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UK gas-price hike good news for shale

Scottish Power plans to raise domestic UK gas and electricity prices by 19% and 10%

UTILITY Scottish Power’s plans to raise domestic UK gas and electricity prices, by 19% and 10% respectively, from 1 August is bad news for 2.4 million consumers. But it could be good news for the country’s shale-gas development prospects, according to Cuadrilla Resources, one of the companies hoping to develop the resource.

Scottish Power’s UK retail director, Raymond Jack, said the price hikes are the result of “sustained increases” in costs – with wholesale prices for an average customer rising by around 30% since November 2010.

Jack also blamed the “rising burden of non-energy costs” for the price increases, such as the cost of meeting government environmental and social programmes, and of improving electricity distribution on the national grid.

Mark Miller, Cuadrilla’s chief executive, told Petroleum Economist that higher natural gas prices for UK consumers could make shale-gas production more palatable to the general public. “The price rises could have a positive impact on shale gas ... which could have a downwards effect on prices,” Miller said.

Cuadrilla recently claimed there could be trillions of cubic feet of shale gas in the Bowland Shale basin, in Lancashire, northwest England. If this is confirmed, this large new supply source could potentially ease pressure on UK natural gas prices.

Miller did not specify a reserves figure for its Bowland basin acreage, but said Cuadrilla’s initial results from tests on its first two wells were encouraging. The company is assessing the basin’s resource potential and having estimates independently verified.

Cuadrilla has been in the media spotlight in recent months: because of concerns that hydraulic fracturing (fracking) at its two drilling sites in Lancashire could contaminate water supplies; and following a British Geological Society (BGS) statement that fracking could “possibly produce earthquakes”.

A 2.3 magnitude tremor hit the Fylde coast on 1 April, followed by a similar one, measuring1.5 on the Richter scale, on 27 May. The BGS said the epicentre of the second tremor was within 2 km of one of Cuadrilla’s drilling sites.

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