Lancashire shale gas will take longer to exploit than expected but the potential value remains, Cuadrilla’s chief executive told an Australian business newspaper today.
In an interview with the Australian Financial Review, Francis Egan said:
“The commercialisation of that resource is undoubtedly going to take longer than anyone would have liked or probably would have anticipated at the beginning of it.
“It may not be in the next 12 months, it might not even be in the next 24 months, but the value of it is still potentially very significant.”
There have been few published interviews with Mr Egan since the UK government imposed a moratorium on fracking in England in November 2019.
This followed a series of earth tremors caused by fracking at Cuadrilla’s Preston New Road site. The largest tremor, measuring 2.9ML, was the largest UK fracking induced seismic event and was felt across the region.
Opponents of Cuadrilla’s operation said the interview was “attempting to give a glimmer of fluffy hope to investors”.
“Only a few people left”
Mr Egan told Hans van Leeuwen, Australian Financial Review’s Europe correspondent:
“There were 50 or 60 people on the site, now there’s nobody on the site. The site is de-manned, there’s no equipment there. It is visited periodically just to make sure the two wells that have been drilled there are OK.
He said head office numbers had also been cut:
“There are only a few people left. We still have technical presence but the overhead has been drastically reduced.”
This would allow Cuadrilla to wait for a potentially critical change in market conditions, he said.
Prices had fallen because of an oversupply of gas and the UK could import gas cheaply, he said:
“As long as there’s a gas glut in the world it’s easy to turn a blind eye and just import your supply. The UK is still importing half our gas needs and it’s easy to do that, but it may not always be easy to do that.
“Typically, that cycle lasts about two or three years, and then you start to see the impact as the existing production declines and the new production doesn’t come behind it to fill the gap”.
Cuadrilla reported in November 2019 it had completed a flow test on the second well at Preston New Road and was carrying out an extended pressure build up test. Planning permission for fracking at the site expired in November 2019. Without a new planning application, the site must be returned to farmland by August 2023.
The company has said it is working with regulators and the shale gas industry to demonstrate that it can frack safely. It has also called for a relaxation of the regulations on induced seismicity, which require operations to pause if fracking causes earth tremors of 0.5ML or above.
Mr Egan said in the interview:
“We’re looking at ways you could modify the operations to prevent any felt seismicity.”
But he said:
“There’s one set of rules for fracking and a completely different set of rules for pretty much every other industry in the UK.”
He acknowledged in the interview, however, that “this argument hasn’t been accepted so far”.
Mr Egan “should concede defeat”
Claire Stephenson, of Frack Frack Lancashire, which has opposed Cuadrilla’s operations, said:
“Mr Egan is attempting to give a glimmer of fluffy hope to investors, although we’re not really sure what support his hope will ever achieve in reality.
“Fracking has never made any financial or business sense, with the recent bankruptcy from pioneering company Chesapeake, dominating shale gas news as the latest fracking collapse.
“With regards to the UK and its failed fracking past, Mr Egan should concede defeat. The focus needs to be on a renewable energy future, not digging around in the dirt for more unburnable fossil fuels.”
Susan Holliday, of Preston New Road Action Group, said:
“Mr Egan is clearly trying to reassure his investors.
“He does not mention that before any further fracking can take place at Preston New Road he needs the UK government to lift the moratorium, the OGA to understand the seismic events from last August and give the go ahead again and Lancashire County council to extend the planning permission with regards to fracking and drilling operations which expired last November.
“He should give up gracefully and restore the site back to a green field now, that will avoid any further distress and disruption to our local community.”
During 2020, all statements about Cuadrilla have come from AJ Lucas, the Australian mining group. It took control of Cuadrilla in February 2020 when it acquired a 45% stake owned by Riverstone, a New York based private equity firm.
Last month, AJ Lucas predicted that the moratorium would be lifted, but not be before 2021. It was responding to a comment by the UK energy minister, Kwasi Kwarteng, that “fracking is over” and that the government had “moved on”.
Last week, AJ Lucas announced that Centrica, a partner in Cuadrilla’s Lancashire operation, had pulled out of the licence.