Centrica has made a move into the UK's nascent shale gas sector with the purchase of a 25 per cent stake in an exploration licence from Cuadrilla and AJ Lucas.
The UK-based energy company has paid £40 million in cash for the interest in the Bowland licence in Lancashire in northwest England. The deal is a sign that the large UK energy companies are starting to realise the potential significance of shale gas in the country.
"Cuadrilla has drilled three exploration wells within the licence area to date, which indicated the presence of approximately 200 trillion cubic feet (tcf) of natural gas," said S&P Capital IQ Equity Research Analyst Clive Roberts. "The UK consumes about 3tcf of gas per year, so this resource has the potential to be highly significant."
Centrica said in a statement that further drilling would be required to establish whether the Bowland discovery is commercial. It has also agreed to pay exploration and appraisal costs of up to £60 million.
Mark Hanafin, managing director of Centrica's International Upstream business, 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.
"This transaction presents an attractive opportunity for Centrica to explore the potential and commercial viability of natural gas from shale in the UK, while utilising its expertise as a responsible operator and developer of UK gas resources."