The British government plans to make more land available for licensing for oil and natural gas exploration in the first such expansion since 2008.
The move, which had been anticipated by the oil and gas industry, could prove to be a milestone in efforts by the government of British Prime Minister David Cameron to encourage the extraction of natural gas and oil from shale rock. The government wants new sources of oil and gas to help replace Britain’s declining offshore production in the North Sea, to create jobs and to ease growing dependence on fuel imports, especially from Russia.
Cameron and his colleagues have said that abundant shale gas and oil have increased the economic competitiveness of the US, and they want to see if Britain, too, can benefit.
“Unlocking shale gas in Britain has the potential to provide us with greater energy security, jobs and growth,” British Business and Energy Minister Matthew Hancock said in a statement released just after midnight yesterday.
Shale gas exploration has been progressing at what seems to be a slow pace, but operators say the gradual changes Cameron has made to Britain’s regulations are giving the country a chance to emerge as an attractive destination for shale investment.
Other European governments have been harder to convince that shale gas is worth the potential political unrest. Many Europeans worry that the hydraulic fracturing technique, known as fracking, that is used in shale production could pollute underground water supplies and lead to other environmental damage.
France has banned fracking, while Germany has in place a de facto moratorium on the practice.
Some East European countries, which want to ease their dependence on Russia, have been more receptive to the shale gas industry. In Poland, for example, more than 50 wells have been drilled. The results have been inconclusive. Some large companies like Exxon Mobil and Italy’s Eni have pulled out, but smaller companies are still trying to work out the right techniques to tap the rocks.
The overall reluctance to exploit shale gas reduces Europe’s energy options — a point highlighted by the confrontation between Russia and Ukraine. With gas production in the EU declining and Germany phasing out nuclear energy, there seems to be little alternative but a heavy reliance on Russia, which supplies about one-third of the gas consumed in the union.
People in the industry say that the response to Britain’s new round of licensing will be an important indicator of whether the government’s policies are succeeding. So far, the British shale industry has been the province of a few small companies, limiting the capital that could be applied to drilling programs. Those limitations seem to be easing: Total of France made a shale gas investment in Britain this year; Centrica, a British utility, and GDF Suez, a French energy company, both announced similar moves last year.
It will likely be several months before new licenses are awarded.
According to a map published by the government, a large portion of Britain will now be open, at least theoretically, to bids from energy companies for drilling rights. The government, however, expects new bids to focus on land near existing license areas in the Midlands, central Scotland and an area of southern England known as the Weald Basin.
In the past two years, the British Geological Survey, a research organization, has published estimates showing there could be substantial amounts of oil and natural gas locked in the shale rock in those regions.
Whether any of this potentially vast resource can be commercially exploited will not be known until energy companies are able to complete extensive drilling and testing programs.
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