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UK Government Begins Fracking Push As It Awards New Onshore Licences

Thu, 17th Dec 2015 13:39

LONDON (Alliance News) - The UK government began offering almost 100 new onshore oil and gas licences to companies on Thursday, with around three quarters of the blocks suitable for fracking.

The 14th onshore licensing round was conducted by the industry regulator, the Oil and Gas Authority, with the 159 blocks on offer being consolidated into 93 licences which have been offered to companies that had successful applications.

The first London-listed stocks to report they had won licences were UK Oil and Gas Investments PLC and Solo Oil PLC, with the pair winning one licence on the Isle of Wight holding 65% and 30% interests each, with Egdon Resources PLC also winning nine licences.

It is likely other London-listed stocks will have applied for licences. Under the licensing round, a total of 95 applications were made by 47 companies.

Importantly, of the 159 blocks that were on offer, around 119 of them hold unconventional shale oil or gas, making them suitable for fracking which has been a hot and controversial topic this week after MP's approved fracking in certain parts of the UK, including underneath national parks.

"Around 75% of the 159 blocks being offered today relate to unconventional shale oil or gas, and additional regulatory requirements apply to this kind of activity," said the UK government. "This round enables a significant amount of the UK?s shale prospects to be taken forward to be explored and tested."

The dishing out of the licences comes only days after MPs voted to allow fracking for shale gas below national parks and other protected sites, bringing the already controversial topic back into the spotlight.

Companies can drill as far down as 1,200 metres under national parks, but will have to drill outside of the parks and then drill horizontally underneath. Although no actual drilling would occur in the parks themselves, the move was criticised as MPs voted for an outright ban on fracking under protected areas earlier this year.

Alongside national parks, companies will also be able to frack underneath areas of outstanding natural beauty, world heritage sites and other protected areas - drawing criticism from environmentalists.

The licences offered to companies Thursday allow them to explore, appraise and extract oil or gas from their respective areas, but does not allow them to begin a full scale operation, meaning any company wishing to progress their licence will need to seek a new licence in the future.

The licence offered to UK Oil and Gas and Solo Oil holds two prospects, the Arreton discovery and the M prospect, with the M prospect extending into the new licence from UK Oil and Gas' nearby offshore licence.

UK Oil and Gas shares were up 8.2% to 1.33 pence on Thursday with Solo shares trading up 12% to 0.262p.

Egdon Resources said it has been offered a total of nine licences through the licensing round, covering a total area of around 1,128 square kilometres, or 278,220 acres, in the East Midlands and over the Cleveland basin.

Egdon will hold a 15% stake in two blocks over the Gainsborough Trough, a 37.5% stake over two blocks over the Humber basin, a 75% stake in one other block over the Humber, a 33.3% stake in three blocks over the Cleveland basin, a 17.5% stake over two more blocks over Cleveland and will also wholly own one other block over Humber.

Egdon shares were trading up 15% to 9.49 pence per share on Thursday.

According to the government's website, other London-listed stocks that have either been offered licences or are involved in ventures that have applied for licences include Europa Oil and Gas (Holdings) Ltd and Ithaca Energy (UK) Ltd.

Europa shares were trading up 0.2% to 2.88p on Thursday whilst Ithaca shares were up 3.9% to 28.32p.

Notably, Cuadrilla Resources, the company that has been spearheading the fracking argument in the UK since 2011, also applied for licences with big players like Total, GDF Suez and Ineos also applying for licences.

The Conservative government has been a big supporter of fracking since winning a majority in the General Election back in May, coming under fire from critics for encouraging the industry whilst cutting renewable energy subsidies.

Notably, the approval for fracking and the licence awards comes only a week after a landmark deal was signed by nations around the world aimed at tackling climate change.

By Joshua Warner; joshuawarner@alliancenews.com; @JoshAlliance

Copyright 2015 Alliance News Limited. All Rights Reserved.

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