Successfully unlocking shale gas trapped below ground in the U.K. could lead to about 42 Tcm (1,409 Tcf) of gas and 6 Bbbl of oil in the Bowland and Midland Valley basins combined, creating another energy source as production from the region’s most mature basin declines.

However, analyst Wood Mackenzie warns the subsurface has yet to be proven, with only six wells targeting shale plays drilled so far in the U.K.; “therefore much remains to be seen from the initial well results in order to prove the commercial viability.”

Currently, shale exploration efforts are being driven by Cuadrilla Resources Ltd., which has plans to drill up to four shale gas exploration wells each at its proposed Roseacre Wood and Preston New Road sites in Lancashire County, and IGas Energy, which has plans to drill and frack at two sites in East Midlands. The latter’s shale gas plans could be boosted further as it works to acquire Dart Energy, which also has been active on the U.K. shale scene with assets in the Bowland Basin.

More companies could join the search after the U.K. government launched its 14th onshore licensing round last week. Licenses are available in areas that include the Bowland and Midland Valley. Figures from the British Geological Survey show the Bowland Basin could hold an estimated 40 Tcm (1,329 Tcf) of gas in place, while Midland Valley could contain an estimated 2.4 Tcm (80.3 Tcf) of gas in place plus 6 Bbbl of oil.

Despite the significant interest that the U.K.’s shale potential has generated, Wood Mackenzie said a number of barriers must be overcome to reach commercial production. For starters, the firm “asserts that the geology of the subsurface and productivity of the U.K.'s shale deposits are yet to be proven.”

“Fundamentally our view hasn’t changed since we assessed the commercial viability of U.K. shale gas in 2012, when we forecast production from the U.K. alone was unlikely to have a material impact on the U.K.’s gas price dynamics out to 2025,” Lindsay Wexelstein, head of U.K. upstream research for Wood Mackenzie, said in an Aug. 1 statement. “The launch of the long-awaited 14th U.K. onshore licensing round is a significant step in the development of the U.K.’s shale gas industry as it could spur the investment and exploration activity required to test the unproven subsurface.”

The U.S. Energy Information Administration (EIA) said in its “World Shale Gas and Shale Oil Resource Assessment” that thick, gas-bearing shale deposits have been confirmed in the Bowland sub-basin, but production testing has not occurred. The EIA described the shale geology of the U.K. as “considerably more complex” compared to North America.

“The Pennine Basin, one of the country’s most prospective areas, has been tested with five vertical wells, which cored the Carboniferous Bowland Shale. Other prospective areas include the rest of the North U.K. Carboniferous Shale region and the liquids-rich Jurassic Shale region of southern England in the Wessex and Weald basins,” the EIA said. “Shale testing is still at an early phase in the U.K.—flow testing and horizontal shale drilling have not even been attempted. In a temporary setback, the first shale well to be hydraulically stimulated triggered a series of minor earthquakes related to a nearby fault.”

This led to an 18-month moratorium, but shale drilling resumed in December 2012 with stricter regulations and monitoring following the government’s conclusion that the environmental risks of shale exploration are manageable and small, the EIA said.

However, “faults are numerous, geologic data control is weak and shale wells are more costly to drill. While the U.K.’s shale resource base appears substantial, commercial levels of shale production are yet to be established.”

Beyond this, aboveground challenges remain, especially when it comes to hydraulic fracturing, which is continuously met with opposition.

“Obtaining planning permission to drill, hydraulically fracture and test wells remains the biggest obstacle in getting exploration activity and development underway,” Wood Mackenzie said. “Given the level of public opposition to shale gas development in the U.K., Wood Mackenzie says that successful bidders will have to undertake extensive public engagement and consultation exercises before planning applications are submitted to local councils.”

The firm also pointed out moves by the U.K. government that aim to lure and support shale gas developers.

The “U.K. government has introduced fiscal incentives which will support the development of succinct shale gas ‘pads,’” the analyst said. “Given land access issues in the U.K., these are likely to be more palatable development concepts for local communities and planning authorities, but their viability will depend on the geology and presence of commercial shale gas reserves.”

The pad allowance cuts the tax on a portion of production income from 62% to 30% at current rates, according to the U.K. treasury department.

“Although major oil and utility companies are already involved in U.K. onshore operations, the potential gas volumes associated with shale developments are likely to drive interest in the licensing round, which could alter the number and mix of companies with onshore operating licenses,” Wood Mackenzie said. “The outcome of the [licensing round] … will be a good indication of the level of interest in the country’s unconventional sector.”

Applications will be accepted through Oct. 28.

Contact the author, Velda Addison, at vaddison@hartenergy.com. Image on the home page is courtesy of Bloomberg.