Will the 14th licensing round kick-start fracking in the UK?

Fracking sign
Source: DollarPhotoClub

In a decision Ken Cronin, chief executive of the fracking industry body UKOOG, called a “vital day for the future of energy in the UK”, the country’s Oil and Gas Authority (OGA) awarded E&P companies 93 licences to explore 159 blocks of land. The licences are predominantly in the North East and the North West of England, but with additional licence blocks in the Midlands, the South of England and Wales. Of these around 75 percent relate to shale gas and oil and will require hydraulic fracturing.

The Oil & Gas Authority said a total of 95 applications for licences were received from 47 companies, covering 295 Ordnance Survey Blocks. Among the biggest winners were INEOS, with 21 licences covering a 700,000 acre area in the North West of England, North Yorkshire and East Midlands, Cuadrilla with 16 licences across 300,000 acres in Yorkshire, IGas and Southwestern Energy.

Other companies granted exploration and development rights include: Alkane Energy, Arora Energy Resources Ltd., GDF Suez E&P U.K., Hutton Energy, Total E&P UK and Island Gas Ltd.

INEOS retained its position as the biggest British shale company with the latest licensing round increasing the company’s acreage to 1 million.

All in all, shale operator have gained access to about 5,000 square miles in England where they plan to drill up to 68 gas wells over the next 5 years. This is on top of 1,000 square miles awarded to fracking firms over the summer.

Commenting on the development, OGA chief executive Andy Samuel said: “I am pleased that the 14th Onshore Round attracted strong interest and a high quality of proposed work programmes. This round enables a significant amount of the UK’s shale prospects to be taken forward to be explored and tested.”

The support of the UK government for shale exploration has been no secret ever since Prime Minister David Cameron vowed to “go all out for shale” back in January 2014.

Following the new licensing round, and responding to a request by the Guardian newspaper for a comment, Chancellor George Osborne said: “Like lots of other countries, we in Britain should be in favour of new forms of energy like fracking that can lead to lower family bills, more jobs and lower carbon emissions for our environment,” adding, “With our new wealth fund, I’ve also made sure the money raised in profits is spent to benefit our local communities, something that didn’t happen in the past.”

He also assured that “before any fracking work can begin (…) there will need to be full checks to make sure it is safe and safeguards the environment.”

Similar assurances came from INEOS, which has stakes in all of what are thought to be the UK’s most promising shale basins, which said in a statement it was “committed to full consultation will all local communities.” It has also pledged to share 6 percent of revenues generated by its shale business with local inhabitants – with 4 percent going to landholders in the area and 2 percent to the local community.

The company also said it is looking at shale gas projects in areas such as Fort Worth, Texas, for lessons on how fracking in more densely-populated regions can be achieved.

There is a sense of impatience within the British oil and gas industry and the feeling that shale projects have been stalled for too long. The results of the new licensing round were received with optimism but tempered with the realization that there is still al long way ahead for the UK shale industry.

“Today marks the end of the beginning for Britain’s shale odyssey. This decision paves the way for the next wave of exploration and will allow us to determine how much of Britain’s shale resources can be exploited,” said the Institute of Directors’ senior energy adviser Dan Lewis, adding:

“The evidence for the benefits of shale is irrefutable and exploration must now be allowed to begin. It is important that country gets behind what could be the next energy boom in the same way we did with the North Sea. If we lose this opportunity, we will be sacrificing jobs, manufacturing, tax revenues and increasing our reliance on foreign gas.”

Upon receiving the licenses, the operators can start planning their future strategies for exploration activities, which is a step forward. Having said that, these plans will still be subject to further local planning, safety, environmental and other authorisations, and as Cuadrilla’s example clearly illustrates, that can be a long and arduous process.

Patrick Erwin, commercial director of INEOS Shale, acknowledged both the progress made and the long road that still lies ahead, when he said: “The government has done quite a lot to facilitate the early development of shale, I think the combination of the various legislative changes they have made to make sure the planning permission works expeditiously are enough to mean we can explore.”

“I think there will need to be more reforms as we move towards large-scale production. (…) “There is nothing technically in the way of exploring these basins in the next two-to-four years and being in a position to start meaningful production toward the end of that decade. The thing that will slow that down is if government cannot deliver on making the planning system work,” he added.

It is also difficult – he noted – to exactly assess the potential of the various licences without exploration work and therefore the company is likely to seek planning permission in most of the geographic regions it has licences.

“We don’t know which of these are going to work until we do the exploration work, so there has to be a parallel track approach,” Erwin said.

The results of the December licencing round – welcomed by the industry – understandably unnerved the environmentalists.

“The government is ignoring evidence of the risks and the wishes of local communities, by weakening regulation and opening up more of the country to fracking,” said Rose Dickinson of Friends of the Earth.
“Spreading the fracking threat to new areas will only increase opposition to it. Despite having had licenses for years, the industry still hasn’t been able to persuade anyone to give fracking the go ahead.”

The U.S. Energy Information Administration estimates the UK has about 26 Tcf of shale gas and 700 million barrels of shale oil and condensate in its Carboniferous and Jurassic shale regions alone. Figures from the British Geological Survey show the UK’s Bowland Basin could hold an estimated 40 Tcm (1,329 Tcf) of gas in place, while Midland Valley could contain an estimated 2.4 Tcm (80.3 Tcf) of gas in place plus 6 Bbbl of oil.

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