uction, and imports now make up more than 50% of current supplies in the nation. Those piped imports have driven up energy costs exponentially and have made a bad economy worse.
Bowing to the pressure, the U.K. parliament lifted the year-old ban.
There’s certainly plenty of opportunity to use the technique in the region. Although only a few seismic studies have been performed countrywide, reserves in the U.K. are estimated to be quite large. The British Geological Survey previously estimated total reserves to be around 5.3 trillion cubic feet (Tcf). However, that number was taken several years ago, before advances in the technology occurred; the BGS is expected to update its reserve numbers in 2013. Based on its own seismic studies, Cuadrilla Resources pegs that number as high as 200 Tcf.
The United Kingdom uses about 3 trillion cubic feet of gas a year.
More importantly, the U.K.’s recent decision to lift the ban could help bring shale gas and fracking to the rest of Western Europe. Both Germany and France have also banned the practice, while a host of other nations have considered doing the same. If the U.K. proves successful, these nations could reverse their own bans.
Two Ways to Play the Ban Reversal
With fracking now coming to the U.K., investors might want to jump into the opportunity. However, most firms that are involved in the U.K. (as of right now) aren’t traded on U.S. exchanges or are private enterprises, as is the case with Cuadrilla Resources.
Still, there are two big ways to play the recent tidal change:
The first is energy industry stalwart Exxon Mobil (NYSE:XOM). Less than a day after the ban was lifted, the world’s largest publicly traded oil company began eying stakes in the U.K.’s shale gas revolution. According to The Sunday Times, the major giant is in talks to buy into a drilling operation in northwest England from energy company IGas.
Exxon has been on the hunt lately to expand its drilling programs as it deals with production and reserves. Unlike the location of some of the most recent large exploration finds, England is seen as a politically friendly nation with the rule of law. That’s a big plus. At the same time, Exxon will be able to apply its leadership in the unconventional sector to the U.K. — the move makes sense for the firm as well as investors.
As for supplying that fracking equipment, Halliburton (NYSE:HAL) might be the oil service kingpin of North America, but Schlumberger (NYSE:SLB) supplies the world and is the dominant player overseas. That includes equipment that lessens the environmental impact and smaller operational footprints — factors that are very important to most Europeans. That puts SLB in the driving position when it comes to supplying equipment in England.
More importantly, as historically low natural gas prices have hurt fracking margins in the U.S., the U.K.’s higher gas prices give Schlumberger more wiggle room on pricing. That will help boost earnings at the global firm more easily than rivals.
England’s shale gas revolution still is in its nascent stages. Both Exxon and Schlumberger could give U.S. investors a chance to participate.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.