U.K. Opens Bidding for New Round of Shale Gas Exploration

Jul 28, 2014 8:30 am ET

(Updates with Greenpeace comment in last paragraph.)

July 28 (Bloomberg) -- The U.K. began the bidding process for the next set of onshore oil and gas exploration licenses, including shale that is considered a cheaper and more secure energy source.

The Department of Energy and Climate Change set out the details, which include planning guidance for areas of outstanding natural beauty, national parks and world heritage sites. About half the U.K. will be open for bids.

“Shale gas in Britain has the potential to provide us with greater energy security, jobs and growth,” new Business and Energy Minister Matt Hancock said in an e-mailed statement. “We must act carefully, minimizing risks, to explore how much of our large resource can be recovered to give the U.K. a new home- grown source of energy.”

The government is offering tax breaks to drillers, and has pledged to ease planning rules, to allow companies to begin shale extraction faster. An area in northern England known as the Bowland basin may hold 1,300 trillion cubic feet of gas, enough to supply the country for almost half a century, if just 10 percent is extracted. Home-grown supplies cut dependence on imports amid declining reserves of oil and gas in the North Sea.

The U.K. is competing with Poland to lead development of the resource in Europe and replicate a shale boom in the U.S. that made it the world’s largest producer of oil and gas. IGas Energy Plc and Cuadrilla Resources Ltd. are leading efforts in U.K. exploration following the lifting of a moratorium at the end of 2012.

Extraction Report

Against the prospect of lower energy prices, ministers must consider the unpopularity of shale extraction. Hydraulic fracturing, which pumps water, sand and chemicals at high pressure to release fuel trapped in underground shale rock, may cause water shortages in parts of the country and cause house prices to drop, according to a report this month by Scientists for Global Responsibility and the Chartered Institute of Environmental Health.

Opponents are concerned that the drilling technique known as fracking may also cause water contamination, an increase in heavy goods vehicles along narrow lanes and an industrialization of the English countryside. Last year, protesters in the village of Balcombe, south of London, halted exploration work by Cuadrilla. Last week, a planning application by Celtique Energie Ltd. was rejected by local authorities because of objections by the community.

“The Government has fired the starting gun on a reckless race for shale that could see fracking rigs go up across the British countryside, including in sensitive areas such as those covering major aquifers,” Louise Hutchins, a Greenpeace energy campaigner, said in a statement.