News Oil & Gas

Cuadrilla to cut UK fracking investment by 90%

Cuadrilla announced it will reduce its gas exploration operations in the UK next year by 90% while it waits for the Government to decide the future of hydraulic fracturing or fracking.

The company will however retain its technical data-base, corporate knowledge and access to technical and operational capability.

Breaking: Government approves Cuadrilla's Lancashire fracking plans at  Preston New Road but Roseacre Wood on hold – DRILL OR DROP?
Lancashire: Cuadrilla conducted hydraulic fracturing in the Bowland shale, at Preston New Road (Cuadrilla Resources)

Chief executive Francis Egan said Cuadrilla would be “well positioned to respond to what is considered a likely future re-evaluation of the value of UK indigenous natural gas.”

Cuadrilla had been engaged in induced seismicity in the Bowland shale, Lancashire but faced opposition from local residents who reported tremors, and operations were suspended at the end of August 2019.

The Government introduced a nine-month moratorium on fracking in November 2019 and is yet to announce whether operations will be allowed to restart.

Cuadrilla is 96% owned by Australian mining firm AJ Lucas (AJL) which completed its final share purchases of 48% from Riverstone in February this year.

AJL’s annual report for 2020 stated: “The share of equity accounted investees loss and UK overhead was $1.2 million, compared to a loss of $4.9 million for the previous year, largely as a result of reduced investment activity as well as the change of accounting following the acquisition of Riverstone’s interest in Cuadrilla in February 2020.”

Mr Egan, added: “As a consequence of the moratorium, Cuadrilla shale exploration operations in [the] UK have been scaled back with operating costs and overheads being very significantly reduced.

“AJL’s investment into its UK oil and gas operations is therefore forecast to reduce by approximately ninety percent in FY21 compared to FY20.

“Notwithstanding these material operating and overhead cost reductions AJL
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.

“The challenge before the industry is to obtain support from the Government to provide a realistic environment to allow meaningful operations to proceed.”

In July 2020, Centrica withdrew from the Bowland shale and said it would return its 25% holding in the Lancashire shale joint venture (JV) to JV partners Cuadrilla and AJL.

As a consequence AJL will become the sole owner of the Lancashire Bowland shale gas licences.

Mr Egan added that because the UK imported approximately half of its gas requirements, and as North Sea reserves diminish, there might be a “further appraisal and production of a significant, high-quality shale gas resource in the UK.”

Cuadrilla is also involved in conventional onshore oil and gas opportunities in Balcombe, Surrey, where it drilled the well in 2013.

The site is now operated by Angus Energy with Cuadrilla and AJL retaining a collective 75% working interest.

Angus is currently seeking planning permission to complete a flow test, and has publicly ruled out fracking.

Cuadrilla’s other interests in UK onshore exploration licences are in Yorkshire, totalling approximately 1,274 km2, many of which target the same Bowland-Hodder shale formations in Lancashire.

Some of the licences are held solely by Cuadrilla, with one is in a JV with chemicals company, INEOS.