Commercial-scale UK shale gas extraction possible before 2020 – INEOS

Author: Tom Brown

2015/12/18

Shale gas pipes - Rex PicturesLONDON (ICIS)--Commercial-scale shale gas extraction remains a possibility in the UK before the end of the decade, but the onus is on the government to ensure that the legislation around the sector works smoothly, an INEOS director said on Friday.

Moves by the government to expedite the delays in the planning approvals process following protracted deliberations over applications by Cuadrilla in Lancashire, eventually leading to the government taking the decision away from local authorities, were welcomed by INEOS.

“The government has done quite a lot to facilitate the early development of shale, I think the combination of the various legislative changes they have made to make sure the planning permission works expeditiously are enough to mean we can explore,” said Patrick Erwin, commercial director of INEOS Shale.

“I think there will need to be more reforms as we move towards large-scale production,” he added.

The company more than tripled the land in the UK it has permission to explore for shale this week in the latest tranche of the UK’s 14th onshore oil and gas licensing round, bringing its total to 1m acres and making it the largest player in the nascent UK shale industry.

Although the sector has been slow to develop, due to a temporary moratorium in 2011, legislative challenges and bitter public opposition, the potential remains for commercial-scale shale gas extraction in the country before 2020, according to Erwin.

“There is nothing technically in the way of exploring these basins in the next two-to-four years and being in a position to start meaningful production toward the end of that decade. The thing that will slow that down is if government cannot deliver on making the planning system work,” he said.

INEOS has stakes in all of what are thought to be the UK’s most promising shale basins, Erwin said, and the company intends to begin the work of community outreach and starting to seek planning permission in most of the geographic regions it has licences.

“We don’t know which of these are going to work until we do the exploration work, so there has to be a parallel track approach,” Erwin said.

Although the geological, legislative and infrastructural conditions in the US shale gas industry differ from anywhere in Europe, INEOS is looking at shale gas projects in areas such as Fort Worth, Texas, for lessons on how fracking in more densely-populated regions can be achieved.

The company is also offering a 6% revenue share from the proceeds of any productive shale plays, with 4% going to landholders in the area and 2% to the local community, as a means of surmounting the lack of mineral rights conferred on property owners in much of Europe compared to the US.

The revenue share and detailed community dialogue ideas were initially rolled out in Scotland, where INEOS bought up shale gas exploration rights across swathes of the country, but the process ran aground after the government instituted a moratorium on fracking while additional research was carried out.

“We respect the process going on in Scotland, the moratorium’s made it a bit difficult to justify investment at the moment,” Erwin said.