Getting ready for UK Shale Gas

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EY - Ken Cronin

“We wanted to answer three important questions as part of this study. First: what will it take to build a shale gas pad in the UK in terms of supply chain and skills; second: what are our capabilities in the UK; and finally, what do we need to do in order to fill those gaps and stimulate the supply chain and skills we already have.

“We have a lot of work to do in terms of working with the communities involved, understanding geology, flow rates and the cost base. Keeping the economic benefits in the UK of the supply chain is not a given, but the potential level of benefits as highlighted in this report should make it an economic imperative that we make the best possible attempt.”

Ken Cronin
Chief Executive
United Kingdom Onshore Operators Group


EY - Michael Fallon

“I welcome the findings of this industry-commissioned study which the Department for Business, Innovation and Skills was pleased to support. The report demonstrates the big prize at stake for the UK in terms of jobs and manufacturing in the supply chain for our onshore oil and gas industry. Just as importantly, it makes clear what needs to be done to be ready to seize this opportunity. The Government is committed to play its part.”

Michael Fallon
Minister of State for Business and Energy


The purpose of this report is to detail the supply chain and skills needed to develop shale gas reserves in the UK. This study was commissioned by UKOOG to identify any supply chain or skills blockages that will prevent the UK realising shale gas’ economic potential.

In 2014, the UK is at the start of onshore shale gas exploration.

  • If safely and economically extracted, shale gas can develop a new onshore gas industry, which provides local employment and ensures a security of supply for the UK.
  • In addition, Europe remains a significant — yet untapped — shale market, and the UK has an opportunity to lead its development and contribute specialised equipment and skills.

Key opportunities and requirements include:

Specialised equipment and skills for hydraulic fracturing totalling £17bn
This includes equipment such as pumps, trucks and blenders, which today are supplied by third parties and only partially from inside the UK. This provides a massive opportunity for UK-based oil field service and manufacturing companies.

A £4.1bn waste, storage and transportation requirement
More work is needed by industry, Government and regulators to understand what is possible with respect to localised and centralised services. Investment will also be needed to bridge the gap as the industry grows.

A £2.3bn steel requirement in the UK
The industry will need 12,600km of steel casing of specific diameter and quality. Our report confirms that the UK can produce this at the right quality, but more research and development is needed to make this a reality.

The potential for a new £1.65bn rig manufacturing industry
The industry will need up to 50 landward rigs at peak drilling activity. UK fabricators have this capability, but are likely to need support to bridge the gap between current and anticipated requirements, to make sure rigs are ready on time and can be supplied from the UK.

A new market for existing UK businesses
The UK currently produces a number of key components that will be vital for a shale industry. Despite no theoretical supply constraints, companies will need to be kept informed and the industry will need to agree standardised practices and common infrastructure.

A 64,500 jobs employment opportunity and a requirement to grow skills
64,500 jobs (direct, indirect, and induced) will be needed at peak. These include highly-skilled direct site development roles with above-UK average salaries. The UK will need to standardise skill requirements and create a national institute of skills to address shortages and provide the right opportunities for already qualified personnel.

 

The oil and gas industry needs to act now to prevent shale gas supply chain and skills constraints. Our report recommends that industry groups, developers and government work together to:

  • Define an investment case to develop required skills at pace.
  • Define common pad and hydraulic fracturing standards, setting detailed specifications for UK suppliers.
  • Encourage investment for UK-based capabilities in specialised areas like steel, rigs, and hydraulic fracturing equipment, as well as shared infrastructure for water treatment, waste disposal and gas processing.