The owner of British Gas is among a number of parties involved in negotiations with Cuadrilla’s controlling owners Riverstone Holdings, the private equity firm, and AJ Lucas, the Australian engineering group.
Bringing in a multinational would support Cuadrilla’s efforts to exploit Britain’s untapped energy reserves held in shale rock through the controversial process of hydraulic fracturing, or fracking.
Attention has focused on the potential of the fledgling shale industry in the UK after the Government last month gave the green light for fracking to resume, after Cuadrilla’s activities around the Bowland shale basin in Lancashire triggered minor earthquakes in 2011.
For Centrica, taking a stake in Cuardilla is understood to be one of 7 or 8 possibilities the company is looking at as part of its diversification strategy.
Centrica currently has no shale projects in the UK or the US, although it is familiar with some of the techniques involved to access reserves in shale rock. Its upstream business says it was “the first to undertake horizontal hydraulic fracturing in North Sea gas wells”.
In the US, the birthplace of the shale revolution, many hope that it will become a net energy exporter or energy-sufficient due to shale gas and oil.
Such is the rise in gas production unleashed by fracking that US natural gas prices have collapsed from a Henry Hub spot price – the benchmark in the country – of more than $15 per million British thermal units, at the end of 2005, to around $3 today.
Cuadrilla and Centrica declined to comment. Riverstone could not be reached for comment.
AJL Price at posting:
$1.63 Sentiment: Buy Disclosure: Held
