Climate and energy secretary Ed Davey tells MPs fracking will resume, but with new controls to address risk of seismic activity Link to this video

Fracking is set to be the next frontier for the UK’s oil and gas industry, after the government lifted restrictions on the controversial practice on Thursday, giving a green light to drilling that could produce billions of pounds worth of gas.

The first new site is likely to be at Anna’s Road in Lancashire, near three exploratory fracking wells that were closed after they caused two minor earthquakes last year. Dozens more sites across the country could be licensed as ministers signalled their hope that shale gas would help to make up for the decline in North Sea gas supplies.

Ed Davey, the Liberal Democrat energy and climate secretary, said: “Shale gas could continue significantly to our energy security, and reduce imports of gas as we move to a low-carbon economy. It could substitute for imports, which are increasing as North Sea gas is decreasing.”

He said companies drilling wells would be subject to a “traffic light” system, with seismic monitoring to ensure that if there are tremors above a certain level, drilling is halted pending investigation. Any chemicals used in fracking have to be approved by the Environment Agency, and the Health and Safety Executive will also be involved in vetting operations.

Francis Egan, chief executive of Cuadrilla, which is pouring tens of millions into exploration, said: “This is a big step for the country, and could be a very valuable resource. We are moving ahead with our plans.”

Estimates of how much shale gas there might be in the UK vary widely. Cuadrilla – the only company yet to have drilled exploratory wells – believes there could be 200tr cubic feet beneath the surface. That would be about 70 times the UK’s annual gas demand, but the estimate is regarded as much too high by some geologists.

The real question is not how much gas there might be, but how much is technically recoverable, and recoverable at a reasonable cost. That amount could be far lower than the available resource – it could be less than 5% is recoverable. However, even that small amount could total hundreds of billions of pounds over decades.

Some businesses and investors are sceptical that fracking could happen here on the large scale required to yield such returns, given the density of population and fears over the impact of the practice, which requires dense rock to be blasted apart to release microscopic bubbles of methane – natural gas – trapped within it. Each site needs up to eight wells to be drilled per square mile to collect the gas, and each requires planning permission and is vetted by several government agencies.

Eight wells per square mile could prove a barrier to companies gaining planning permission, especially if local opposition groups step up their current activities. In the US, fracking has been associated with groundwater contamination, methane leaks and the use of toxic chemicals. Davey said that would not happen in the UK, as the industry would be far more tightly regulated, but that may not assuage the concerns of local groups.

Ben Caldecott, head of policy at the boutique investment bank Climate Change Capital, said: “Fracking will continue to generate significant local opposition, which will undermine long-term political support and the investment case for a UK shale gas expansion. This is fortunate, as it’s clear from the latest Committee on Climate Change (CCC) findings that another dash for gas will expose us to higher and more volatile fuel prices.”

The CCC, the statutory body set up to advise ministers on how to meet the UK’s greenhouse gas targets, has warned that a big expansion in the use of gas – such as the 40 new gas-fired power stations the Treasury is aiming for – would be “incompatible” with the UK’s carbon budgets.

Davey insisted that shale gas from the UK would displace imports, “to the benefit of the economy”.

A Downing Street spokeswoman said: “There is great potential for prices to come down and that is something that is attractive about finding another source of energy.”

But environmental experts pointed out that this would still lead to a rise in fossil fuel consumption overall, because the gas that would have been imported will be sold elsewhere.

There is also no guarantee that shale will bring down gas prices. Jim Watson, professor at the University of Sussex, said: “Even if UK shale gas resources turn out to be large and low-cost – and that is a big if – this will not necessarily bring down prices to UK consumers. It is unlikely that UK shale gas will be anywhere near as cheap as it is in the US, and any price difference between UK gas and continental European gas will quickly disappear as a result of demand from other countries.”

Chris Shearlock, sustainable development manager at The Co-operative Group, added: “We’re concerned UK regulation has yet to catch up with shale gas and it’s important to realise that the risks of groundwater contamination can’t be totally eliminated even with good regulation. Shale gas extraction risks derailing the government’s own greenhouse gas reduction targets, and with over half of our gas requirement already being imported, a limited input of shale gas will in fact increase our reliance on foreign gas, leaving us vulnerable to price volatility. Instead, the UK should concentrate on renewable technologies, which not only offer a sustainable energy future but thousands of new jobs and more stable energy prices.”

Industry welcomed the government’s move. Steve Radley, director of policy at EEF, the manufacturers’ organisation, welcomed the government’s green light for fracking: “The government continues to demonstrate a shift to a more balanced energy policy. Shale gas is a potentially game-changing resource where, in the US, it has slashed energy prices and helped spur a re-industrialisation. As we continue to struggle to rebalance our economy and balance our books, we cannot ignore this potentially significant resource. Well-regulated exploration is the sensible approach.”