U.K. shale drilling has been a slow process over the years and hasn’t warranted much attention, but recently things have begun to shake up a bit.
Tuesday, the U.K. had its very first sign of interest from a major oil player, as France’s Total SA (NYSE: TOT) announced it will begin looking into shale gas plays in Britain.
There’s plenty of action to be had. The Bowland shale in Cheshire, for example, is thought to hold between 822 and 2,281 trillion cubic feet of gas, according to ProactiveInvestors, an estimate worthy of exploration.
The announcement comes on the heels of plans by IGas Energy PLC (LSE: IGAS) – the U.K.’s biggest operator – to drill an exploration well in the Bowland during the current quarter in addition to its other projects.
The recent peak in interest of British shale probably has a bit to do with the success the U.S. has received from its own shale boom. The nation’s energy supplies are waning amid domestic natural gas declines, so now is as good a time as any to take a good hard look at any opportunity that presents itself.
But it won’t prove easy. There is strong opposition to the highly controversial technology of hydraulic fracturing, or fracking, that is needed to shake the gas from the shale rock.
Major companies have largely ignored the U.K. up to this point, and small companies have dominated the action.
IGas
IGas may be in the best position to turn the tides for the English. With about a decade of experience in onshore drilling in the northwest of England, north Wales, the East Midlands, and southern England, the company is expanding its portfolio and adding to what is already the U.K.’s largest collection of onshore operations.
The oil and gas company has been diligent this year, speaking with different landowners and industrial firms in both Lancashire and Cheshire to iron out possible upcoming deals. These deals would let IGas drill on land, while providing those landowners with precious supplies of gas.
New partnerships are likely to be formed in the coming months.
Negotiations with landowners and regulatory approval are still needed before IGas can drill new sites. But businesses are eager to deal, gaining access to any gas that is ultimately produced.
Many English firms could benefit greatly from an indigenous source of gas at their disposal.
IGas estimates there is as much as 172 trillion cubic feet of shale gas where it has obtained licenses, capable of single handedly satisfying Britain’s gas demand for decades to come.
The company has spoken with Essar Energy PLC (LSE: ESSR) and has had interest from glass and clay manufacturers, among others. Talks will continue. IGas drilling details are likely this week.
IGas is also keeping good public relations by including the public in its activities – a very important aspect moving forward if there is any hope to avoid protests like ones in recent history.
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Other Interests
Dart Energy (ASX: DTE) is active as well, looking to partner-up and develop its shale assets in the northwest of England.
It is also interested in Bowland shale prospects and has roughly 110 trillion cubic feet of estimated gas to its name.
There is an ongoing formal process to add one or more partners to work alongside Dart to begin exploration and drilling.
As for Total – the lone wolf of the giant oil companies with vested interest in the U.K. – it has begun talks to take a stake in at least one project at the onset, and it will consider bidding in a licensing round to take place next year.
It is unclear who Total will team up with at present.
Slow Going
At the end of the day, things are still moving rather slowly in the U.K. While there is a lot more chatter taking place, it’s still just that: chatter.
But in the next few months, we’re likely to see some of these negotiations realized. 2014 will be an important year for these companies as they begin exploring and eventually start fracking.
There has been no commercial shale gas production in the U.K. to date, and only a handful of exploratory drilling has taken place. That’s why reserve estimates are so skewed.
But it is happening. And the U.K. is gaining ground, even if it is slow for now. Itt won’t ever hit the large scale success seen by the U.S., but even if companies like IGas can exploit only 10 percent of their holdings, it would still be enough to supply U.K.’s gas needs into the next decade.
Companies aren’t going to ignore that.
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