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Britain to launch shale licensing round next summer-govt

Source: Reuters - Tue, 17 Dec 2013 03:22 PM
Author: Reuters
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LONDON, Dec 17 (Reuters) - Britain will launch its latest licensing round to allow companies to explore for shale gas in early summer and it forecast high interest, showcasing Britain as one of Europe's main contenders in the race to exploit shale gas resources.

Geological studies show Britain to have large shale reserves that could reverse a rising dependency on energy imports, but more drilling is needed to see whether the deposits are economic as gas has not yet been proved to flow from the rocks.

Unveiling an environmental assessment on the impact of further shale drilling in Britain, Energy Minister Michael Fallon told reporters on Tuesday he expected strong demand for the licensing round scheduled for mid-2014.

"We could be doubling the amount of onshore licences in this round," Fallon said, adding the government expects to issue 50-150 licences.

The round, Britain's 14th tender to open up onshore areas, has been delayed by around four years after the licensing process was suspended in 2010 following earth tremors caused by shale gas exploration in Lancashire, northwest England.

The government's support for shale development comes despite strong local and environmental opposition to the controversial extraction practice of hydraulic fracturing, or fracking, used to develop shale and unconventional gas blocks.

Engineering consultancy AMEC, which published the environmental assessment for the government, estimated a maximum of 2,880 wells could be drilled under the new licensing round, each producing roughly 86 million cubic metres over a 20-year lifetime.

"Today marks the next step in unlocking the potential of shale gas in our energy mix," Fallon said, adding that in a high-activity scenario, Britain could produce more than three times the country's current gas demand in the 2020s, creating up to 32,000 jobs.

"But we must develop shale responsibly, both for local communities and for the environment, with robust regulation in place," he added.

Before the licence round is given the green light, the government must consider responses to its environmental impact report as part of a consultation that will be open until March 28.

The environmental report found existing regulations would be robust enough to ensure that the adverse effects of shale gas production, which critics say include water contamination and heavy traffic near drilling sites, are minimised.

Separately in a letter made public on Tuesday, British Prime Minister David Cameron warned the European Commission not to propose European Union-wide legislation to regulate the nascent fracking industry.

Companies have shown a growing interest in Britain's shale gas over the last year, encouraged by a geological study that doubled an estimate of the country's gas resources, and new tax breaks to support shale development.

France's GDF Suez and Britain's Centrica, two heavyweight energy firms, have signed up for positions in UK shale, while oil company Total has said it would like to explore for shale in the country.

The government's director of oil and gas licensing and exploration, Simon Toole, told reporters oil and gas majors as well as smaller firms had declared interest in the new round.

The industry welcomed the government's assessment.

"Having the regulatory process written in one place is extremely helpful and underlines the extensive nature of regulation of oil and gas exploration in this country, which is among the most comprehensive in the world," said Ken Cronin, chief executive of the UK Onshore Operators Group.

In the United States, the discovery of shale gas has transformed the energy market and helped bring down prices for consumers.

Britain is one of the only European countries actively supporting the development of shale gas, along with nations in eastern Europe such as Lithuania and Poland.

The British government has offered a tax incentive scheme to developers of shale gas in Britain.

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