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Game Changer: Britain’s Shale Gas Bonanza

An area in northwest England may contain 200 trillion cubic feet of shale gas, putting it in the same league as some of the vast shale-gas plays that have transformed the U.S. energy industry.

The figure for the area near Blackpool, released Wednesday by Cuadrilla Resources, a small oil-and-gas company with operations in England’s Bowland Shale, highlights the U.K.’s emerging position as a new frontier for unconventional gas exploration. But it inflamed environmental groups who say the technology used to extract shale gas is environmentally damaging.

“We have as much gas per square mile in Bowland as the successful North American shale plays,” said Mark Miller, Cuadrilla’s chief executive, in an interview. He said the company found nearly four times more gas than it was expecting to discover.

The discovery of such vast resources—200 trillion cubic feet would be enough to meet U.K. gas demand for 64 years—comes at a time when the U.K.’s conventional gas fields are in steep decline and as it is becoming increasingly dependent on imports such as liquefied natural gas from Qatar and piped gas from Norway.

The exploitation of shale gas has revolutionized American energy markets, helping the U.S. in 2009 to overtake Russia as the world’s largest gas producer. Shale now accounts for about 20% of U.S. gas production, but total output is expected to quadruple in coming years. The boom has touched off a scramble for access to acreage in the Barnett, Marcellus and Haynesville shales in the U.S., where much of the new resource is concentrated.

Now the shale boom is beginning to spread to Europe, which also boasts large reserves of unconventional gas. But opposition from environmentalists has been fierce. Shale gas is produced using a technology known as hydraulic fracturing, or “fracking,” which involves injecting huge volumes of water, sand and chemicals deep underground, creating fissures—or fractures— that allow the gas trapped inside the shale rock to flow out. Critics fear that fracking can contaminate ground and surface water or even cause gas to leak into domestic water supplies. In June, France became the first country to ban shale-gas exploration.

In response to Cuadrilla’s announcement, the environmental group WWF called Wednesday for a moratorium on shale-gas production in the U.K. and said the country should be more focused on investing in renewables than increasing its reliance on fossil fuels. “The government should at the very least halt shale gas exploration in Britain until more research can be undertaken on both the climate-change impacts and contamination risks associated with shale gas,” said Jenny Banks, WWF-UK’s energy- and climate-change policy officer.

Cuadrilla said a parliamentary committee had looked into the health and safety issues surrounding fracking and decided not to introduce tough new controls on the practice. Spokesman Paul Kelly said Cuadrillaswas trying to provide a transitional resource that would bridge the gap until renewables could be deployed on a realistic scale.

Cuadrilla had to suspend its fracking operations earlier this year after two small earthquakes shook the Blackpool area in April and May. Critics said they were caused by Cuadrilla’s operations. The company commissioned a study by a group of independent experts to determine whether there was a link. They are expected to present their final report in the next few weeks, and Mr. Miller said he was “confident” it would provide a basis for Cuadrilla to resume fracking.

Cuadrilla stressed Wednesday that the 200 trillion cubic feet was “gas in place” and wasn’t the same as the recoverable volume of gas in Bowland, which could turn out to be a much smaller figure. The Marcellus Shale has about 84 trillion cubic feet of technically recoverable natural gas, according to the U.S. Geological Survey.

Cuadrilla has so far only drilled two exploration wells, with a third soon to be completed, but in its “high-end” scenario it envisages drilling 800 wells in the area over 16 years. Cuadrilla said it hoped to be able to present the U.K. government with a full-field development plan by the end of 2012 and start commercial production of gas in 2013.

Cuadrilla’s announcement could lead to sharp upward revisions in estimates of Britain’s shale-gas potential. The country has traditionally ranked low on the list of European shale-gas players, with the U.S. Energy Information Administration saying earlier this year it had only 20 trillion cubic feet of technically recoverable shale-gas resources, compared with Poland’s 187 trillion cubic feet. That could now change.

The Wall Street Journal, 22 September 2011