Wood Mackenzie urges caution over shale as Weir ups presence

By PERRY GOURLEY
Published on 20/12/2012 07:56

SCOTTISH energy consultancy Wood Mackenzie has urged caution on the commercial viability of shale gas in the UK.

In a study of prospects for the industry, it claimed there were a number of obstacles to be overcome.

Its warning came as Glasgow-based engineering group Weir signalled its confidence in shale gas exploration in the US with a deal to buy family-owned

Mathena for up to $385 million (£236.9m).

Weir chief executive Keith Cochrane said the deal would increase the company’s presence in shale oil and gas markets which he noted had “attractive long-term structural growth prospects”.

Mathena manufactures a range of pressure control products to meet the increasing environmental and safety requirements of shale drilling. The acquisition, which is expected to be completed in the next few days, will be funded from Weir’s existing banking facilities.

The UK government recently offered tax incentives for developers as it believes shale gas could contribute significantly to energy security by reducing the reliance on imports.

Edinburgh-based Wood Mackenzie said it was a positive sign for the industry that the government was looking to improve conditions for shale gas exploration, but it stressed there were some issues to be resolved.

“Commercially viable UK shale gas development will only be possible if the subsurface is as good as the very best shale plays in North America,” it argued.

The research suggested that many more wells would need to be drilled in the UK before it was possible to accurately predict the ultimate recoverable volume of shale gas in the UK.

“Therefore any estimates of the ultimate impact on UK gas supply are premature,” it added.

The report also highlights hurdles which would need to be overcome for the industry to thrive including public concern over the safety of hydraulic fracturing and the development of a supply chain to ensure wells can be drilled affordably.

Shares in Weir Group closed up 51p at 1,863p.