The news on shale gas reserves comes just in time - but will extraction be economical?

Shale gas resources in the UK may be far greater than thought according to a new report from the British Geological Survey, which was asked to estimate the amount of gas trapped beneath Lancashire and Yorkshire.

There could be 1,300 trillion cubic feet under the region's Bowland basin alone, although its unclear how much could be extracted. Shale gas was announced as a priority for the government in yesterday's spending round, with tax and planning reforms to facilitate the development of the industry. The government is set to announce the financial benefits of fracking (the extraction technique used).

Senior economic adviser at the Institute of Directors Corin Taylor was also pleased at the news.

Developing a shale gas industry could create thousands of jobs, reduce imports, support manufacturing and help rebalance the economy. We now have official confirmation that Britain’s shale gas resources are enormous, and we now need to press ahead with exploration to find out what proportion is recoverable. Even if only 10 per cent of the gas in the ground could be recovered, it would still provide more than 40 years’ worth of Britain’s total gas consumption. Shale gas is the best energy news this country has had in a long time.

However, there are concerns over how much extracting the gas would actually cost. Greenpeace energy desk editor Damian Kahya estimates that to extract ten per cent of the gas - assuming that every well has a productivity level equivalent to those at the Haynesville Sabine Platform (the most productive wells in the US) - we would need 50,000 wells, rising to 100,000 for the second most productive region, and around 22m truck journeys to transport the water needed (excluding waste water).

And that's assuming we could extract ten per cent. Analysis of world shale reserves by the US Energy Information Agency (EIA) suggests that, taking into account extraction history and geological risks, only around 4 per cent of the gas in in the rocks is ever likely to be extracted - which Kahya calculates to be about 17 years' worth.

Of course, technological developments could make this process more efficient and we certainly shouldn't rule out these huge reserves immediately, particularly as UK electricity regulator Ofgem has already warned against shrinking reserves of spare power, and is set to give an updated assessment of the market later today.

In any case, we're likely to see more investigations and greater investment in the extraction of shale gas in the near future.

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