Centrica Confirms Bowland Shale Deal

After widespread speculation, UK integrated gas firm Centrica confirmed Thursday that it has bought a 25-percent stake in the Bowland shale gas license in Lancashire, northern England.

In a move that will be seen as a major endorsement of the UK’s shale gas potential, Centrica reported that it has paid a sum of $63 million to Cuadrilla Resources and Cuadrilla’s major investor, Australia’s AJ Lucas, in order to acquire the 25-percent interest in exploration license (PEDL 165). Centrica has also agreed to pay exploration and appraisal costs of up to $94 million.

Rumours emerged last week that Centrica was in advanced talks with Cuadrilla about acquiring a stake in the Bowland shale.

So far in the UK no commercial shale gas production has taken place, but Cuadrilla has plans to begin the hydraulic fracturing of wells in the Bowland shale next year once it has completed a series of environmental impact assessments. Centrica said that once the exploration and appraisal phase is completed if it then elects to continue into the development phase it would make a further contribution of up to $94 million to the project.

Commenting on Thursday’s deal, Centrica’s managing director for its International Upstream business, Mark Hanafin, said:

“With North Sea gas reserves declining and the UK becoming more dependent on imported gas supplies, 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.

“The government’s clear commitment to developing the UK’s shale gas industry is creating the right environment for companies to invest and to deliver those benefits.”

Cuadrilla CEO Francis Egan said in a separate statement:

“Today’s announcement represents a significant step in our ongoing exploration programme for natural gas within the Lancashire Bowland Basin. Centrica, Cuadrilla and A J Lucas recognise the exciting gas potential that lies within the shale rock in Lancashire.

“Natural gas from UK shale can create thousands of jobs, generate significant tax revenues, reduce our ever increasing reliance on imported coal and gas and make a positive contribution to the country’s balance of payments.

“Centrica will bring to the Cuadrilla operated joint venture deep experience of all aspects of natural gas exploration, extraction and transportation and share the commitment of Cuadrilla and A J Lucas to explore for and develop this resource in a safe and environmentally responsible manner.”

Speaking to Rigzone, Ken Cronin, Chief Executive of the UK Onshore Operators Group, added:

“The announcement today is very good news for both Cuadrilla and the industry.”

A report issued last month by UK employers’ organization The Institute of Directors stated that a shale gas industry in the UK could support up to 74,000 jobs.


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