On 28 July 2014, the UK Government launched the 14th UK onshore licensing round.  In light of the announcement Wood Mackenzie's UK Upstream research team has assessed the current UK unconventional sector and new acreage.  Onshore licences are available in areas including the Bowland Shale in the north of England and the Midland Valley in Scotland. The previous onshore licensing round was opened in 2007 and since then, shale plays in the onshore UK unconventional sector have generated large amounts of interest. However, Wood Mackenzie believes a number of barriers need to be overcome to achieve commercial production from the UK's onshore shale plays.

Lindsay Wexelstein, Head of UK Upstream research for Wood Mackenzie offers: "Fundamentally our view hasn’t changed since we assessed the commercial viability of UK shale gas in 2012, when we forecast production from the UK alone was unlikely to have a material impact on the UK's gas price dynamics out to 2025. The launch of the long awaited 14th UK Onshore licensing round is a significant step in the development of the UK's shale gas industry as it could spur the investment and exploration activity required to test the unproven subsurface."

The key findings from Wood Mackenzie's latest analysis are summarized below:
• The British Geological Society estimates a potential gas-in-place resource of 1,329 trillion cubic feet (tcf) in the Bowland basin alone. Wood Mackenzie asserts that the geology of the subsurface and productivity of the UK's shale deposits are yet to be proven.

• Only six wells targeting shale plays have been drilled to date in the UK therefore much remains to be seen from the initial well results in order to prove the commercial viability.

• Obtaining planning permission to drill, hydraulically fracture and test wells remains the biggest obstacle in getting exploration activity and development underway. Given the level of public opposition to shale gas development in the UK, Wood Mackenzie says that successful bidders will have to undertake extensive public engagement and consultation exercises before planning applications are submitted to local councils.

• UK government has introduced fiscal incentives which will support the development of succinct shale gas 'pads'. Given land access issues in the UK, these are likely to be more palatable development concepts for local communities and planning authorities - but their viability will depend on the geology and presence of commercial shale gas reserves.

• Although major oil and utility companies are already involved in UK onshore operations, the potential gas volumes associated with shale developments are likely to drive interest in the licensing round which could alter the number and mix of companies with onshore operating licenses.

• The outcome of the 14th UK Onshore Licensing Round, which is open for applications until 28 October 2014, will be a good indication of the level of interest in the country's unconventional sector.
Source: Wood Mackenzie