LONDON — Cuadrilla Resources, a private equity-backed British oil and gas company, continues to try to find a way to produce shale gas in its home country.
On Friday, the company said it was applying for a permit to hydraulically fracture an exploration well that it has drilled at Grange Hill in Lancashire in northwest England. The company hopes to be able to test the well next year. The company also said it planned to ask for permission to drill and fracture six new wells in the region.
Hydraulic fracturing, or fracking, involves pumping large amounts of liquids and sand or other material down wells to loosen up rock formations so that the oil and natural gas they contain flow out.
Cuadrilla’s efforts to pioneer shale gas production in Britain has not been without setbacks. An attempt to fracture another well in 2011 set off small tremors and led to an 18-month moratorium on fracking that was only recently lifted.
Despite tens of millions of dollars in expenditure, the company still has no production outside of a 1990s-era gas well in the same area.
The company also delayed recent plans to drill for oil in West Sussex, south of London, after discussions with environmental regulators determined that it needed additional permits.
AJ Lucas, an Australian engineering company that is one of Cuadrilla’s two main owners with Riverstone Holdings, a private equity firm based in New York, said it had invested about $74 million in the company since 2007.
Despite the costs and delays, there have been some recent upbeat omens for the company and other would-be shale gas drillers. Britain’s coalition government sees shale gas as a possible replacement for the declining production in the North Sea and is broadly supportive.
‘’There is a general recognition we should be getting on with the exploration phase,’’ Francis Egan, Cuadrilla’s chief executive, said during a recent interview.
Last month, Centrica, one of the large British utilities, agreed to pay 40 million pounds, or $60 million, in cash and 60 million pounds in financing commitments for a 25 percent share in Cuadrilla’s 1,200-square-kilometer, or about 460-square-mile, Lancashire license area.
‘’With North Sea gas reserves declining and the U.K. becoming more dependent on imported gas supplies, it is important that we look for opportunities to develop domestic gas resources,’’ Centrica said.
In addition, a recent study by the British Geological Survey, a research group, estimated that there could be a large amount of shale gas — 1,300 trillion cubic feet, or 37 trillion cubic meters — below the region in central England where Cuadrilla has its main licenses. Britain’s current natural gas reserves are about 8.7 trillion cubic feet.
But until companies are permitted to drill and test extensively, how much of the gas, if any, is commercially recoverable will not be known.
Michael Stephenson, a geologist at the geological survey, said that the British formation most closely resembled the Barnett shale, a formation in the Dallas-Fort Worth area of Texas that is one of the main shale gas producers in the United States. Mr. Stephenson said that while the Barnett shale appeared to be almost entirely formed of dead marine organisms from an ancient seabed, the British shale, which is known as the Bowland shale, has more terrestrial content like pieces of plants and wood.
‘’This will probably have some effect on the quality of the gas,’’ he said, meaning that it may not flow as well.
In general, major companies like BP and Royal Dutch Shell have played a waiting game about the shale gas situation in Britain, preferring to have others take the risk as well as bear the intense scrutiny that drilling on land in Britain attracts.
‘’People won’t drill unless they understand the potential, and they won’t understand the potential unless they drill,’’ Mr. Stephenson said.
Cuadrilla is the exception. Along with others in the industry, it is now offering incentives to local communities where it wants to drill.
It says that it will pay 100,000 pounds, or about $151,000, for each well site and share 1 percent of the revenues. The company estimates that could be as much as 1.4 billion pounds, or $2.1 billion, of shale gas in Lancashire.
Article source: http://www.nytimes.com/2013/07/06/business/global/british-company-applies-for-shale-gas-fracking-permit.html?partner=rss&emc=rss