Centrica’s head of upstream Mark Harafin was quoted in the Telegraph over the weekend saying that the company would probably not bid for further licenses when they are offered in the next round expected later this summer.
“Not surprising from Centrica given the uncertainty surrounding shale gas reserves, and the impending CMA market review,” an analyst note from RBC Capital said.
Previously Centrica have warned that the Competition and Market Authority probe could result in an investment hiatus due to the uncertainty the review poses. The CMA review could take as long as two years to complete, and result in the breaking up of UK utilities into separate retail and upstream arms.
As the UK’s biggest energy supplier Centrica is particularly vulnerable to any structural changes demanded by the CMA. In addition shale gas investment carries even greater uncertainty due to limited industry progress so far.
Harafin said the company would not “bet” any more money on shale gas fracking until it had discovered to what extent UK shale reserves are recoverable.
The company has already taken a 25% stake in Cuadrilla’s license area for the Bowland shale for £40 million with up to £120 million of additional development spend.
Citi analysts added: “It will be interesting to see how many of the existing players bid for further licenses in the upcoming round as it may indicate the current views of the industry on future potential based on the limited data so far from drilling operations.”
The UK’s 14th onshore licensing round is expected by July.