UK shale explorer must wait months to resume fracing


UK shale explorer must wait months to resume fracing

LONDON -- The UK government will "soon" give a final decision on whether to give the green light to hydraulic fracturing, a process of extracting shale gas, as part of the government's broader gas strategy to be announced next week.

But it will be months before privately held Cuadrilla Resources Ltd., the only company using fracing for shale gas onshore in the UK, will be able to resume fracing operations as it will still need approvals from local authorities.

It's important for Cuadrilla to resume fracing so it can more accurately quantify how much of their estimated gas resource of 200 Tcf, or 5.6 Tcm, can be recovered.

Shale oil and gas exploitation in the U.S. has transformed the American energy market and there have been hopes of a similar transformation in the UK and across Europe. But many hurdles remain: companies are exposed to ever changing regulations, there are widespread public fears about the safety of shale exploitation, production costs are high and there is a shortage of equipment like drilling rigs.

In the past year, the British government has re-aligned its energy policy to encourage the construction of new gas-fired power stations in efforts to keep the lights on while reducing greenhouse gas emissions. It's even consulting on a "generous" new tax regime to open up the country's potential shale gas reserves.

But even if the government gave the go-ahead next week, the earliest that Cuadrilla could start fracking would be around the end of March, Cuadrilla Chief Executive Francis Egan told Dow Jones Newswires in an interview.

"You've got to go through the planning process, which involves environmental assessments and public consultations and then a decision by the council," Mr. Egan said.

"We just have to work our way through that process and that takes time and it will take a few months to go through that."

Cuadrilla obtained a license in 2008 to explore in Lancashire, northwest England, but had to halt fracing last year while it addressed concerns over the environmental safety of the process used to release the gas.

Environmental concerns have presented the biggest hurdle to shale gas development in the U.K. and elsewhere in Europe. Green groups allege that fracing, a technique which blasts the rock with sand, chemicals and water to release the gas, can contaminate groundwater. There are also fears that the drilling can cause earthquakes.

Three studies commissioned by the UK Department of Energy and Climate Change, or DECC, have concluded that it was safe to resume shale gas drilling at the current small scale. But DECC has been slow to give the final approval.

"We're carefully considering the results of the consultation and we'll make a decision on it soon," said a DECC spokesman.

British newspaper reports said the government is expected to give the go-ahead for fracing to resume next Wednesday alongside the publication of the gas strategy.

Exploration is still at an early stage in the UK, so a reliable estimate of the reserves can't be made.

A 2010 study from the British Geological Survey estimated that the potentially recoverable resources could be 150 Bcm of gas or almost two years of U.K. gas consumption. The BGS is working on a new resource estimate for the Bowland Shale around Blackpool where Cuadrilla is exploring.

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