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U.K. Fracking Ahead

Brian Hicks

Written By Brian Hicks

Posted April 30, 2013

Does the U.K. have a chance to become a shale gas producer like Texas? It’s a long-shot, but it could happen.

The Energy and Climate Change Committee recently reported that fracking is advisable in order to reach untapped natural gas reserves in shale-rich areas. The committee took into consideration the widespread protests against fracking; however, the committee urged the government and oil companies to handle the situation in such a manner that would persuade the public to go along with drilling.

super frackWith that being said, this could prove to be quite a hurdle in a country where fracking has gained a bad reputation. There would need to be quite a shift in consciousness in the way the British public feels about fracking, and it could take some time.

The committee was not so presumptuous as to surmise that more fracking would lead to a replication of what has taken place in North Dakota and Texas. Because of differences in “geology, public attitudes, regulations, and technological uncertainties,” according to Financial Times, a U.K. shale boom would be most unlikely.

But it does not mean that more drilling will have no effect on the British economy, which desperately needs uplifting. Supporters hope that more fracking would lead to lower energy bills and a decrease in imports.

The government already plans to invest heavily in North Sea and Atlantic drilling through tax breaks for oil companies and employment programs. Heavy drilling on the mainland would be another avenue worth exploring, especially considering a recent report by the British Geological Survey stating that U.K. shale reserves had been grossly underestimated.

According to a 2010 report, there could be as much as 5.3 tcf in the shale reserves of the U.K. Although the distribution composition is not well known, a good portion of the reserves is said to be concentrated in Northern England.

You can expect more reports in the future that would most likely exceed the 5.3 tcf estimate.

The only way to find more reserves so is to drill more wells, but the government has a long way to go in convincing the public.

Fracking Opposition

British officials are still trying to make nice with oil companies after a temporary ban on fracking in 2011. According to Reuters, the fracking ban was lifted several months ago amid tighter restrictions. The reaction to fracking stemmed from a few tremors that took place in Blackpool under the operation of Cuadrilla Resources.

But no major quake took place, and the government is showing leeway in allowing more fracking operations.

In fact, officials hope to cajole rural folk and local towns into supporting more drilling in exchange for lower energy rates and amenity perks such as sport clubs and community centers, according to an article by CNN. The areas in question are mostly in northwest and southeast England, places where vast shale reserves are sequestered.

The Energy Committee advised that all communities should benefit in hopes that more people will comply with drilling initiatives.

But the committee and the government are aware of fracking pushback, even among members of government.

Energy Secretary and Liberal Democrat Ed Davey signaled some doubt regarding shale’s potential to lower energy bills, but he still maintained a spark of optimism by declaring he wanted to see more evidence.

The national government seems to be getting on board with fracking, but let’s also factor in local leadership.

The Energy Committee also suggested that local officials should retain some control over operations. If local officials are in opposition to fracking—or any business proposals that the government or energy companies have submitted—it could very well turn into a political stalemate.

The Globe and Mail also addressed the issue of private landowners and property owned by the British Crown.

We may think of the crown as an entity above the economic fray, but in a gesture to show solidarity to her subjects, Queen Elizabeth has agreed to cutbacks of her own.

It is important to keep in mind that any attempts to drill on or acquire royal lands would most likely be subject to hefty homage to the Crown for the sake of replenishing the Queen’s coffers.

But the most powerful opposition will be the environmental community, citing water contamination, earthquake risks, and harmful chemical emissions as reasons to cease fracking operations—the same opposition arguments that have been made in the U.S.

Despite the heavy obstacles, there are companies using fracking on the mainland.

In a way, the opposition and tighter measures have worked in their favor because this has stamped out competition by detracting other companies from exploring the British Isles.

However, if more natural gas reserves are to be discovered, there must be more investment activity and oil companies coming to Britain.

British Shale Investments

Energy companies with an already active role on the British mainland will have first dibs on excess reserves if the political climate and public opinion permits more fracking.

According to The Globe and Mail, Finance Minister George Osborne proposed a tax allowance for shale gas development in hopes of attracting more oil companies.

It is obvious that the British government has a goal of following the American model of shale drilling by ushering in a business friendly atmosphere for oil companies.

Cuadrilla has drilling sites in “Singleton and Preese Hall on the Fylde coast, Anna’s Road near Lytham, and Banks, between Preston and Southport,” according to Lancashire Evening Post.

Obviously, Cuadrilla CEO Francis Egan was delighted with the Energy Committee’s report and hopes fracking will be expanded in Britain.

IGas (LSE:IGAS) is another company that has managed to operate 100 wells around the U.K., and the company is planning to drill two more wells in search of shale gas. Designations for the two extra wells are pending.

Locations for additional drilling are also being scouted in Sussex and Surrey, according to The Guardian.

IGas CEO Andrew Austin is willing to wait and see if Britain will undergo a shale boom of its own, but he does not rule out the possibility of finding more reserves.

Analysts are also hoping that companies like Royal Dutch Shell (NYSE:RDS.A), BP (NYSE:BP) and Centrica (LSE:CAN) will join IGas and Cuadrilla in joint ventures.

Whether or not Britain will be able to discover more reserves than the United States is up in the air for debate, but the untapped reserves could get the British economy back on track.

 

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