Shell sets its sights on a leading role in fracking

Oil giant posts profit slide, reveals $90m Arctic rig hit and confirms its interest in UK shale gas deal

Shell has Britain's nascent shale gas industry in its sights after its chief executive, Peter Voser, declared plans to be a "leading player" in the fast-growing global fracking business.

Fresh from signing a £6bn shale gas deal with the Ukraine at Davos last week, Mr Voser said he was looking at a number of fracking opportunities across Europe, including the UK and Germany. Shell disclosed its interest in UK fracking after revealing a disappointing 6 per cent slump in profits to $27bn (£17bn) for 2012, as its US oil and gas business was hit by rising costs and falling prices. The shares fell nearly 3 per cent to 2,294p.

The company also revealed a $90m hit from the grounding of its Arctic drilling rig, the Kulluk, near the Alaskan coast on New Year's Eve, after it ran into a storm on the way to Seattle for routine maintenance. It said the Kulluk was not yet repaired, and it was "too early" to say whether its Arctic setbacks would be resolved in time for the drilling season, which runs from July to October. However, Mr Voser pledged his allegiance to the Arctic despite a series of setbacks over the years in the region, where Shell has invested $5bn but has yet to discover commercial quantities of oil.

Fracking, or hydraulic fracturing, is used to release oil and shale gas from rocks by blasting sand, chemicals and water into them. The practice is controversial because it has been linked to earthquakes and water pollution, but it has also enabled an energy revolution in the US, where new techniques have unleashed a wave of rock-based oil and gas. Shell already has significant fracking operations in the US and has secured contracts to produce shale gas in China.

The practice was temporarily banned in the UK after the country's first exploratory shale gas drilling site, near Blackpool, was linked to earth tremors. However, it was given the green light in December after an investigation concluded it should proceed under close supervision.

Mr Voser said he was "very excited" about the opportunities for fracking, but cautioned that there was no certainty of a deal being done in the UK, where he saw no prospect of any significant shale gas production for at least 10 years.

In comments echoing recent statements from British Gas owner Centrica and BP, Mr Voser said: "Given the population density, we see less development in European shale [than the US] and that also applies to the UK. I don't see the impact of shale as a major driver over the next 10 years although it might be after that."

Whether the UK could develop a successful shale gas industry depends primarily on whether it has the right geology, as well as the right regulation and tax structures, Mr Voser added.

He played down, without denying outright, reports that Shell is considering buying a stake in Cuadrilla, a company chaired by the former BP chief executive Lord Browne that caused the tremors near Blackpool and is leading the fracking charge in the UK.

"We are on the high level so don't link us to anything which is ongoing at this stage. That would be too early," he said.

The $90m Kulluk charge, to be spread over the fourth quarter of 2012 and the current quarter, covers salvage and other costs but no repair work, meaning that the eventual cost to Shell could be considerably higher.

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Telesales Executive - OTE £32,000+

£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Day In a Page

War with Isis: Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria's capital

War with Isis

Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria
Scientists develop mechanical spring-loaded leg brace to improve walking

A spring in your step?

Scientists develop mechanical leg brace to help take a load off
Peter Ackroyd on Alfred Hitchcock: How London shaped the director's art and obsessions

Peter Ackroyd on Alfred Hitchcock

Ackroyd has devoted his literary career to chronicling the capital and its characters. He tells John Walsh why he chose the master of suspense as his latest subject
Ryan Reynolds interview: The actor is branching out with Nazi art-theft drama Woman in Gold

Ryan Reynolds branches out in Woman in Gold

For every box-office smash in Ryan Reynolds' Hollywood career, there's always been a misconceived let-down. It's time for a rethink and a reboot, the actor tells James Mottram
Why Robin Williams safeguarded himself against a morbid trend in advertising

Stars safeguard against morbid advertising

As film-makers and advertisers make increasing posthumous use of celebrities' images, some stars are finding new ways of ensuring that they rest in peace
The UK horticulture industry is facing a skills crisis - but Great Dixter aims to change all that

UK horticulture industry facing skills crisis

Great Dixter manor house in East Sussex is encouraging people to work in the industry by offering three scholarships a year to students, as well as generous placements
Hack Circus aims to turn the rule-abiding approach of TED talks on its head

Hack Circus: Technology, art and learning

Hack Circus aims to turn the rule-abiding approach of TED talks on its head. Rhodri Marsden meets mistress of ceremonies Leila Johnston
Sevenoaks is split over much-delayed decision on controversial grammar school annexe

Sevenoaks split over grammar school annexe

If Weald of Kent Grammar School is given the go-ahead for an annexe in leafy Sevenoaks, it will be the first selective state school to open in 50 years
10 best compact cameras

A look through the lens: 10 best compact cameras

If your smartphone won’t quite cut it, it’s time to invest in a new portable gadget
Paul Scholes column: Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now

Paul Scholes column

Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now
Why Michael Carrick is still proving an enigma for England

Why Carrick is still proving an enigma for England

Manchester United's talented midfielder has played international football for almost 14 years yet, frustratingly, has won only 32 caps, says Sam Wallace
Tracey Neville: The netball coach who is just as busy as her brothers, Gary and Phil

Tracey Neville is just as busy as her brothers, Gary and Phil

The former player on how she is finding time to coach both Manchester Thunder in the Superleague and England in this year's World Cup
General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?