Private petrochemicals group Ineos has bought the 15 UK shale gas drilling licences from France’s Engie for an undisclosed sum, as the future of fracking in the country remains unresolved.
Ineos said the deal had expanded its UK shale portfolio by 10% to more than 1.2m acres, making it by far the country’s biggest shale player.
The licences cover exploration rights across Cheshire, the East Midlands and Yorkshire, including what was Engie’s 30% stakes in four blocks operated by Cuadrilla in the latter and increasing its stakes in seven IGas licences and new stakes in four others operated by IGas.
Significant reserves of shale gas are said to be located around the UK but while the UK government is keen to tap this resource, various companies’ attempts to gain permission for fracking have been blocked by local councils due to public concern about groundwater contamination and even worries about potential earthquakes.
Engie said it had decided to exit from UK shale after a strategic review “in response to commodity price declines”. The company, which recently moved its headquarters from Switzerland back to Britain, wants to invest 1 billion pounds into shale gas which it hopes will provide feedstock for its petrochemicals business.
In its zeal to try and develop Britain’s shale gas resources, Ineos has been known to offer more generous compensation packages to locals affected by fracking than the industry standard.
However, Howard Rogers, chairman, Natural Gas Research Programme and senior research fellow at The Oxford Institute for Energy Studies is sceptical about the nascent shale gas industry in the UK. He said recently in an interview: “There is a huge question over whether the well sites are viable economically as individual investments. Even if successful, would a few shale gas pads — albeit drilling multiple wells with horizontal sections going off in different directions — make a meaningful contribution to the UK’s gas production which is already falling in terms of conventional gas production from the North Sea?
“Moreover, is the UK public going to allow this to develop on even a modest scale?
“On balance, my answer is ‘probably not’,” he said.
Engie was one of the first big energy companies to back Britain’s nascent shale gas industry when it bought parts of Dart Energy’s licenses, a company since then taken over by IGas, in 2013.