New laws allow for exploration and hydraulic fracturing under national parks
The United Kingdom’s Oil and Gas Authority awarded 93 new licenses to explore for oil and gas last week. Around 75% of those exploration licenses relate to shale oil and gas, which will likely require companies to use hydraulic fracturing to produce. The areas covered by the licenses include 159 blocks of land located mostly in the North East and North West of England, reports BBC.
“We need to get shale gas moving,” said Britain’s Energy Minister Andrea Leasdsom.
The new licenses were offered one day after the British Parliament approved new legislation that will make it possible for companies to explore for shale gas under national parks. Companies will still need to apply for permission to build rigs and drill from local and central authorities before beginning operations.
Companies awarded licenses last week include Cuadrilla Resources, IGas Energy and GDF Suez, the French utility. Switzerland-based petrochemical company Ineos was awarded the most licenses with 21, meaning the company will have one million acres of British land under exploration, reports The New York Times.
Ineos plans to spend $600 million in exploration
Ineos operations one of two gas crackers in the U.K., employing 4,000 people across the country, according to the company. Ineos said that it can use natural gas from shale exploration as feedstock for its petrochemical business, or to power its facilities. The company has also promised to give 6% of its shale gas revenues to homeowners, landowners and communities who live above its shale gas operations. Ineos believes its contributions to the community will total 2.5 billion pounds ($3.72 billion) over the life of its business.
Ineos Upstream CEO Gary Haywood said the company has committed to spending 400 million pounds ($600 million) on exploring the company’s new licenses. Haywood estimates that two to three years of test drilling and hydraulic fracturing would be needed to determine whether shale gas can be produced from the area.
Developing the U.K.’s shale industry
British majors like BP (ticker: BP) and Shell (ticker: RDSA) have so far steered clear of exploring for shale gas in the U.K. due to the high level of controversy surrounding the issue, and uncertainty over how economical the assets in place are. Exploration from companies like Ineos could help grow interest in the U.K.’s shale industry, helping petrochemical companies like Ineos source more of their feedstock domestically.
Despite the potential to produce more natural gas inside of the U.K., and meet Prime Minister David Cameron’s goal of closing Britain’s remaining coal-fired power plants by 2025 in favor of natural gas, a great deal of opposition remains. Many companies already hold licenses to explore for shale gas, but have put off drilling.
“Spreading the fracking threat to new areas will only increase opposition to it,” said Rose Dickinson of Friends of the Earth. “Despite having had licenses for years, the industry still hasn’t been able to persuade anyone to give fracking the go ahead.”
Local and central governments have a say in permitting drilling
While Parliament’s decision to allow companies to explore under national parks seems like a move in the right direction for developing the U.K.’s shale gas resources, companies still face a long application process. Local and central government bodies will still need to give the greenlight before companies like Ineos will be able to begin exploration of their new licenses, a process that could take some time.