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British Geological Survey study boosts UK gas hopes

A long-awaited report from the British Geological Survey points to vast unconventional gas resources, writes Justin Jacobs

The push to explore the UK’s shale-gas fields received another boost today with the release of a long-awaited report from the British Geological Survey (BGS) finding that the country could have vast resources.

The BGS estimates total gas-in-place figures for the Bowland basin in the north of England range from 822 trillion cubic feet (cf) on the low end to 2,281 trillion cf on the high end. The central estimate for gas-in-place in the basin is 1,329 trillion cf.

The report emphasised that there is not enough data to estimate recovery rates for the Bowland basin, so it is not known how much gas will ultimately be producible, though typical rates in the US have been around 10%.

If recovery rates in the Bowland basin do turn out to be similar to those seen in the US, even the BGS’ low-end estimate would translate into 82.2 trillion cf, dwarfing the UK’s conventional gas reserves of 1.7 trillion cf.

The 48-page report will give geologists plenty to pore over. Interestingly, the BGS split the estimate between an upper, or shallower section of the Bowland shale, and a lower, or deeper, section of the area.

According to the BGS: “The upper unit is more prospective, primarily due to the better well control which demonstrates its closer resemblance to the prolific North American shale gas plays, in which the productive zones are hundreds of feet thick. The lower unit is largely undrilled, but where it has been penetrated it contains organic-rich shale intervals, whose lateral extent is unknown.”

Although better understood and more prospective, the resource estimate for the upper section makes up a much smaller proportion of the total gas-in-place estimate. The mid-range gas-in-place estimate for the upper section is 264 trillion cf, or around 20% of the total 1,329 trillion cf. The mid-range estimate for the less-understood lower section, meanwhile, is nearly five-times as high at 1,065 trillion cf. The sections overlap in many areas but the lower section covers a much larger area, which will likely influence where companies choose to invest. (map can be found here)

The report comes less than two weeks after British gas supplier Centrica bought a 25% stake in privately-held Cuadrilla Resource’s PEDL165 licence in the north of England. Centrica committed £100 million ($152.95m) in cash and exploration spending commitments up front as part of the deal and a further contingent payment of £60m towards development costs if early exploration is successful. Perhaps more important was that Centrica became the first company with significant financial resources to back UK shale-gas exploration.

Tony Carruthers, Cuadrilla’s commercial director, called the deal “a ringing endorsement of the UK’s shale potential.”

Centrica was not the only company interested in Cuadrilla’s acreage. Majors ExxonMobil, Shell, Total and Statoil were all involved in talks with Cuadrilla, according to a Wall Street Journal report. Centrica won out in the end because it was thought the company, with its history of working with the UK government, would better be able to navigate the tricky politics of shale gas in the UK, according to the report.

At least one of those companies remains interested in UK shale. French major Total is not in talks with any other acreage holders, but is interested in the long-delayed 14th onshore bidding round, an advisor to the company told a conference earlier this week

While the industry is growing increasingly interested in the UK’s shale-gas resources, the government is trying to win over the public. Alongside the BGS report, the government announced a series of financial incentives for those near shale-gas exploration sites. Shale-gas drilling is an intensive industrial activity that can be disruptive to local communities. To compensate for that disruption the government has put forward a package of community benefits that includes £100,000 for communities near each exploratory well, 1% of revenues from every production site and other measures

“Shale gas represents an exciting new potential energy resource for the UK and could play an important part in our energy mix. The next step for industry is to establish how much gas is technically and commercially recoverable,” Energy Minister Michael Fallon said.   

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