Following poor success across Europe, including Poland, Ukraine, France, the Netherlands, and Denmark, the UK now remains the last candidate province for European shale gas and oil in the near term. And a fracking moratorium in Scotland has further reduced that to England & Wales. The British government is in favour of developing the resource and opened up significant acreage in the 14th Onshore Round. Nonetheless, some resistance remains.
Meanwhile, North Sea production has been waning and the current deficit amounts to around 1 trillion cubic feet (Tcf) per annum, with the figure set to double over the next 20 years. 1/3 of gas imports come from either Russian fields or LNG supplies of mixed provenance. And with ‘Brexit’ looming, it will be vital for the UK economy to secure long term, reliable energy.
Figure 1. Falling North Sea gas production could create a huge energy deficit
The British Geological Survey has estimated around 1300 Tcf GIIP (P50) for the Bowland Shale in Northern England and 4.4 Billion barrels (Bbbl) OIIP for the southern Weald Basin. A further 80 Tcf GIIP and 6 Bbbls OIIP (P50) have been inferred for the Scottish Midland Valley but – due to the fracking restrictions – this basin is off-limits for the foreseeable future. Smaller CBM potential has also been identified within a number of coal measures in Wales and the English midlands.
Figure 2. UK shale gas licences and key shale plays
The recent news that Third Energy will be allowed to frack an existing well at Kirby Misperton in North Yorkshire has been met with cautious optimism. The upstream operators and investors are generally cheered by the progress but are keeping their expectations in check for a few reasons, not least being that both regulatory process and limited onshore drilling capacity suggest it will still be only a handful of wells per year for the near term. Looking ahead, here are the likely main players:
- INEOS holds 35% of the net licensed acreage and has promised to drill up to 30 shale wells – the first planning application went in at the beginning of 2017. INEOS owns Grangemouth refinery in Scotland and is keen to identify domestic condensate feedstock sources;
- Cuadrilla has begun site preparations at Preston New Road in Lancashire, but will not drill until Q2. The company faced significant local opposition but has obtained permission to drill up to four wells at the site following Central Government intervention, and may still get consent to drill four more at the nearby Rosacre Wood site;
- IGas has some investor issues at the moment which are likely to hamper any aggressive push on their unconventional assets although they do have a pending application alongside Egdon Resources;
- Egdon is mainly focussed on its conventional assets in the near term;
- ENGIE, Total, Centrica have taken up substantial acreage but have been more reserved in their approach with Total and Centrica content to participate rather than operate;
- UK Oil & Gas is focused on the Horse Hill tight reservoir discovery near Gatwick but has some prospective shale acreage in the Weald Basin;
- A number of other significant players – including Horizon Energy Partners and Hutton Energy – are keeping cards close to their chest for the time being.
Over 12,300 sq km of prospective acreage has been licensed to 24 companies.
Figure 3. UK shale acreage holders (net sq km)
To date only Cuadrilla has actively drilled for shale gas, with six wells (including two sidetracks) in Lancashire during 2010 – 2012. Only one of these was fracked – Preese Hall 1 – but seismic activity was detected during testing and led to suspension of operations. A number of earlier wells intercepted the shale horizons and have contributed to preliminary play mapping.
Nonetheless, even if INEOS, Cuadrilla, and the other companies successfully drill their 14th Round commitments, there will still only be around 50 exploration shale wells. Compare this to 74 in Poland (far less the thousands in the US) and it becomes obvious that the UK will need to be fortunate to gather substantial data. This links with the energy supply perspective that unconventional reservoirs are not expected to become a significant part of the domestic energy mix in the near to medium term. Longer term/industrial development of shale is of course highly reliant on adequate data gathering and a consistent investment environment – it’s still too early to make a call on either. The Horse Hill oil discovery does provide some potential relief as successful development of this tight reservoir may stimulate onshore E&P.
In terms of shale play development, there is a long way to go but Third Energy’s planned frack at Kirby Misperton and Cuadrilla’s expected spud in Q2 lie on the immediate horizon, with INEOS and possibly IGas to join the party later in the year. This hardly amounts to exciting times for the UK sector, but at least it is encouraging that there will soon be some real data and results to work with, and hopefully the foundations will be set for a more vibrant industry in the medium term.
Thoughts? Comment below.
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