UK shale acreage attracts top oil companies

14 Jun 2013

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Owners of prospective UK shale acreage turned down interest from four of the world's biggest oil companies Exxon Mobil Corp, Royal Dutch Shell PLC, Total SA and Statoil ASA favouring a deal with Centrica PLC, The Indian edition of The Wall Street Journal, Indian edition reported, citing a person familiar with the matter today.

The largest energy retailer in the UK, Centrica, owner of British Gas, was favoured on considerations of its perceived ability to more easily manoeuvre through political risks, according to the person.

"Centrica's expertise in the energy sector as both an operator and developer provides a welcome boost for the growth of shale gas in the UK," said UK energy minister Michael Fallon in a statement after the company announced yesterday that it would invest up to £100 million in the Bowland shale formation, with an initial acquisition of a 25-per cent interest for £40 million from Cuadrilla Resources Ltd, the UK's leading shale-gas explorer, and Australian energy-and-mining company AJ Lucas Ltd.

The deal highlights the increased interest in UK shale gas reserves as the government there sought replication of the North American shale gas revolution that had transformed the US energy market.

A shale gas boom could assist in shaking off economic stagnation with the lowering of cost of energy for businesses and consumers, and creation of jobs. Shale gas has though, yet to be produced in the UK.

Meanwhile Centrica would invest £160 million into the controversial fracking fields around Blackpool the site of two minor earthquakes in 2011, the company announced today.

Centrica, the parent group of British Gas, said it would take a 25-per cent stake in six wells in Lancashire bringing it into partnership with current operators Cuadrilla, whose chairman is former BP boss Lord Browne.

The hunt for shale gas has run into much controversy with local campaigners and environmentalists raising concerns over potential  pollution of underground water reserves and the industrialisation of the countryside.

Fracking, a process in which rocks containing natural gas are blasted with water and sand – was suspended for 18 months in the UK in the wake of the two seismic events but has since been received the go ahead as safe to resum.

According to Francis Egan, chief executive of Cuadrilla, the announcement represented a ''significant step'' in the efforts to exploit shale gas in the UK. Estimates suggest reserves in a certain area alone could provide 70 years of domestic supply although the amount of gas that could be recovered and at what cost was not known.

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