The decision of Communities Secretary Sajid Javid in October 2016 to overrule local county council objections to private operator Cuadrilla’s fracking plans in Lancashire is upheld by a high court judge today.
This is a boost for stocks with exposure to the UK shale industry including IGas Energy (IGAS:AIM), up 3.8% to 5.7p, Egdon Resources (EDR:AIM) up 3.6% to 10.1p and Europa Oil & Gas (EOG:AIM) up 4.8% to 5.5p.
Earlier this month Egdon unveiled two transactions linked to UK shale assets. One was a deal to acquire 12% of the unconventional resources exploration rights for its PEDL 209 licence from Stelinmatvic Industries in exchange for 12% of the conventional rights.
An opt-in arrangement with Total on the same block offered the French company the opportunity to pick up 50% of its 72% interest in the unconventional rights in exchange for covering cost up to £13.47m.
DO NOT GET CARRIED AWAY
Investors should not get carried away by shale gas prospects in the UK. The means used to exploit shale gas are proving controversial - in particular the use of hydraulic fracturing or ‘fracking’ technology and this is an obstacle to shale’s development.
North America, where the shale industry has expanded massively in the last decade, is blessed with a wealth of pipelines and drilling rigs and the understanding of the resources is supported by decades of conventional drilling in the most prominent shale basins. To date efforts to exploit shale outside the US, where similar conditions do not exist, have made slow progress.
The UK is no exception with operators tripped up by landowners, environmental groups and the planning system.
Even progressing the development of conventional assets onshore in the UK can be a challenge as Egdon and Europa have discovered with their Wressle discovery in Lincolnshire.
The companies, which own a respective 25% and 30% of the asset, recently announced the a formal planning appeal process would start in the coming weeks. In January a planning committee went against the advice of its planning officer and turned oil production plans down.
