Saturday, August 27, 2022

From an Expert Personally Answering This Blogger: The UK Is Years, Maybe Decades, Behind in The Fracking Arena. Sigh.

 It can take years for a single fracking operation to take place.  Licencing is the first hurdle.  Assuming an onshore operation, to whom does the land belong?  AND to whom does the subsurface rights belong?  Traditionally in Britain, it is the monarchy that holds subsurface rights, whereas in USA they are held by the individual landowners.  The licensing authorities are usually an arm of government.  An operating company (operator) interested in fracking will first be looking at the hydrocarbon potential of the area.  Normally, this will first involve geoscience, notably geology.  Discussions will be held with the licensing authority as to what fiscal terms will be applied to the area of interest.  Normally, the authority will have an outline “terms and conditions”, which may include a service contract, production contract or a concession.  The terms will differ for each type.  The main difference in the type of “agreement” will be related to who holds title to the resources discovered, the authority or the operator.  If the area of interest is considered attractive for hydrocarbon exploration and production, the licensing authority may offer it out for industry bids to attract the best offer for a work program.  The aim is to secure the best deal possible for the licensing authority from an interested operator.  Once an agreement is reached the operator will begin work in preparing programs to best explore for recoverable hydrocarbons.  In fracking, particularly onshore Britain, it is difficult to get past the EIA (Environmental Impact Assessment) due to environmental activists and NIMBYS (not in my back yard).  That is why fracking is basically non-existent.  

In the USA, Donald Trump created the environment where fracking could flourish and the country became energy independent for the first time.  All that was lost, when Biden gained power in the White House.  In theory, once commercial hydrocarbon have been found, a development plan will be submitted to the licensing authority by the operator. This is a big project.  Again, the major hurdle of an EIA will have to be overcome and political will have to be strong. In theory, once the plan is approved, the development phase will be undertaken and finally production will begin.  The economics and characteristics of the resource will be the ultimate determining factors on whether the project will go ahead and how much and how fast production will be undertaken.  Infrastructure will have to be built for the produced hydrocarbons and of course purchase contracts will have to be in place with buyers.  As you can imagine, we are not talking of a simple, straightforward and quick operation.  I have given you a flavour of what might be involved and hope you can see that there has to be political will to go down this route, competent operators to actually get the stuff out of the ground and then the infrastructure to deliver it to market.  BTW onshore is less expensive and ultimately cheaper than offshore operations.  There are exceptions to this around the world, but the UK is not one of them.

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