01/10/2012 Newsnight Scotland

stood up population problems tomorrow.

-- store up. Tonight and Newsnight Scotland,

once upon a time, we feared peak oil. Well, a new generation of

cheap oil and generation put an end to that nightmare, but also destroy

dreams of a future for renewables? Good evening. The search for an

alternative to fossil fuels could face a long delayed. The reason is

shale gas is now being recovered on a vast scale from under the United

States. It is arguably cleaner than coal and cheaper than Russian gas.

So, on America, it is attractive. Here, too, efforts to recover shale

gas are gathering pace. What will that mean for the UK's climate

change targets or the drive to develop renewable energy? Business

editor, Douglas Fraser, is with the night. You have looked at some

unconventional ways to extract oil and gas. Engineers have been

ingenious. Yes. To start with, we used to talk about peak oil, the

point at which a man keeps going up, because of rising prosperity, then

demand falls away, because you cannot replace depleting reserves.

We are talking about this less because of this ingenuity.

Engineers are digging older oil fields and extracting more than was

expected, using text -- using enhanced recovery, ingenious ways

of doing that. And taking some old coal minds, and Promethean that

used to kill miners can be extracted and burn safely. -- and

the gas that used to kill miners. There is some controversial work in

Canada, some new methods of tight Rock, using intense pressure. That

is done with hydraulic fracturing. That releases gas. That is in Bath

quantities. It is particularly in the United States. What impact is

thus having on the markets? It is led by North America. The oil and

gas coming from the fracturing netted in the United States. All

for a while and gas within that market are cheaper than the rest of

the world. Gas is very cheap. And signs of conversion from coal-

burning, particularly for electricity, and oil towards gas.

It is a slow process, but in the space of four or five years, this

revolution is underway and becoming evident. In Britain, the Institute

of Directors, responding to a lot of environmentalist concerns,

saying this could produce 10% of Britain's energy needs for decades

to come, producing jobs in the process, if we have a go with using

the fracturing record in Britain. We are already importing liquid

natural gas into the UK to meet needs. It could be possible because

that doing that, maybe from Texas? The knock on effects is, if you get

cheap and relatively clean burn fuel, particularly with growing

problems with the renewal of Britain's nuclear power stations,

you can change the economics of oil and gas. And the economics and

attractiveness of renewable power. Solar power and much of the world,

went closer to home, and the economics of trying to drill and

extract relatively expensive offshore oil and gas. I have been

finding out more about this, hearing from a Scot who is in

charge of about Scottish company at the heart of this revolution.

The threat of oil and gas running out has receded and by a long way.

The prospect now, or is it a threat? Gas so pled double it times

the energy economy on its head. is still dependent on Middle-East

oil. But there is a change happening, Beauly in North America.

It is quite possible, even likely, that North America, particularly

the US, could be self-sufficient and energy by the end of the decade.

Scotland can claim to be at the root of this revolution. It was

here in West Lothian that the crashed ice oil and gas from the

shield Rock, remnants left in these, this was the starting place for

today's global oil and gas industry. While this rock is history here, it

is seen as a future in many other parts of the world. In America, of

course, the future has already arrived. Texas oil fields are

producing vast quantities of gas from horizontally drilled wells,

along with chemicals a pump that high pressure. Up to 30 times that

of a car tyre for up to ten days. That fractures the rock, releasing

gas. That is captured at ground level for up to two years after the

initial work. Closer to home, it has also been tried with rocks

under Blackpool. The viewer is it creates minor earthquakes and could

damage the water table. It is far from a proven technology. What is

clear is there are serious environmental risks associated with

it. You may get the gas out, but at what cost? And we know renewables a

clean, safe and reliable and we have had independently commissioned,

sorry, independently done research that shows court -- that shows got

and can read all energy needs from renewables. -- that shows Scotland.

Weir Group, based in Glasgow, is big in Texas. They are exploiting

unconventional gas supplies. It has created 600,000 jobs. The boss says

what happens then America is forcing a rethink. It is a

fundamental game changer. If you look at it simply, it is estimated

that, within three or four years, 50% of US natural gas production

will come from unconventional sources. Some commentators now

suggest that, as we look out over a horizon of seven years, the US

could in fact be energy Independent by 2020, which is a staggering

thought. In the past few years, since the fracturing began to

deliver gas to homes and industry, look how the price has plummeted.

As a result, there is a big shift. Coal burning is down. Natural gas

is up by more than renewables. countries that we see at the top of

the less that China, Argentina and Australia. There are substantial

reserves there. There is a willingness and a desire to move

forward, perhaps the biggest challenge in terms of translating

that into reality will be the availability of equipment, the

infrastructure requirements, because it is all very well

fracturing a well, and sourcing gas oil, what you then do with that?

You need to get it to market. Having the piping and support

infrastructure to enable development is unnecessary must.

What about Europe? There are strong press but -- there are strong

prospects and Poland and France. Unlike West Lothian. Think back

several decades ago. The UK was able to take the lead in the

development of off-shore deep-sea technology. It has now been able to

export its skills and capabilities right around the world. I genuinely

believe we have a similar opportunity here in terms of shale

gas and becoming the European hub and platform for the development of

the injury. -- industry. In West Lothian, developments can only be

slight. But there are plans for extraction of dance -- gas to the

north of here near Stirling. But that does not mean it will not be

affected here. Energy prices following is good for consumers,

not so good for the Environment, and there are wider concerns for

the established oil and gas industries.

If energy gets cheaper, there is the big question of whether it is

attractive to go after more attractive deals, such as in the

North Sea. And if America is no longer looking to secure its energy

supplies from around the world, because of plenty at home, there is

the question about global politics. Energy independence is already at

Leigh in the presidential campaign. Does the US need to act as world

policeman. If it does not, who will do that?

I am joined now by the oil economist, Professor Alex Kemp from

Aberdeen University, and from Birmingham, by Professor Michael

Bradshaw from the University of Leicester. Thank you both for

joining us. Alex Kemp, you have watched the oil and gas industry

smoke and develop. How much development or potential do you

think shale gas has? It will be bigger in America than it already

is. I would expect that that expansion will continue for quite

some years ahead. For other parts of the world, as your introduction

mention, there are good prospects on China. And in Russia. In

Australia. In Europe, Poland, particularly. Some in the UK and

some in France. I can see that, because the technology is now well

proven and developed, that their shale gas will continue to grow for

quite a number of years ahead. Michael Bradshaw, Barack Obama says

there is potentially 100 years of shale gas under America's feet. Do

you think that is wishful thinking? I think there is still quite a lot

of uncertainty about the potential for shale gas was there. There is

uncertainty about how much there is anywhere in the world. There is

some of the United States and technology is improving. I guess I

am a bit more guarded to be believing that this vital source of

cheap energy is going to be freely available around the planet. Why is

that? There a real logistical issues, which were touched on by

one of the early speakers about increasing the scale of drilling

activity very rapidly. But also specific circumstances in the

United States to do with tax and legislation and so for, existence

of a national gas grid, all of these things. The existence of

March drilling rigs allowed the rapid development of shale gas in

the United States, which will be difficult to replicate anywhere. We

need to be guarded. Under more densely populated areas, like

Europe, with environmental concerns, there are factors that will

slowdown development. It will not stop it, but it will develop more

Do you think we will see large amounts of shale gas extracted from

under the UK? In terms of the UK, the reserve position is still

uncertain. There have been differing views on the extent of

the reserves in Lancashire and the South of England. I think it is an

open question about whether we will be a big producer in the UK. I also

agree that, for onshore gas with shale, the environmental issue will

loom large and it will be very difficult to get concentrations of

drilling rigs such as is generally allowed in America to take place in

urban areas in the UK. Mike Bradshaw, the potential problems of

quite large? Earthquakes, pollution to groundwater, these are bad

headlines. Many of these issues are shared by conventional gas

production and forms of mining. It is a combination of factors to do

with the fracking technology. The creation of waste water, the issue

of seismic risk and the wider issue as to how much carbon dioxide is

produced from shale gas rather than conventional gas. This is why the

Environmental Agency is mounting a campaign against shale, but at the

bottom line, we don't know the full scale of environmental impacts nor

do we have the regulations to handle them. Potentially the

possibility is that this shale gas could be used to replace Kohl,

which its critics would refer to as a very dirty fuel source. That is

true and it is the case that in different parts of the world, shale

play different roles. In the United States, shale gas production is

replacing coal in power generation. We have a different situation in

Europe in the way we view gas. We have quite rigid carbon dioxide

reduction targets which means that even though replacing gas, coal

with gas reduces carbon emissions, if it also reduces other carbon

sources it has the opposite effect. Indeed. Alex Kemp, you can see the

dilemma facing the Chancellor and we know that he is mulling over

this issue, whether to back gas and potentially shale gas, or whether

to back renewables. Which lined you think he will go down? Well, it

appears that we are going to have eight - strategy announcement in

the near future which will emphasise the usefulness of gas to

the UK economy. There is, of course, in this present Conservative

government, growing scepticism about the subsidies given to

renewable energy. I foresee that gas, even gas imports, will still

play a substantial role in the UK economy. So they will replace Cole,

more for power generation. The pressure to reduce subsidies on

renewables will probably continue for at least a few years. Mike

Bradshaw, what do you think ultimately the Chancellor might

decide on this point? Because when there is lots of cheap gas around

it makes renewables less attractive. A I'm not sure there is an awful

lot of cheap gas at the moment. One of the consequences of events in

Japan is that Japan is buying a lot more liquified natural gas than it

expected to. As mentioned, they pay a lot more for their gas. The idea

that we will have an abundance of cheap gas in the UK any time soon,

I don't think that is the case. Domestic shale gas production is a

longer term issues. We are increasing the amount of gas we

import year on year as our own production falls. I don't think it

is an either or because natural gas has a key role to play backing up

the intermittency of renewable electricity generation. Providing a

base load, but it also, when the wind doesn't blow, we have to rely

on gas-powered generation. Gas has a role to play, how big a role is a

question. An increasing amount of that gas will have to be imported.

One of the things that has happened with the United States and shale

gas is it is asking difficult questions about the logic of

linking gas prices to oil prices, which is one reason why gas prices

are five. Thank you both very much. Well, just before we go, time for a

quick look at tomorrow morning's papers. The Independent's lead,

double poll blow cast shadow over Miliband's big day. Only one in

five think Ed Miliband has what it takes to be Prime Minister. That is

what it says. The Telegraph focusing on the death