* Investors say lessons can be learned from U.S.
* Environmentally friendly technology in demand
* Aberdeen to face competition for shale crown
By Stephen Eisenhammer
LONDON, March 20 From trucks and cranes to
chemists and trains, the supply chain winners from the U.S.
shale boom have often been surprisingly simple. Now investors
and executives are eyeing businesses that might benefit from a
boom in Britain.
Many of the opportunities from across the pond should be
replicable, investors say, but the UK's far smaller size reduces
some of the transport challenges while its population density
means environmental concerns could be greater.
Although it is still very early days, signs are encouraging.
The British Geological Survey has estimated rock formations in
northern England's Bowland Basin hold around 1,300 trillion
cubic feet (tcf) of gas. Even with usual recovery rates as low
as 10-15 percent, it could supply Britain's annual consumption
of 3tcf long into the future.
In January the nascent industry got another boost as Total
became the first major oil company to commit to
exploring for shale gas in the country.
One of the successes key to U.S. shale oil and gas has been
the rapid growth of a supply chain to support the industry,
keeping down the cost of things like drilling and hauling.
Some see this as an obstacle in Britain which, unlike the
United States, does not have an onshore oil and gas heritage;
others see an opportunity.
"Shale is a frontier market, one that has the potential to
grow rapidly, and it's right here on our doorstep so it's
definitely exciting," said Glynn Williams, partner at private
equity group Epi-V and a member of Britain's all-party
parliamentary group on unconventional oil and gas.
Williams has already invested in a few British companies he
thinks should benefit and is keeping a close eye on others. He
mentioned Clear Solutions, a manufacturer of environmentally
friendly drill fluids; waste management company Remsol; and
Ground Gas Solutions, which monitors gas and water for
environmental damage, as firms well-positioned for shale growth.
"I think the best opportunities are around shale services
and products that can be shown to be environmentally sound and
sustainable," he said. "You might use a drill rig for a few days
or weeks but the environmental concerns are going to be there
for the full life cycle of the well," he added.
Fears over the environmental damage fracking could cause
have led to protests across the UK. Cuadrilla, the only company
to have actually hydraulically fractured a shale gas well in
Britain, froze its drilling plans on a site in rural England
after angry demonstrations.
Activists argue the government should invest in renewable
energy rather than fracking, fearing the process may trigger
small earthquakes and pollute water supplies. Industry experts
say the scale of opposition fracking firms may face on a local
level remains an unknown.
A lot of the business opportunities so far have been in
basic logistics in the United States, where energy consultancy
group IHS estimates unconventional oil and gas production
supports more than 1.7 million jobs and predicts that number
will rise to 3 million by the end of the decade.
In places like Williston, a once sleepy town in North Dakota
now at the heart of the U.S. shale industry, "mom-and-pop" firms
have flourished. The main drag is lined with local firms
supplying, trucks, cranes, and drilling tools or building
equipment for companies fracking nearby.
Francesco Giuliani, managing director at First Reserve - one
of the world's largest private equity group focused on energy -
said his company was not yet putting bets on UK shale but that a
number of lessons could be learned from the United States.
"If you look at the opportunities in the U.S., it's
everything that has to do with logistics. We bought a crane
company at the end of last year," Giuliani said, referring to
TNT Crane & Rigging acquired by First Reserve in October.
"There will be opportunities that will be replicable
one-to-one from the U.S. to UK., so having learnt what happened
in the U.S. you can try and extrapolate what's going to happen
in the UK, but a lot of it will have to do with the specific
type of drilling, resources, and transportation bottle-necks,"
ABERDEEN TO LOSE OUT?
It is not just smaller businesses that have done well out of
shale in the United States. Baker Hughes, one of the
world's biggest oil services companies, was quick to see the
potential in unconventionals and saw profits nearly triple
between 2009 and 2011 as drilling activity jumped.
Not surprisingly then, FTSE 100 engineering firm Amec
, which has a strong oil services division active in the
North Sea, is already eyeing up the kinds of businesses that
might play a part in a shale revolution.
"We are looking at the shale proposition, we're doing quite
a lot of research work into the companies that are active in
that area and whether we've got services we could provide," said
Alan Johnstone, Europe brownfield director at Amec.
One of the key questions for companies like Amec is whether
the Scottish city of Aberdeen, so long the centre of innovation
for the North Sea and one of the hubs for offshore oil globally,
will be the home of UK shale as well.
In many ways Aberdeen is too geographically misplaced,
expensive and over-qualified with its focus on high-end
technology. Some industry insiders predict a lower-cost supply
chain centre focused on shale will emerge around Yorkshire and
Lancashire, home to Britain's most attractive shale deposits.
Yet, with pretty much every oil service company active in
the UK present in Aberdeen, it would be unwise to rule it out.
"I think some of the skills are pretty transferable to
another location and the barrier to entry is probably quite
low," said Johnstone. "However, the technical expertise is so
well clustered and engrained up here... I think there's a really
good opportunity for it to be germinated from Aberdeen."
(Additional reporting by Ernest Scheyder in New York; Editing
by Pravin Char)