* Proposal allows drilling without landowners' permission
* Billions of barrels of oil under rock formations in south
* Huge shale gas finds in north have fuelled fracking boom
* Britain relies fuel imports as North Sea reserves dwindle
(Adds report on reserves, detail, background)
By Sarah Young and Henning Gloystein
LONDON, May 23 Britain plans to ease rules on
accessing shale oil and gas, including drilling without
landowners' permission, a move that coincides with a government
report suggesting billions of barrels of shale oil may lie
underneath southern England.
As the country's North Sea reserves dwindle, hopes are that
shale oil and gas will take its place and reduce dependence on
imported fuel. The report from the British Geological Survey
cites reserves of as many as 8.57 billion barrels of oil, with a
central estimate of 4.4 billion.
Britain has extracted about 45 billion barrels of North Sea
oil since the 1970s but output has been falling for a decade. In
the U.S. the massive expansion of shale gas extraction has
driven down energy prices and cut dependence on imports.
"Britain needs more home-grown energy. Shale development
will bring jobs and business opportunities," Energy Minister
Michael Fallon said in a statement on Friday.
But fracking - drilling and pumping chemicals, sand and
water into rocks at high pressure - has triggered tremors and
countries including France and Bulgaria have banned it. Lobby
group Greenpeace says fracking causes serious environmental
risks, especially to fresh water.
Protests in Britain have involved marches and attempts to
disrupt oil and gas companies' work. Opposition flared last year
in the village of Balcombe, in southern England.
Fracking in the Conservative Party's heartland areas in
southern England could prove politically challenging for the
senior partner in the coalition government.
To help placate local opposition, the government said on
Friday that shale companies had proposed they make a voluntary
one-off payment of 20,000 pounds ($33,700) to communities for
each well they drill that extends more than 200 metres
That payment would be on top of the shale compensation
payouts already in the offing. The government said last year
that the shale industry would have to provide communities
located near exploratory wells with 100,000 pounds worth of
benefits and 1 percent of the revenue from each production site.
EASY ACCESS, LARGE RESERVES
The government's proposal is to allow companies to drill
below 300 metres (328 yards) without permission from landowners,
although "hydraulic fracturing would only occur at far greater
depths of 1.5 kilometre (around 5,000 feet) or more," it said.
A three-month consultation on the plan ends in August.
Ken Cronin, chief executive of the UK Onshore Operators
Group (UKOOG), said the British onshore shale extraction legal
system "desperately needs updating", as it was delaying projects
and created unnecessary costs.
As the law stands, companies have to negotiate rights of
access with every landowner living above where they are drilling
and that process can take many months or more.
If Britain's reserves are economically recoverable, the
shale oil would add to a small shale gas boom, in which
companies such as Alkane, Egdon, Cuadrilla,
Dart and Island Gas are seeking to capitalise
on large reserves found in northern England.
"We've known that there's a big potential for oil and gas
explorations across the country but particularly in terms of oil
in the Weald Basin which is the area that stretches roughly from
Winchester across towards Gatwick, up to the M25 and down to the
coast at Chichester," IGAS chief executive Andrew Austin told
Some bigger companies, such as British utility Centrica
, French oil major Total and French utility GDF
Suez have also entered the British shale market.
($1 = 0.5931 British pounds)
(Editing by Louise Ireland and Kate Holton)