Exploitation of the UK’s significant shale gas resources is unlikely to result in low natural gas prices, according to new research by leading energy analysts Bloomberg New Energy Finance. The cost of shale gas extraction in the UK is likely to be significantly higher than in the US, and the rate of exploitation insufficient to offset the decline in conventional gas production, meaning market prices will continue to be set by imported gas.
In the US, exploitation of shale gas has led to a dramatic reduction in gas prices, from highs of around $12/MMBtu in 2008 to a low of $1.80/MMBtu in March 2012, since when they have recovered to around $3.40/MMBtu. These very low natural gas prices have resulted in a windfall benefit to US consumers, accelerated a large-scale shift in power generation away from coal and helped re-energise the US’s industrial economy. UK gas prices were also around $12/MMBtu in 2008, but are still in the $10 to 12/MMBtu range today due to continued reliance on high priced imports.