Energy prospectors go west to Blackpool in search of 'shale gas'

Cuadrilla Resources, backed by former BP chief Lord Browne, hopes to extract gas from the Bowland shale

Terry Macalister
guardian.co.uk, Sunday 25 July 2010 17.48 BST
Article history

Extracting shale gas near Blackpool would reduce the need for imports
as North Sea gas supplies dwindle. Photograph: Christopher Thomond

Blackpool could become the new Houston if an experimental "shale gas" well being drilled in the north-west of England this week turns up the same stellar results that have been seen in America.

Lord Browne of Madingley, the former BP chief executive, is one of the backers of Cua
The well being drilled is the first of its kind in Britain and comes after discoveries of huge reserves in the US promised to transform the energy landscape there and sent gas prices plummeting.

In an interview with Channel 4 News, to be screened shortly, Chris Cornelius, the founder of Cuadrilla, said that in future shale gas could reduce the need for some imports into Britain as North Sea supplies run down.

"It's very early days," he said. "It will take a lot of exploration and a lot of effort by small companies like us, and larger companies as well, but ultimately we are hopeful that we would find certain deposits here that would add to the net reserves of the UK."

The Financial Times recently claimed that shale gas would "change the world". The American finds have scuppered the plans of Russia and other countries to start exporting gas to the energy-hungry US.

Any kind of gas is a relatively carbon-friendly alternative to oil, and countries around the world are keen to find their own supplies that will help to limit climate change while also providing energy security.

But shale gas comes with its own environmental problems. The gas is reached by drilling wells deep into rock formations, which are then "fractured" or broken up with the aid of water and heavy chemicals, to release tiny pockets of trapped gas.

The US Congress is currently investigating the potential threat posed by these substances to local water supplies but the big oil companies have no doubt that shale gas is the new oil rush.

Royal Dutch Shell has just bought a shale gas expert, East Resources, for $4.7bn (£3bn), while Shell has started to drill for shale gas in Sweden, and ConocoPhillips is drilling in Poland.

There have been no big discoveries yet in Europe but Cuadrilla is confident that it can make a strike in Britain. The company is backed by some of the most canny financial players in the world: the Carlyle Group, the private equity firm at which the former British prime minister Sir John Major used to have a seat on the board, and Riverstone Holdings, where Browne is UK managing director.

Cornelius told Channel 4 that his company had taken care to involve the Health and Safety Executive (HSE) and other agencies to ensure that there would be no major problems attached to the drilling process.

"There are certain cases in the US where certain operators have been documented as having some issues, and they do exist. But I think we have done everything here working with the HSE and the Environment Agency in the UK to ensure that doesn't happen on Cuadrilla's location," he said.

A programme shown last month on HBO, the US cable television network, documented some alarming and spectacular pollution incidents allegedly caused by shale gas drilling – including tap water apparently so contaminated with methane gas that it caught fire. However, the Washington-based environmental thinktank the Worldwatch Institute argues that hydraulic fracturing is not necessary polluting – and insists that most of the documented incidents are the result of clumsy drilling and poor regulation.

The shale discoveries in America have not only led companies to wonder whether there could be similar finds waiting to be made in Europe, China and elsewhere in Asia but have upset the existing world gas order.

Gazprom, the aggressive Russian state-backed operator, has admitted that it is rethinking many aspects of its plans to export gas to America and elsewhere in the light of the collapse of gas prices in the US.

There have even been suggestions that geopolitics are changing as a result of shale gas discoveries. Some attribute Moscow's willingness to sign a new nuclear arms reduction treaty with Washington and to accept tougher sanctions against Iran to Russia's realisation that it will have less opportunity to use energy as a foreign policy tool.

Shale gas is nothing new; the innovation lies in the development of new methodology for extracting it – for example, allowing mining companies to drill horizontally as opposed to vertically.

Twenty years ago, British Gas drilled a couple of exploratory wells in the north-west in an attempt to extract gas in commercial quantities.

Cornelius said: "They penetrated through the Bowland shale [part of the same geological formation that extends to Blackpool], and the old indications were that there was gas in that shale. So we decided that this area would be prospective, and after about a year's worth of work we decided that this was the place to start."

He added: "We're quite confident that we'll find gas – it's just whether we find gas in economic quantities. I don't think we'll ever be like the US, but I think there will certainly be the possibility that we'll find significant volumes of gas in various parts of Europe, which will be potentially commercial.

"It could help offset imports into Europe by a certain percentage, about 5% or 10%, if we're successful."

Blackpool's slot machine-filled promenade is often referred to as "the golden mile". If shale gas reaches its potential, the area might be known as the new gold coast.

• This article was amended on July 30 2010. The buyer of the US company East Resources for $4.7bn should have been named as Royal Dutch Shell instead of ExxonMobil. The article also suggested that Blackpool's "golden mile" was named for its illuminations; actually, the more limited stretch of promenade in question was named mainly for its many slot machines and stalls.