U.K.: SHALE GAS CONSOLIDATION

The U.K. may not have produced a cubic foot of commercially viable shale gas yet. But consolidation in the sector is already under way.

U.K. onshore oil-and-gas producer IGas Energy  PLC said Friday it has agreed to acquire Australia's Dart Energy PLC in an all-share deal valued at £117.1 million ($197.38 million).

The deal will create the U.K.'s largest shale-gas explorer by acreage under license, supplanting rival Cuadrilla Resources, which is chaired by former BP  PLC Chief Executive John Browne. Cuadrilla was the first company to hydraulically fracture a shale well in northwest England in 2011.

The consolidation of the two shale minnows, though tiny by global energy industry standards, reflects the growing interest in the U.K.'s fledgling shale-gas sector. The country could have 26 trillion cubic feet of shale-gas deposits, the U.S. Energy Information Administration has estimated.

Exploration activities are set to ramp up this year, while the government is weeks away from auctioning a new set of onshore exploration licenses that is expected to draw in several new players to the country, including U.S. companies.

Large European energy companies, including France's Total SA  and GDF Suez SA,  have already picked up stakes in licenses held by IGas and Dart, boosting funding and expertise for exploration and drilling campaigns. The U.K. government is eager to develop the sector because gas production in the North Sea is declining and the country is becoming more dependent on imported gas.

The increased use of hydraulic fracturing, commonly known as fracking, along with developments in the use of horizontal drilling, have in the past several years helped the U.S. to substantially increase its homegrown gas supply.

U.K. policy makers are hoping for a similar revolution. Earlier this week a committee of the House of Lords, one of the U.K.'s two legislative branches, urged the government to follow the U.S. and "go all out for shale."

"Here in the U.K. we have not yet left the starting gate. Developing a successful shale gas and oil industry in the U.K. must be an urgent national priority," said Lord MacGregor, chairman of the House of Lords Economic Affairs Committee.

But protests and local opposition have slowed shale-gas development to date in the U.K. Only a handful of exploration wells have been drilled, and only one well has been fracked. Industry experts say that exploration efforts need to be ramped up to have a clearer idea of how much of the potential gas can be developed at a profit.

wsj.com