Centrica in £160m shale gas move

BRITISH Gas owner Centrica is investing £160m in a share of Cuadrilla Resources’ shale gas licences in Lancashire.

The deal will see Centrica pay £40m for 25% of Cuadrilla’s Bowland Shale licence area and commit £60m to the joint venture.

It has promised to pay a further £60m subject to “certain operational milestones”.

Staffordshire-based Cuadrilla is a joint venture between private equity firm Riverstone and the Australian engineering group AJ Lucas. They each have 41%, with management holding the balance. Following this deal Cuadrilla will hold 56.25% of the Lancashire licence, AJ Lucas 18.75% and Centrica 25%.

Chief executive Francis Egan said: “Today’s announcement represents a significant step in our on-going exploration programme for natural gas within the Lancashire Bowland Basin. Centrica, Cuadrilla and AJ Lucas recognise the exciting gas potential that lies within the shale rock in Lancashire.

“Natural gas from UK shale can create thousands of jobs, generate significant tax revenues, reduce our ever increasing reliance on imported coal and gas and make a positive contribution to the country’s balance of payments.

“Centrica will bring to the Cuadrilla operated joint venture deep experience of all aspects of natural gas exploration, extraction and transportation and share the commitment of Cuadrilla and AJ Lucas to explore for and develop this resource in a safe and environmentally responsible manner.”

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.”

A recent report from the Institute of Directors said the UK shale gas industry could support 74,000 jobs, and the supply of domestic gas could cut imports from 76% to 37% by 2030.

There are large shale gas reserves underneath Lancashire but the hydraulic fracturing extraction process – or fracking – which involves pumping large amounts of water underground at high pressure, has many opponents.

Environmentalists claim it can pollute the water table and last year the government imposed a temporary ban on fracking after a minor earthquake in Blackpool was linked to Cuadrilla’s operations. This was lifted in December and Chancellor George Osborne is now promising tax incentives to support the industry.

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