Scottish Power, Egdon Give Go-Ahead to UK Shale Gas Project

Scottish Power, owned by Spain's Iberdrola (IBE.MC), and Egdon Resources have decided to move ahead with a joint project to explore and develop shale gas in Britain, after seismic data showed the potential for reserves.

Britain is counting on the development of shale gas to help lessen its increasing dependence on imports as North Sea output declines.

Under a farm-in agreement between the two companies, Scottish Power, which holds the mineral licenses for two sites in northeast England, will take 50 percent of the gas produced from them, unless it opts out of the agreement or the work is abandoned.

Egdon, the country's second-biggest shale gas explorer by acreage, will cover the full cost of drilling and reserve evaluation work and become the operator of the project.

Shale gas resources in northern England are estimated at more than 400 times Britain's annual gas consumption. But environmental protestors have opposed the use of hydraulic fracturing or fracking to retrieve the gas for fear it can pollute groundwater.

Scottish Power joins the likes of utility Centrica (CPYYY) and French energy firms Total and GDF Suez, which have bought into shale gas development sites in Britain.

The Scotland-based utility said it had no plans to invest in other shale gas sites in Britain.

"We were approached by Egdon Resources who are now planning to undertake the exploration-phase works, and we have no plans to look for any similar projects elsewhere in the UK," a spokesman said.

The two licence areas in Lincolnshire and South Yorkshire are located near Scottish Power's operational Hatfield Moor gas storage site.

"We are very encouraged by the results of our evaluation ... both in terms of conventional and unconventional prospectivity," Mark Abbott, managing director of Egdon, said in a statement.

By Karolin Schaps