturned a Lancashire council decision to stop fracking. And as recently as the first week of February, it was reused by UKOOG.

With little movement in shale development, it begs the question why the numbers continued to be used. There is also the more fundamental issue of why the numbers have not been reached. IoD energy policy advisor and contributory author of the 2013 report Dan Lewis, suggested two major factors: further research into the UK’s geology was held back by planning, and the fall in wholesale gas prices made exploration harder to justify.

Gas price slump

So, firstly, what of the fall in gas prices? UK wholesale prices in 2013 were particularly high, according to data from leading price reporting agency Argus Media. In December 2013, the front-month contract reached its highest level since autumn 2008, at 70 pence per therm. Thereafter, the price dropped over 60% between December 2013 and April 2016, when it reached 28 pence therm. Prices have since recovered to 51 pence per therm last month.

This price fall is unlikely to have changed developers plans on exploratory drilling. Natural gas markets are cyclical, like most extractive industries. Companies routinely make discoveries that are not developed until the economics are more favourable to do so – and it is difficult to know what the economics of a discovery will be before its been made.

Throughout, companies continued to invest in North Sea gas fields which are typically more expensive than onshore ones. This includes Shell and BP, as well as chemicals company Ineos – itself seeking to develop shale – which acquired licences for new fields in 2017. Norway – the UK’s largest overseas gas supplier – also continued to invest in new offshore gas production capacity, despite the price fall.

Planning holding back exploration?

What of the claim that further research into the UK’s geology was held back? In the absence of exploratory drilling, companies cannot make estimates of how much gas there is, and if it can be economically produced. Drilling data is crucial for any development. A lack of geological data was highlighted earlier this decade as a potential issue for the development of shale.

But the issue here is not a lack of drilling data; it is that operators underestimated the opposition they would face when trying to carry out the drilling. Surprisingly, the 2013 IoD report regarded social acceptance and public confidence (the ‘social licence’) as only moderate barriers to shale development. This hints at the two most significant problems facing shale: firstly, public support for fracking is weak. And secondly, the sector is in a state of denial about it.

This month’s public attitudes tracker from the UK’s department for business, energy and industrial strategy showed support for fracking was at just 16% – an increase from the all-time-low of 13% in November, but far below the 79% figure for renewables. In response, Ken Cronin of UKOOG said he was pleased to see support for fracking was up, while  communications officer Katherine Gray –  formerly of the pro-fracking Taxpayers Alliance – claimed the increase showed “people are increasingly for shale jobs, local investment and our security of supply.” 

Long-term forecasting in extractive sectors is inherently difficult, because of the cyclical nature of markets, externalities of supply and demand, and a range of (often unforeseen) barriers. But this is well understood, and it sits opposed to the optimistic forecasts some in the shale industry made. That said, it remains to be seen if the government’s leaked shale gas prediction will be any more accurate.

Yet, the time, effort, and expense that has been invested in court cases, legal challenges, and preparatory works at drilling sites, strongly suggests that they were – and remain – far from giving up. But in the absence of a sudden swing in public support behind fracking, it is unlikely that even the government’s much-reduced estimate for the sector will be met.

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Joseph Dutton is a policy adviser at global climate change think tank E3G. He tweets @JDuttonUK