Britain doubles north England shale gas estimate

LONDON (Reuters) - Britain doubled its estimate of shale gas resources in the north of England, renewing hopes of reducing its growing reliance on imports, but the government said shale explorers would have to share revenues with local communities.

A report by the British Geological Survey estimated on Thursday the rocks of the so-called Bowland shale area held 1,300 trillion cubic feet (tcf) of gas.

The latest estimate indicates shale gas could transform the UK energy market, even though typically only 10 to 15 percent of shale gas in place is recoverable. It compares with British consumption of 2.76 trillion cubic feet last year, according to BP.

“Today’s news from the Geological Survey confirms 1,300 trillion cubic feet of (shale resources), which is double previous estimates,” Chief Secretary to the Treasury Danny Alexander told parliament.

Britain, Europe’s largest gas consumer, hopes to follow the United States into energy independence by exploiting shale gas. Its gas imports are expected to surpass domestic North Sea production by 2015.

But the British shale gas industry is at an early stage and has not yet determined whether it can produce gas economically. Recovery depends on the type of rocks and their response to the hydraulic fracturing (fracking).

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Drilling to test the shale over the next few years will prove critical for the infant industry, which must reassure a sceptical public and vocal environmental lobby concerned about the effects of fracking.

To help placate the local opposition, the industry will have to provide communities located near exploratory wells with 100,000 pounds ($153,400) worth of benefits and 1 percent of the revenue from each production site, the government said on Thursday.

“This will provide a welcome boost for communities who will host shale exploration and production as well as offering strong assurances that operators will engage with them and work to the highest health, safety and environmental standards,” Energy Minister Michael Fallon said in a statement.

Shale gas is ordinary natural gas trapped in dense rock formations. The process of fracking, in which water and chemicals are pumped deep underground to break open the rocks, has led to fears it could cause earthquakes and contaminate drinking water.

A year-long ban on drilling was recently lifted after the government imposed more stringent rules on fracking to reduce any earthquake risks.

Major energy companies are taking steps to participate in the exploration and development of Britain’s shale gas.

UK utility Centrica recently bought a stake in Cuadrilla, the most advanced shale driller in Britain. French oil major Total also said it would like to explore for shale gas in Britain.

Companies already exploring for shale in the Bowland area in northwest England include IGas, which has estimated that between 15.1 and 172.3 tcf of gas is in place on its licence alone.

Shares in IGas were up 9 percent in early trading on Thursday.

Additional reporting by Oleg Vukmanovic and John McGarrity; editing by Jane Baird