After the so-called Beast from the East exposed the fragile state of the UK's energy security, a leading shale explorer today said British shale gas production has a "vital" role to play alongside the development of renewable energy.
Egdon Resources, the second biggest London-listed company with exposure to UK shale gas, said the cold snap in March, which caused wholesale gas prices to soar as National Grid warned Britain did not have enough supplies to meet rocketing demand, highlighted the importance of indigenous production of oil and gas.
"Even as we transform to a low carbon economy, we will be producing gas," Mark Abbott, the managing director of Egdon, told City A.M. "We are going to be using it. It's not about if we’re using it, it’s about where it comes from."
Philip Stephens, the chairman of Egdon, added that while challenges "no doubt" remain – including strong public opposition – the UK shale business is "gaining considerable traction" this year. He cited the drilling of the UK's first ever horizontal shale gas well by Cuadrilla earlier this month, with fracking set to begin there in mid-2018.
Importantly, this will test the commerciality of UK shale gas, Abbott said. "There's no doubt that within ground there’s a lot of gas. It's about how much we can get out commercially that is key."
With an increased level of industry activity due to take place over the coming months, we believe the spotlight will shine more brightly on this exciting space, and Egdon’s sizeable acreage position ensures we represent a compelling vehicle for investors to benefit from the eventual uptick in much needed onshore activity.
With the release of its interim results today, Egdon said it expects to continue to make progress in the second half of the year.
The firm, which holds interests in 43 licences in the UK, said oil and gas revenues during the six months to January were flat at £0.51m while its loss widened to £0.85m from a £0.73m loss the previous year. It has £4.1m of cash in the bank.
Egdon expects drilling at its key Springs Road site with operator Igas to begin in the middle of this year, and it is also hoping to gain planning permission to develop its conventional oil discovery at Wressle "after many setbacks".
"Success in these prospects will significantly enhance our future," Stephens said.