First fracked gas could hit UK market in 2017

A worker helps monitor water pumping pressure and temperature, at a hydraulic fracturing and extraction site. (AP)
Updated 06 May 2016

First fracked gas could hit UK market in 2017

LONDON: First supplies of shale gas, extracted using the unconventional fracking process, could enter the British gas market as early as mid-2017, said the head of shale gas firm Cuadrilla Resources.
Britain is estimated to have substantial amounts of shale gas trapped in underground rocks and Prime Minister David Cameron has pledged to go all out to extract those reserves to help offset declining North Sea oil and gas output.
But progress has been slow as applications for shale gas projects have been held up at local government level where they have faced vocal opposition from environmental campaigners.
Cuadrilla initially wants to carry out fracking — which injects water, sand and chemicals into rock formations to release shale gas — at two sites in northwest England.
It hopes to get government approval to start operations at the sites before August.
“If we get good results from the wells ... gas could go into the system next year,” said Francis Egan, CEO of Cuadrilla, 46 percent owned by Australian engineer AJ Lucas .
Gas flows from initial testing would be small but Egan said full production could start in 2018 if necessary permits are obtained.
Lancashire Council last year rejected Cuadrilla applications for fracking at the sites, underscoring local community concerns about the technique.
However, Britain has since changed planning rules to allow government intervention to approve or reject shale gas drilling permits and give priority to appeals involving the projects.
A planning inspector is expected to make recommendations on Cuadrilla’s Lancashire applications to local government minister Greg Clark by July 4 and he will then make the final decision.
Egan said he is confident the project will be approved since the government has voiced strong support for the technology and had previously received legal advice to approve the applications.
The government hopes a shale gas boom will help generate jobs in the oil and gas industry which has been hard hit by a 60 percent slump in oil and gas prices in the last two years.
Gas prices in Britain remain higher than in the United States, where shale gas drillers are under severe strain from the energy market downturn.
Egan said the skills needed for fracking are broadly the same as those used in conventional gas.
“With the general environment and where the North Sea industry is going we are determined as ever to press on and secure a new gas source,” he said.
Cuadrilla expects to be able to secure service contracts much more cheaply than previously expected as it benefits from discounts due to weak demand.
Egan estimated industry services would likely be 30-40 percent cheaper than before the oil slump.


Trade truce boosts China’s hopes after weakest growth in 29 years

Updated 18 January 2020

Trade truce boosts China’s hopes after weakest growth in 29 years

  • US deal revives business confidence with latest data showing surprise acceleration in industrial output and investment

BEIJING: China’s economic growth cooled to its weakest in nearly 30 years in 2019 amid a bruising trade war with the US, and more stimulus is expected this year as Beijing tries to boost sluggish investment and demand.

But data on Friday also showed the world’s second-largest economy ended the rough year on a somewhat firmer note as a trade truce revived business confidence and earlier growth boosting measures finally appeared to be taking hold.

As expected, China’s growth slowed to 6.1 percent last year, from 6.6 percent in 2018, data from the National Bureau of Statistics showed. Though still strong by global standards, and within the government’s target range, it was the weakest expansion since 1990.

This year is crucial for the ruling Communist Party to fulfill its goal of doubling gross domestic product (GDP) and incomes in the decade to 2020, and turning China into a “moderately prosperous” nation.

Analysts believe that long-term target would need growth this year to remain around 6 percent, though top officials have warned the economy may face even greater pressure than in 2019.

More recent data, along with optimism over a Phase 1 US-China trade deal signed on Wednesday, have raised hopes that the economy may be bottoming out.

Fourth-quarter GDP rose 6 percent from a year earlier, steadying from the third quarter, though still the weakest in nearly three decades. And December industrial output, investment and retail sales all rose more than expected after an improved showing in November.

Policy sources have told Reuters that Beijing plans to set a lower growth target of around 6 percent this year from last year’s 6-6.5 percent, relying on increased infrastructure spending to ward off a sharper slowdown. Key targets are due to be announced in March.

On a quarterly basis, the economy grew 1.5 percent in October-December, also the same pace as the previous three months.

“We expect China’s growth rate will come further down to below 6 percent” in the coming year, said Masaaki Kanno, chief economist at Sony Financial Holdings in Tokyo.

“The Chinese economy is unlikely to fall abruptly because of ... government policies, but at the same time the trend of a further slowdown of the economy will remain unchanged.”

December data released along with GDP showed a surprising acceleration in industrial output and a more modest pick-up in investment growth, while retail sales were solid.

Industrial output grew by 6.9 percent from a year earlier, the strongest pace in nine months, while retail sales rose 8 percent. Fixed-asset investment rose
5.4 percent for the full year, but growth had plumbed record lows in autumn.

Easing trade tensions have made manufacturers more optimistic about the business outlook, analysts said, though many of the tit-for-tat tariffs both sides imposed during the trade war remain in place.

“Despite the recent uptick in activity, we think it is premature to call the bottom of the current economic cycle,” Julian
Evans-Pritchard and Martin Rasmussen at Capital Economics said in a note.

“External headwinds should ease further in the coming quarters thanks to the ‘Phase One’ trade deal and a recovery in global growth. But we think this will be offset by a renewed slowdown in domestic demand, triggering further monetary easing by the People’s Bank.”

Among other key risks this year, infrastructure — a key part of Beijing’s stabilization strategy — has remained stubbornly weak.

Infrastructure investment grew just 3.8 percent in 2019, decelerating from 4 percent in January-November, despite sharply higher local government bond issuance and other policy measures.

“This shows that local governments continued to face funding constraints,” said Tommy Xie, China economist at OCBC Bank in Singapore.

Some analysts are also worried about signs of cooling in
the housing market, a key economic driver.

Property investment growth hit a two-year low in December even as it grew at a solid 9.9 percent pace in 2019. Property sales fell 0.1 percent, the first annual decline in five years.

Beijing has worked for years to keep speculation and home price rises in check, and officials vowed last year they would not use the property market as a form of short-term stimulus.

China will roll out more support measures this year as the economy faces further pressure, Ning Jizhe, head of the Statistical bureau told a news conference.

Ning noted that per capital GDP in China had surpassed $10,000 for the first time last year. But analysts believe more painful reforms are needed to generate additional growth.

Beijing has been relying on a mix of fiscal and monetary steps to weather the current downturn, cutting taxes and allowing local governments to sell huge amounts of bonds to fund infrastructure projects.

Banks also have been encouraged to lend more, especially to small firms, with new yuan loans hitting a record 16.81 trillion yuan ($2.44 trillion) in 2019.

The central bank has cut banks’ reserve requirement ratios (RRR) — the amount of cash that banks must hold as reserves — eight times since early 2018, most recently this month. China has also seen modest cuts in some lending rates.

Analysts polled by Reuters expect further cuts in both RRR and key interest rates this year.

But Chinese leaders have repeatedly pledged they will not embark on massive stimulus like that during the 2008-09 global crisis, which quickly juiced growth rates but left a mountain of debt.

Containing financial system risks will remain a high priority for policymakers this year. Corporate bond defaults hit a new record last year, while state-linked firms had to step in to rescue several troubled smaller banks.

Even with additional stimulus and assuming the trade truce holds, economists polled by Reuters expect China’s growth will cool this year to 5.9 percent.