Energy secretary Ed Davey has given the go-ahead to the controversial practice of fracking in the UK in order to exploit extensive shale gas resources locked deep underground.
The announcement reverses the unofficial moratorium on fracking that has been in place since early 2011, when drilling by Cuadrilla Resources, a private shale gas explorer, triggered two small earthquakes in Lancashire.
Fracking involves pumping water and a mix of chemicals underground at high pressure to shatter rock formations and release gas. While many environmental groups condemn the practice, it has revolutionised the energy landscape in the US and government ministers are keen to try to replicate that success in the UK.
Safety will nevertheless be a top priority, says Mr Davey. "Fracking must be safe and the public must be confident that it is safe." He added: "Shale gas represents a promising new potential energy resource for the UK. It could contribute significantly to our energy security, reducing our reliance on imported gas."
New government-backed safety measures include a requirement to extensively monitor seismic activity before, during and after drilling; a traffic light system used to halt fracking under certain conditions; and a requirement that drillers show they have built strong enough wells to prevent any gas or chemicals escaping into water tables near the surface. The names of any chemicals added to the water used in fracking will also be publicly disclosed.
The government is also likely to press ahead with a "generous new tax regime" for UK shale gas developers, as chancellor George Osborne hinted in October.
This should help to entice companies to enter the country's nascent shale gas industry. Cuadrilla is the only company to have tried fracking in the UK so far, but says its licences within Lancashire's Bowland shale complex could hold as much as 200 trillion cubic feet of gas in place. Other companies with UK shale gas licences include Igas Energy (IGAS), BG Group (BG) and Australian Stock Exchange-listed Dart Energy (DTE), as well as privately-owned explorers Celtique Energie and Reach Coal Seam Gas.
Investors could also get exposure to this emerging sector by investing in drilling companies or service providers such as Schlumberger or UK-listed Hunting (HTG), says Chris Boxall, manager of SF Fundamental Energy Fund.
