The Geopolitics of Shale

Energy is the stuff of power. Long dead British Socialist Aneurin Bevan once remarked, “This Island is almost made of coal and surrounded by fish. Only an organizing genius could produce a shortage of coal AND fish at the same time.” Bevan lived in those long-distant days before the EU concentrated such organizing genii in Brussels.

Today, Bevan would have to add shale oil and gas to his irony. As Britain contemplates a new energy policy to stop the lights going out (and the UN starts yet another doomed to fail climate change conference) the British Geological Survey suggests that Britain’s shale oil and gas reserves are enough to make the Island again energy self-sufficient for many years to come with up to 1,000 trillion cubic feet of gas alone.

Britain is not on its own. Significant reserves have been found in France, northern Germany, and Poland. Indeed, current estimates are that the top five producers could be the US, Canada, China, Brazil, and the UK, with the International Energy Agency suggesting this month that the Americans could be energy self-sufficient by 2035. It is not often that a genuine geopolitical game changer comes along but all the signs are that shale oil and gas is precisely that.

At present it is still too expensive to extract such oil and gas in volume compared with conventional hydrocarbons. Indeed, current extraction costs in the North Sea could be up to $200 per barrel, compared with between today’s marginal costs of between $50-60bn for the extraction of conventional hydrocarbons. However, US technology is driving down the cost of both onshore and offshore extraction, and the British are among world leaders in extracting energy from tough environments.

There are also concerns about just how much of the suggested reserves can be exploited. This may explain the reticence of governments to make forecasts that prove over time to have been too optimistic. It could also be that governments are concerned about possible environmental damage and must in any case continue the search for balanced energy policies in which renewables remain an important contribution to the national energy mix. There are also some possible and unfortunate side-effects. Last year concerns were expressed in Lancashire that the use of high pressure water (fracking) to drive oil and gas reserves up and out of the shale had caused small earthquakes.

What about the geopolitics? If for once the major producers of oil and gas also become the major consumers then one of the main causes of systemic friction will have been removed. Hyper-competition over resources between the consumptive democracies and the consumptive oligarchies such as China, in which power is legitimized by economic growth rather than the vote, looks at present to become the signature threat of this century. Moreover, a shift in the balance of energy power away from the Middle East could (just could) make the region more stable as it will certainly concentrate the minds of leaders therein, although I fully accept it could have precisely the opposite effect. As for Russia, Moscow would become one producer amongst many and would have to compete for exports on price…and behavior.

The implications for Europe’s security and defense would also be profound. Absent the need to look beyond its borders for energy would the US be quite so prepared to pay the price it currently pays to stabilize Europe’s extended region? It will of course pay close attention to oil-rich Iran’s nuclear ambitions and Egypt’s political turmoil because the US guarantees Israel’s security. However, absent the comforting presence of an America focusing much (not all) of its grand strategic effort on Asia-Pacific and Europeans will surely once and for all have to get serious about security and defense. At the very least shale would change the terms and conditions of the transatlantic security contract which at present threat from the great European defense depression.

There is also delicious irony to this story. On October 21, 1912 the British began work on HMS Queen Elizabeth, a super-Dreadnought battleship which joined the Fleet in 1915. The Royal Navy’s first all oil-fired ship paved the way for the conversion of the entire British Grand Fleet from coal to oil and in effect started the West’s dependence on the Middle East. Ironically, the new HMS Queen Elizabeth, a 65,000 ton super aircraft-carrier will be launched in 2015, just at the moment when such oil dependence may begin to come to an end.

Shale will also change the balance of power within states. The UK’s massive shale reserves are under England and the English North Sea. Energy is indeed the stuff of power. Good luck Scotland!

Julian Lindley-French is Eisenhower Professor of Defence Strategy at the Netherlands Defence Academy, Fellow of Respublica in London, Associate Fellow of the Austrian Institute for European and Security Studies and a member of the Strategic Advisory Group of the Atlantic Council. He is also a member of the Academic Advisory Board of the NATO Defence College in Rome. This essay first appeared on his personal blog, Lindley-French’s Blog Blast.

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