Centrica plc, parent company of British Gas, has announced that it has acquired a 25 per cent interest in the Bowland exploration licence in Lancashire.

Bought from Cuadrilla Resources Ltd (Cuadrilla) and AJ Lucas for £40 million in cash, Centrica has also paid exploration and appraisal costs of up to £60 million, to explore the potential of capturing shale gas (in a process known as fracking) for energy use.

Fracking is a controversial procedure, with opponents of the technique saying that it contributes to climate change and causes air pollution, and that it can contaminate drinking supplies with methane and toxic chemicals and trigger earthquakes. Those who support the industry tend to dismiss such concerns as misguided, with a recent Chatham House briefing on shale gas claiming it’s ‘an area where popular ignorance overrules science’.

Supporters of shale gas, such as the Institute of Directors, have also estimated that natural gas from shale could reduce the amount of gas the UK has to import in 2030 from 76 per cent to 37 per cent and create 74,000 jobs across the industry and its supply chain. Shale gas reserves are notoriously difficult to estimate accurately, however.

Bowland licence details

The Bowland licence is operated by Cuadrilla, and three exploration wells have been drilled to date. According to initial data obtained from drilling, there could be 200 trillion cubic feet (tcf) of natural gas in place within Cuadrilla’s Bowland Shale licence in Lancashire. Centrica has said that further drilling will be required to establish whether the discovery is commercial.

If Centrica elects to continue into the development phase, a further contingent consideration of £60 million will become payable.

Mark Hanafin, Managing Director of Centrica’s International Upstream business, said: “With North Sea gas reserves declining and the UK becoming more dependent on imported gas supplies, it is important that we look for opportunities to develop domestic gas resources, to provide affordable sources of gas to our customers, and to deliver broader economic benefits to the UK.

“The government’s clear commitment to developing the UK’s shale gas industry is creating the right environment for companies to invest and to deliver those benefits.

“This transaction presents an attractive opportunity for Centrica to explore the potential and commercial viability of natural gas from shale in the UK, while utilising its expertise as a responsible operator and developer of UK gas resources.”

Industry criticism

Reacting to the news that Centrica/British Gas will join Cuadrilla in fracking for shale gas in England, Greenpeace spokesman Joss Garman said: “British Gas already has a battered reputation among consumers who feel increasingly ripped off by the company.

“Fracking isn’t going to help them. Now even Cuadrilla have admitted that energy experts were right all along when they said that UK shale gas won’t lower energy bills.

“Now British Gas will be known, not only for sky high fuel bills, but for industrialising the English countryside and pursuing a business plan that’s entirely predicated on digging up and burning polluting fossil fuels with no regard for the impacts on climate change.”

Read more about the fracking process.