Infrastructure Bill [HL]

Written evidence submitted by CENTRICA (IB 40)

Executive Summary

· Centrica supports the measures in the Infrastructure Bill to simplify deep sub-surface land access rights for onshore oil and gas and geothermal energy.

· The current system of sub-surface land access is not fit for purpose and will prohibit companies from exploring the potential of UK shale gas reserves.

· The British Geological Survey (BGS) estimates that there could be 1,300 trillion cubic feet (TCF) of shale gas in place in the Bowland-Hodder Basin alone. UK annual gas consumption is just 3 TCF, so this is a sizeable resource for the UK. At a time when 80% of UK homes rely on gas for central heating and the UK North Sea is maturing this is an important opportunity for the country.

· Companies, including Centrica, are at the early stages of shale gas exploration and need to undertake preliminary drilling to determine the potential of this sector. The changes to deep sub-surface land access rights contained in this Bill are essential for this to take place as well as for the development of geothermal energy.

About Centrica

1. Centrica plc is a UK FTSE 100 integrated energy company, employing over 37,000 people across the world. We are involved in every stage of the energy process from sourcing oil and gas in the North Sea to supplying over 11 million UK customers and nearly 900,000 businesses with heat and power.

2. The Centrica plc group includes British Gas, Centrica Energy, BordGais in Ireland and Direct Energy in North America as well as Centrica Storage. Centrica Energy, the upstream arm of the group, explores and produces for oil and gas in the UK, Netherlands, Norway, Canada and Trinidad and Tobago.

3. Centrica Energy is one of the largest gas producers on the UK Continental Shelf. In June 2013 we acquired a 25% stake in Cuadrilla’s Bowland Basin shale gas exploration licence in Lancashire. Cuadrilla is awaiting a final determination from Lancashire County Council (expected January 2015) on planning proposals to drill, hydraulically fracture and test the flow of gas at two sites in Fylde, Lancs.

Why Centrica invested in Shale Gas?

4. Centrica has a long history of exploring and producing UK natural resources to provide heat and power to British homes. Our Morecambe Bay gas fields started operating thirty years ago and they are now the largest producing natural gas fields in the UK. The gas we produce is used to both supply homes directly, but also to fuel electricity generation. Centrica is active in power generation, owning a number of UK stations.

5. The UKCS is maturing and it is important that companies like ours look to the UK’s future energy security. By 2030 DECC estimates that the UK will import 76% of gas supplies meaning an increased reliance on overseas supplies.

6. In 2013 the BGS announced that UK shale gas resources were larger than initially anticipated and there is potentially 1,300 TCF of gas in the Bowland-Hodder Basin. This compares with UK annual gas consumption of 3 TCF and could provide gas to the UK for decades.

7. The shale gas industry could create 74,000 jobs in a peak scenario by 2030 and would require substantial investment of £33bn, much of which could be in the UK supply chain. This could help reinvigorate UK industry and particularly the manufacturing, chemicals and energy intensive industry sectors.

8. Centrica acquired a 25% stake in Cuadrilla’s exploration licence in Bowland Basin because we believe it is important to determine the potential of this new resource. Cuadrilla has submitted two applications to drill, hydraulically fracture and test the flow of gas at two sites in Lancashire.

9. These planning applications would allow us to undertake initial drilling to determine how much of the gas in Lancashire is likely to be commercially recoverable, greatly improving our ability to estimate the potential for shale gas extraction in the UK.

10. Centrica has been undertaking safe and effective hydraulic fracturing in the North Sea for many years.

Why is the Infrastructure Bill important for shale gas development?

11. T he measures related to shale gas land access in Part 5 of this Bill will allow companies to drill below land at a depth greater than 300m without landowner permission . This will not impact landowners’ surface rights, but will allow horizontal drilling for shale gas, which typically takes place using a well of 6-9 inches in diameter at a depth of greater than 1 mile.

12. The coal and water industries as well as Crossrail and the Environment Agency, amongst others, already have rights that allow sub-surface land access. This is often at a depth far shallower than would be needed for shale gas drilling. Crossrail runs at a depth of roughly 40m with a tunnel of several metres across.

13. The current land access regime is not fit for purpose as it is lengthy, complex and prohibitive. Unless companies have permission from landowners to drill horizontally hundreds of metres below their land, which could be several thousand people, they are prohibited from drilling . In the absence of consent, access can only be obtain ed through lengthy legal proceedings.

14. In the early stages of this industry, whilst companies are exploring the sector’s potential and projects are not profitable, this delay and expense stymies investment and will stall the sector.

15. The measures included in this Bill will mean companies are able to drill horizontally underground without needing to undertake these lengthy and prohibitive landowner and legal negotiations . It is important to note that this will not affect the rights of any landowners where activities are planned at th e surface or a depth above 300m . Companies will still need to go through the full regulatory and planning regime for any shale gas exploration, appraisal and production that takes place.

16. The Royal Society determined in 2012 that "the health, safety and environmental risks [ related to shale gas extraction through hydraulic fracturing] can be managed effectively in the UK." We believe the UK has one of the most robust regulatory regimes in the world .

January 2015

Prepared 15th January 2015