UK #shalegas: profitable endeavour or Ponzi scheme as fracking opponents insist?
Opponents of fracking can regularly be seen and heard claiming that fracking for shale gas will never be profitable in the UK and so it isn't worth even trying.
We decided to do a layman's analysis to see if this claim stands up to scrutiny. You'll never guess what? It doesn't...
According to a report by the Institute of Directors (IoD) in 2013, a shale gas production pad consisting of 10 vertical wells each with four horizontal wells coming off deep underground (so 40 wells per pad) could be expected to produce a total of 128 bcf (billion cubic feet) of gas over its lifetime.
128 bcf = 1,280,000,000 therms.
The current wholesale price of gas is 39.29p per therm (see Ofgem).
Therefore, at current prices, the gas from a 40-well pad would be worth £502,912,000.
According to EY in 2014, it will cost £33 billion to bring 4,000 wells into production nationally, or £8,250,000 per well.
Developing a 40-well pad would therefore cost £330,000,000.
If you deduct this cost from the revenue generated on sales of gas, it leaves a profit of £172,912,000 per pad.
That's a profit margin of 34.48%
None too shabby if you ask us, and absolutely no basis for claiming that UK shale gas will be unprofitable.