Last summer, Centrica (CNA), the owner of British Gas, acquired an interest in a major land package near Blackpool from privately-owned Cuadrilla Resources. French utility group GDF Suez, meanwhile, tied up 12 licences across the north of England in October in a deal with Australia's Dart Energy (ASX: DTE).
Other listed UK companies that are well positioned to benefit from further shale gas acreage deals include Aim minnows Europa Oil & Gas (EOG) and Alkane Energy (ALK). Europa controls a large land package to the east of Total's new acreage while Alkane controls land immediately to the west and north. Egdon also holds a separate interest in two licences directly to the north.
This week, no fewer than five Europa directors and executives bought shares either in the open market or via a placing at prices between 6p and 8.45pa share. Chief executive Hugh Mackay nearly tripled his personal shareholding to 2.34m shares at a cost of over £100,000.
Finding the 'sweet spot'
Still, one of the biggest challenges for investors in UK shale gas plays is that it's very difficult to ascertain whether a company's acreage position is any good. It took American exploration companies many, many years to find the so-called geological 'sweet spots' that are most conducive to shale gas production. Certain parts of a formation might only yield tiny amounts of shale gas, but a well just a few miles away in the right part of the basin could prove to be a gusher.
In the UK, "the main interest is in the Carboniferous [rock] units, particularly the Bowland shale formation, which occurs throughout parts of north-west and central and eastern England", say experts at the British Geological Survey (BGS).
A rough guide to the Bowland shale formation
Source: Dart Energy
Within the wider Bowland shale formation, there are several different sub-regions, or geological basins, some of which are comparable to basins that are producing shale gas in the US. But the quality of the shale varies widely from basin to basin, as well as within basins. So until exploration wells are drilled and fracked, we won't really know which geological basin, if any, will prove to be the first 'sweet spot' producers are hoping to find. Thus far, IGas Energy (IGAS) has built up a large land position in the Cheshire basin; Cuadrilla and Centrica are focused on the Bowland basin near Blackpool; Total, Egdon and IGas are focused on the Gainsborough Trough; and Dart and GDF Suez have bought wide swaths of land across all three basins.
Shale gas basins within the wider Bowland-Hodder shale formation
Source: Department of Energy and Climate Change
Cuadrilla's acreage near Blackpool is undoubtedly the most high profile, being the site of a minor earth tremor caused by the first attempt at fracking there (it was abandoned halfway through). Yet Total's recent, high-profile move into the Gainsborough Trough region could really ignite interest there, especially with GDF Suez also controlling a sizeable land position in the same basin.
UK shale gas licences farmed into by major energy companies
Mark Abbott, Egdon's chief executive officer, told Investors Chronicle that the BGS and independent consultant RPS have both highlighted the Gainsborough region as "a particular area that could be one of the core areas for development" of shale gas. "It's the same age rocks as you're looking at in the Cuadrilla acreage and the IGas acreage over in Cheshire, just a different basin. We basically have a thick development of these shales within what is quite a simple geological setting. We believe it has the correct parameters to develop a shale gas play, and we're encouraged to say the least by the fact that Total have verified our view by farming in," said Mr Abbot.
To view a more detailed map of onshore oil and gas licences in the Gainsborough Trough, including those held by IGas, Egdon, Alkane, Dart and Europa, click here.
Note: Total has farmed into licences (PEDL) 139, 140 and 209. GDF Suez has farmed into licences (PEDL) 185, 186, 187, 188, 189, 147 and EXL273 in the west, and 012, 146, 200, 207, 210 and EXL288 in the east. Egdon farmed into licences 161 and 162 in December.
