UPDATE 1-British shale driller suspends work on protest threat

Fri Aug 16, 2013 7:41am EDT

By Sarah Young

LONDON Aug 16 (Reuters) - An oil explorer has suspended drilling in southern England in response to the threat of an escalating protest against fracking, the controversial process used to extract gas and oil from shale deposits that has transformed the U.S. energy market.

Caudrilla Resources's site in the village of Balcombe in rural West Sussex has become a focal point for protesters who oppose fracking, a technique the company has pioneered in the search for shale gas in Britain.

Public debate on shale gas and fracking has intensified in recent months.

The government in July proposed tax breaks for shale gas investment as part of its efforts to follow the United States, where surging production has lowered energy prices and cut imports.

Prime Minister David Cameron on Monday gave his unequivocal support to fracking, risking angering his party's supporters from more rural areas where any exploration is likely to take place.

Hydraulic fracturing, or fracking, retrieves gas and oil trapped in tight-layered rock formations by injecting high-pressure water, sand and chemicals.

Critics say it can trigger small earthquakes and pollute the water supply, while others oppose any oil and gas exploration in picturesque parts of the countryside.

UK-based Cuadrilla said on Friday it would scale back its operations in West Sussex after taking advice from police who are concerned about an influx of up to 1,000 extra protesters this weekend.

"We plan to resume full operations as soon as it is safe to do so," the privately owned company said.

Cuadrilla is drilling a conventional test well to look for oil in Balcombe, but has not ruled out seeking permission for fracking at a later date depending on the results of its initial exploration.

Conoco Philips drilled a well on the same site in 1986 which found evidence of oil, but not in commercial quantities.

Acquiring fracking permits in the UK is a lengthy process which often takes months.

Cuadrilla is the only company to have fracked a shale gas well elsewhere in Britain, making its activities a target for protesters.

Sussex Police said the relocation to Balcombe of a climate camp under the banner "No Dash for Gas", which had been due to take place in Nottinghamshire, was behind the expected increase in demonstrators.

Local protesters and a group called "Frack Off" have formed the opposition so far.

A Cuadrilla spokesman said the company had brought in extra fences ahead of the weekend. Security firm G4S has provided security since the start of drilling in July.

"I'm quite worried about safety on the site, we have a group who are relocating a camp to the site, who have said publicly that they will be taking direct action against the site," Cuadrilla Chief Executive Francis Egan told ITV News on Thursday.

Britain is thought to have major shale reserves which could help reverse a rising dependency on energy imports, but the nascent industry has yet to prove that it can make oil and gas flow from the rocks.

UK utility Centrica recently bought a quarter stake in Cuadrilla's northern England shale licences. French oil company Total has also said it would like to explore for shale gas in Britain.

Britain also has a history of environmental activism causing disruption to infrastructure projects.

In one of the most high-profile cases in 1996, nearly 7,000 people demonstrated against the building of a new road near Newbury in southern England. The development of other motorways has also been delayed, resulting in tens of millions of pounds of extra costs.

VSA Capital analyst Malcolm Graham-Wood said that the suspension of drilling should not affect Caudrilla's plans long term.

"It makes no difference whatsoever that they're halting drilling...I would have thought the delay will only be a day or two. The international oil and gas business work in much more difficult conditions than Balcombe in West Sussex," he said.

Protesters from the No Dash for Gas organisation's 'Reclaim the Power' group claimed Caudrilla's suspension of operations as a victory.

"It's only a start. We would like to make sure they don't frack in Balcombe, or anywhere else at all," protester Luke Johnson was quoted as saying on the group's website.

Britain's Department of Energy and Climate Change sought to reassure critics. "The government has been clear that wherever shale gas fracking is conducted it must be done in a safe and environmentally sound way," it said.

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