Last Thursday the parent company of British Gas, Centrica paid £40million for a 25% stake in the British owned Shale Gas explorer Cuadrilla.
The deal will also include a further £60million to be used for further licences with a contingent £60 million for exploration and production basis results of further studies. “This gives us an option of going into shale at a good price to establish what’s down there,” a Centrica spokesman said. The deal shows that UK shale gas exploration now has a route to market. Moving away from a lot of the hype, it is a signal to the market and consumers, when an energy giant invests directly into fracking, it is a sign that it is becoming economically viable. Furthermore, any discoveries can be put into the market directly whereas Cuadrilla or Igas on their own lack the necessary infrastructure to do so.
“With North Sea gas reserves declining and the UK becoming more dependent on imported gas, it is important that we look for opportunities to develop domestic gas resources, to provide affordable sources of gas to our customers, and to deliver broader economic benefits to the UK,” said Mark Hanafin, managing director of Centrica’s international exploration and production business.The irony in this particular case is Centrica previously owned the exact same well Cuadrilla is exploring.
Previous statements from Centrica show that they felt the well was uneconomical and very little gas there. However the deal does bode well for the UK government who are categorically supporting shale fracking. The market has also assisted Igas, another shale gas explorer listed on the AIM.
Opposition continues in Europe regarding fracking through both France and Spain. “We have to have our eyes wide open about what is going on in the U.S.,” Environmental and Energy Minister Delphine Batho said during a radio debate. “The reality is that the cost of producing gas doesn’t take into account considerable environmental damage.”