A major cut in investment in the shale gas company, Cuadrilla, is likely in the coming months, its owner has predicted.
The Australian mining group, AJ Lucas, forecast investment in Cuadrilla would be reduced by 90% in the financial year to June 2021, compared with the previous 12 months.
The AJ Lucas annual report, published on 28 August 2020, blamed the UK government moratorium on fracking in England, imposed 10 months ago.
As a result of the moratorium, the report said Cuadrilla had “scaled back” its shale exploration operations in the UK”. Operating costs and overheads had been “very significantly reduced”, it said.
“Cuadrilla’s funding requirement has been significantly reduced, largely as a result of reduced staffing and operations. Cuadrilla will engage in limited analysis of prospective areas of its licences, in preparation for activity when the moratorium is lifted.
“A small team currently operates in the UK, maintaining Cuadrilla’s UK licences and statutory obligations.”
Fracking at Cuadrilla’s Preston New Road site in Lancashire was suspended by regulators a year ago, on August bank holiday Monday 2019. The company’s operations caused the UK’s strongest fracking-induced earthquake, measuring 2.9ML.
By then, Cuadrilla had fracked just seven of the more than 40 planned stages of the PNR2 well, the second of four planned horizontal boreholes at the site.
Writing in the annual report, Francis Egan, Cuadrilla’s chief executive and AJ Lucas board member, said “the limited number of stages fractured … meant that a meaningful sustained flow rate of gas from the full length of the lateral could not be measured”.
“Gas recovery potential therefore remains to be determined.”
Fracking on the site’s first well, PNR1z, in 2018 was also interrupted by seismic events. The two final wells have not been drilled. The company said the “ultimate recoverability” of shale gas at Preston New Road requires further hydraulic fracturing and flow testing.
Cuadrilla has said it has been working with other UK shale gas companies to address the government’s concerns about fracking, which led to the moratorium.
Mr Egan said the work included potential techniques to improve the predictability of seismic events caused by fracking.
“Progress with respect to engaging with the Government to lift the moratorium is slow and it is therefore difficult for the Company to predict relief and resumption of activity.
“The challenge before the industry is to obtain support from the Government to provide a realistic environment to allow meaningful operations to proceed.”
But he added:
“[AJ Lucas] maintains an oversight of and access to fit for purpose technical and management capability in the UK.
“This allows it to fulfil its UK oil and gas licence and other regulatory commitments and preserve the inherent value in the significant shale gas resource and conventional oil and gas exploration prospects underlying those licences.”