Interest and activity are gathering momentum in the emerging UK shale gas sector, with Cuadrilla Resources looking beyond its existing Bowland basin assets in northwest England and setting its sights on a recently spudded shale well south of London in the Weald basin in West Sussex.

In addition to Cuadrilla’s firm drilling plans in these areas, recent political maneuvering also has flagged the northeast of England, as well as London, as likely prime fracturing locations. As a result, the shale gas industry is starting to feature heavily in the wider media and catch the public’s attention.

Balcombe drilling plans

Cuadrilla received all the necessary permits in late July from the UK Department of Energy and Climate Control and during the last weekend in July geared up to drill a new well near the small West Sussex village of Balcombe.

This changed when protestors blocked the site, with the operator delayed for several days before eventually spudding the well on Aug. 2. The well has a working name of Lower Stumble and lies in Petroleum Exploration and Development License (PEDL) 244 in the Weald basin.

Cuadrilla noted that the single well near Balcombe is for “exploratory drilling only and will not include hydraulic fracturing” at this stage. The company plans to drill and take samples of the underground rock in a vertical well drilled to a depth of around 3,000 ft (914 m). A possible horizontal leg of 2,500 ft (762 m) also may be drilled from the vertical well, depending on the results of sampling in the vertical.

Neither the vertical nor the horizontal well will be hydraulically fractured intially. If oil or gas is discovered, a short flow test will then be carried out requiring fracing. Cuadrilla said that the well will take two to three months to drill, including an acid wash.

“If Cuadrilla finds oil or gas, a series of extensive technical, environmental, and public consultations would take place before any further decisions are made,” the company said.

Bowland basin focus

While Cuadrilla is keen to test prospects in West Sussex, its largest play in the UK remains the Bowland basin in Lancashire in northwest England.

The company experienced a fierce public backlash in 2011 when minor tremors were caused by early fracturing work in the basin. But following extensive work with the government and the local community, Cuadrilla is now back to the stage of planning more drilling there. The operator is looking to spud six wells in PEDL 165 and wants to flow-test these wells with the use of fracturing techniques.

Cuadrilla is first conducting an environmental impact assessment for the drilling before applying for permits to get activity under way. The application is expected to take place this year.

The company also will apply for planning consent to drill up to three further vertical exploration wells. These will not be hydraulically fractured. They will allow additional rock samples to be taken and further improve knowledge of the subsurface geology. The locations of these wells will be discussed with the community before being finalized.

A further stage in determining how much of the natural gas reserves can be recovered from the shale would be to test gas flow from some of the hydraulically fractured exploration wells over an extended period.

In June UK gas major Centrica acquired a 25% stake in PEDL 165 from Cuadrilla and AJ Lucas for US $60.6 million. Centrica also will pay exploration and appraisal costs of up to $90.9 million.

One operator not planning on joining the UK shale scene at this stage is Shell. The major has said there is no certainty as to whether shale will succeed in the UK and is instead looking to North America, China, Ukraine, and Russia for its international shale investments.

Francis Egan, Cuadrilla CEO, said, “The purpose of all our ongoing exploratory work is to demonstrate that natural gas can be produced from the shale in commercial quantities. By sharing our plans for the exploratory program, we hope that people will have an understanding of what we plan to do and why.”

Tax breaks

Recently, the UK government revealed much-publicized plans to give tax breaks to companies involved in the country’s shale gas industry.

The government proposed cutting the tax on some of the income generated from producing shale gas by more than half from 62% to just 30%. UK Chancellor George Osborne said in a government statement, “We want to create the right conditions for industry to explore and unlock that potential in a way that allows communities to share in the benefits. I want Britain to be a leader of the shale gas revolution because it has the potential to create thousands of jobs and keep energy bills low for millions of people.”

Regarding the proposal, Egan told E&P, “Cuadrilla welcomes the publication of the government’s consultation on a proposed tax regime for the emerging shale gas industry. We will need to carefully consider the details in full regarding what these mean for Cuadrilla. While we are still in the exploration phase, we believe that shale gas has the potential to make a considerable contribution to the UK’s energy supply and security while at the same time creating thousands of jobs and generating very significant tax revenues and community benefits.”

London calling?

London Mayor Boris Johnson caused some controversy recently by giving his backing to the shale gas sector potentially focusing on London if it means a source of cheaper gas to meet the city’s huge energy demand and bills.

The gap between London’s energy supply and demand will drop to just 2% in two years, which will force some industries not to operate at peak times, Johnson said.

“If reserves of shale can be exploited in London, we should leave no stone unturned, or unfraced, in the cause of keeping the lights on,” he said in a statement. “It’s time for maximum boldness in energy supply.”

While fracing in London is unlikely for various reasons – including financial, logistical, and public opposition, to name a few – there are a few smaller companies with licenses nearby. These are for conventional exploration but do not rule out shale activity.

Northdown Energy Ltd. holds PEDL 245, which lies within the London M25 orbital motorway. Other companies that hold acreage near the city are Reservoir Resources (PEDL 236) and Magellan Petroleum Corp. (PEDL 246). These licenses and others near Cuadrilla’s West Sussex license could be the best solution of producing gas in a far less densely populated area and transporting the gas to London.

Unclear future

For now the UK’s fledgling shale gas industry is still taking its first nervous steps as it tries to find the best path toward extracting as much cheap gas as it can while upsetting as few communities as possible. But with politicians growing increasingly eager to chime in with their own sound bites, this hot topic will take some time to cool down.

UK SHALE GAS RESERVE REPORT

The British Geological Survey (BGS) recently issued an estimate for in-place shale gas reserves in an area between Wrexham and Blackpool in the northwest of England and Nottingham and Scarborough in the east. The lower limit of the range is 23.3 Tcm (822 Tcf) and the upper limit is 64.6 Tcm (2,281 Tcf). The median estimate was set at 37.6 Tcm (1,329 Tcf). BGS is due to release another report on more areas, including southern England, in the near future.

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