"I am in principle prepared to consent to new fracking proposals for shale gas, where all other necessary permissions and consents are in place," Davey said in a ministerial statement. America is already reaping the benefits of surging shale gas production through lower gas prices and an expected industrial revival as gas-intensive industries from petrochemicals to manufacturing consider returning to home soil given the abundance of low-cost energy.
Europe's largest gas consumer, Britain in May 2011 put a temporary stop to hydraulic fracturing or "fracking" for shale gas, a process in which water and chemicals are injected at high pressure into rock formations to retrieve trapped gas, after earth tremors were measured near a fracking site close to Blackpool.
Fracking can now resume, but explorers need to operate under tighter rules including more thorough assessments for seismic risk and installing a so-called traffic light system where operations will be automatically stopped in certain conditions. Currently only shale gas firm Cuadrilla Resources has an exploration license for shale gas in Britain but the company has said that initial production volumes from well tests in Lancashire were unlikely to materialise before March.
"I think with this announcement that there are other companies who will apply for exploration licences," Simon Toole, DECC's head of licensing, exploration and development, said. Approval to resume shale gas exploration had been widely expected before the end of the year as Davey said in October that he hoped to lift the ban.
Cuadrilla Resources Chief Executive Francis Egan said the decision to allow it to explore a belt of gas-filled shale one mile thick at its Lancashire site was a "turning point for the country's energy future", adding it could create jobs, generate tax revenues and enhance Britain's energy security.
"Today's decision will allow continued exploration and testing of the UK's very significant shale resources in a way that fulfils the highest environmental and community standards," Egan said. Industry group Shale Gas Europe said that development will also make UK manufacturing more competitive as additional supply will help lower gas prices.
Cuadrilla's expected shale gas production in Lancashire could cut wholesale gas prices in Britain by 2-4 percent from 2021, a recent study by consultancy Poyry found. The government announced this month that it would create a dedicated government office to simplify regulation and to offer tax breaks to the shale gas industry.
Britain's domestic natural gas reserves are dwindling, and national production has been dropping since 2004, turning the country from a net exporter into an importer of natural gas. The British Geological Survey (BGS) estimates Britain's onshore shale reserves at 5.3 trillion cubic feet (150 billion cubic metres), which would be enough to meet Britain's gas consumption for one and a half years, although UK shale gas exploration companies such as Cuadrilla Resources have put their figures as high as 200 trillion cubic feet. BGS is expected to upgrade its estimate of UK shale gas resources early next year.