The shale gas company, IGas, said today it could drill 80 wells by this time next year, with the “right government support”.
IGas also said fracking in its core shale gas area in the East Midlands had “a significantly lower chance” of causing earthquakes than Lancashire.
In interim accounts, the company said it had the potential to establish five production well pads, each with up to 16 wells, within 12-18 months.
Initial production from the sites could supply three million homes, the company said.
IGas currently has no shale gas sites with planning permission for drilling, testing or fracking. It suggested it needed changes to the current planning system to deliver its predictions:
“We look forward to working constructively with the new administration to achieve a streamlined regulatory process that can deliver accelerated development of this strategic natural resource.”
The current regulations on controlling fracking-induced earthquakes have also been a barrier in the past few years to shale gas companies. The traffic light system requires fracking to pause if it induces seismic activity of 0.5 or above on the local magnitude (ML) scale.
Cuadrilla’s three attempts at high volume hydraulic fracturing all caused small earthquakes above the 0.5ML level
But IGas today said the geology of its main shale gas area, the Gainsborough Trough in Lincolnshire and Nottinghamshire, was “less complex” than other parts of the UK. It said:
“we firmly believe that the geo-mechanics of the Gainsborough Trough present a significantly reduced risk of induced seismicity of the type experienced elsewhere in the UK”.
IGas also said there was a new method of assessing the likelihood of induced seismicity. This looks at the geo-mechanical history and setting of the area and analyses 11 key factors, the company said.
“Together with existing techniques, these give us a good idea of how likely we are to experience induced seismicity in a wider area and on a site-by-site basis.
“Using this method to supplement already existing techniques, the Gainsborough Trough, on a qualitative basis, can be demonstrated to have a significantly lower chance of induced seismicity when compared with the Bowland Basin in Lancashire.”
Further hydraulic fracturing in multiple wells was needed to test and calibrate the models, IGas added.
It said research on the new assessment method had been submitted to the British Geological Survey for its review of the science of fracking commissioned by the government. The review was submitted to ministers in early July but has not yet been published.
IGas said the recent increase in oil prices and a weaker pound against the dollar had been “a welcome boost to revenue and cash generation”.
Despite a fall in production because of equipment failure, IGas saw revenues rise to £30.5m for the six months for the end of June 2022. This was up on £16.6m for the same time in 2021.
Profit was £19.4m, compared with a loss for the first half of 2021 of £12.2m. The company said it had reduced its debt by £4.6m.
Operating costs rose because of higher commodity prices, as well as increased costs for staff, materials and equipment.
Ellesmere Port write-off
The company said it had written off £6.4m exploration and evaluation assets for the Ellesmere Port licence area, PEDL184 in Cheshire.
This followed the refusal of planning permission in June 2022 for testing the Ellesmere Port-1 well.
“This licence, whilst prospective, is outside our core shale exploration area and, as the Group have no plans for further activity on the licence in the short term, the full capitalised amount has been written off.”
The company said it had also impaired £1.5m of previous costs in the Lybster licence, in Caithness. These were not expected to be recovered in any future development of the site, it said.
Corringham, Lincolnshire: IGas said an infill drilling project could add about 100 barrels/day in 2023. The proposal had planning permission and the company said it had applied for environmental permits.
Glentworth, Lincolnshire: DrillOrDrop has reported on plans for a new oil site. IGas said it proposed to drill an appraisal well and up to seven horizontal development wells. A planning application was expected in the final quarter of 2022, it said. If successful, this new site could target an additional 200 barrels/day, with potential to add another 500 barrels/day, the company said.
IGas described geothermal as a “truly competitive solution in a landscape of increased gas prices”. It said:
“We firmly believe that deep geothermal is the only utility scale source of renewable heat suitable for deployment in urban areas.”
The company said it had applied for a capital grant for its Stoke-on-Trent geothermal project from the Green Heat Network Fund. A decision was expected in the last quarter of the year.
It also planned to apply for grant funding from the Public Sector Decarbonisation Scheme to support six geothermal schemes supplying renewable heat to NHS trusts.
IGas said it was in discussions with 15 parties who want to buy geothermal energy, amounting to 100MW installed heat generation from 15 separate sites.
Key figures for six months to 30 June 2022
Revenue: £30.5m (same period 2021 £16.6m)
Oil sales in value: £27,343,000 (same period 2021 £15,284,000)
Oil sales in volume: 316,171 barrels (same period 2021 330,984)
Gas sales in value: £1,719,000 (same period 2021 £740,000)
Gas sales in volume: 938,203 therms (same period 2021 1,247,946 therms)
Earnings before interest, taxes, depreciation, and amortization: £10.7m (same period 2021 £2.7m)
Profit: £19.4m (same period 2021 loss of £12.2m)
Operating cash flow: £16.4m (same period 2021 £6.4m)
Net debt: £9.7m (same period 2021 £13.2m)
Cash and cash equivalents: £2.7m (same period 2021 £2.8m)
Estimated energy profits levy: £0.2m
Net production: 1,865 barrels of oil equivalent per day (boepd) (same period 2021 2,005 boepd)
Estimated underlying cash operating costs per barrel of oil: $40.4/boe
Tax credit: £13.2m (same period 2021 £1.9m)
Investment in assets: £10.6m(same period 2021 £3.7m)
Debt repayment: £4.6m (same period 2021 £1.4m)
Total assets: £186,895,000 (same period 2021 £161,819,000)
Total liabilities: £98,373,000 (same period 2021 £61,905,000
- IGas also announced today that its chief executive, Stephen Bowler, was leaving the company immediately.