Fracking Economics

How the economics of fracking stack-up

Back in 2013, the Institute of Directors (IoD) produced a report that predicted a shale gas production pad comprised of 40 wells could be expected to produce 1.28 billion Therms (128 bcf or billion cubic feet) of gas over its lifetime. At current wholesale prices, that would be worth £502 million.

A 2014 report from consultants at EY said that developing a 40 well pad will cost £330 million.

Deducting the forecast cost from the expected revenue leaves a profit of £172 million per production pad, at a 34% profit margin.

This suggests that fracking for shale gas in the UK will likely be profitable enough to succeed and that it is far from the "Ponzi scheme" that opponents often suggest.

It appears that the economics of fracking favour continued exploration and future production.