First fracked gas could hit UK market in 2017 – Cuadrilla

LONDON (Reuters) - First supplies of shale gas, extracted using the unconventional fracking process, could enter the British gas market as early as mid-2017, the head of shale gas firm Cuadrilla Resources told Reuters on Friday.

The IGas Energy exploratory gas drilling site is seen at at Barton Moss near Manchester in northern England January 13, 2014. REUTERS/Phil Noble

Britain is estimated to have substantial amounts of shale gas trapped in underground rocks and Prime Minister David Cameron has pledged to go all out to extract those reserves to help offset declining North Sea oil and gas output.

But progress has been slow as applications for shale gas projects have been held up at local government level where they have faced vocal opposition from environmental campaigners.

Cuadrilla initially wants to carry out fracking -- which injects water, sand and chemicals into rock formations to release shale gas -- at two sites in northwest England.

It hopes to get government approval to start operations at the sites before August.

"If we get good results from the wells ... gas could go into the system next year," said Francis Egan, chief executive of Cuadrilla, 46 percent owned by Australian engineer AJ Lucas AJL.AX.

Gas flows from initial testing would be small but Egan said full production could start in 2018 if necessary permits are obtained.

Lancashire Council last year rejected Cuadrilla applications for fracking at the sites, underscoring local community concerns about the technique.

However, Britain has since changed planning rules to allow government intervention to approve or reject shale gas drilling permits and give priority to appeals involving the projects.

A planning inspector is expected to make recommendations on Cuadrilla’s Lancashire applications to local government minister Greg Clark by July 4 and he will then make the final decision.

Egan said he is confident the project will be approved since the government has voiced strong support for the technology, while the local authority had previously received legal advice to approve one of the applications.

The government hopes a shale gas boom will help generate jobs in the oil and gas industry which has been hard hit by a 60 percent slump in oil and gas prices in the last two years.

Gas prices in Britain remain higher than in the United States, where shale gas drillers are under severe strain from the energy market downturn.

Egan said the skills needed for fracking are broadly the same as those used in conventional gas.

“With the general environment and where the North Sea industry is going we are determined as ever to press on and secure a new gas source,” he said.

Cuadrilla expects to be able to secure service contracts much more cheaply than previously expected as it benefits from discounts due to weak demand.

Egan estimated industry services would likely be 30-40 percent cheaper than before the oil slump.

(This version of the story has been refiled to clarify paragraph 11)

Editing by Adrian Croft and Keith Weir