British minister says EU shale gas would curb reliance on Russia

HOUSTON, May 5 (Reuters) - European countries should make a push to start producing shale gas if they hope to reduce reliance on Russian natural gas, Britain's energy minister said on Monday.

Many European Union countries have yet to allow or encourage the extraction technique known as hydraulic fracturing, or fracking, which uses a mix of pressurized water, sand an chemicals to unlock hydrocarbons from rocky deposits.

"There are a number of European countries that are extremely dependent on Russian gas," Britain's Minister of State for Business and Energy Michael Fallon told Reuters.

"Europe has to reduce that dependence, to improve its connectivity, to look at encouraging more diverse sources of supply of gas ... and more generally to encourage indigenous sources of production of at least shale gas."

Russia's annexation of Ukraine's Crimea four weeks ago has frustrated the West, which has imposed limited sanctions against some Russian individuals. Tougher sanctions may not be an option for Europe because of its heavy use of Russian gas, analysts say.

Though less than 1 percent of its gas supplies come from Russia, the United Kingdom imports a considerable amount of gas and started moving to tap shale resources two years ago.

Fracking, though opposed by many environmental groups concerned about water supplies, has transformed the energy outlook of the United States and trimmed its reliance on foreign oil.

"In five years time I certainly hope we will be in the production phase," Fallon said.

He said major companies including Total (NYSE: TOT - news) , Centrica (Frankfurt: CENB.F - news) and GDF Suez (TLO: GAZ-U.TI - news) have expressed interest in British shale gas.

Fallon added that the country is working to encourage crude oil output from the final third of the continental shelf of the north sea.

"We are putting in place a new regulatory regime, we are reviewing the fiscal regime," he said. "We've only got two-thirds of the barrels out and we've got one third to go," he said. (Reporting By Terry Wade; Editing by Bernard Orr)