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The BBC's David Shukman explains how fracking works
The government has opened the bidding process for new licences to extract shale gas, using the controversial fracking process.
About half the UK is open to exploration, but tightened rules cover areas of outstanding beauty.
Companies granted a licence to begin test drilling will also need planning permission and environmental permits.
The coalition sees shale gas as a major potential energy source. Critics of fracking warn of environmental dangers.
Fracking involves blasting water, chemicals and sand at high pressure into shale rock formations to release the gas held inside.
In announcing the so-called 14th onshore licensing round, Business and Energy Minister Matthew Hancock said: "Unlocking shale gas in Britain has the potential to provide us with greater energy security, jobs and growth."
"We must act carefully, minimising risks, to explore how much of our large resource can be recovered to give the UK a new home-grown source of energy."
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Energy Minister Matthew Hancock: "Some kind of recompense is very reasonable"
It is the first time in six years firms have had the opportunity to secure new licences.
"Of course there is local opposition in some places," Mr Hancock told the BBC.
"But broadly there is also public support for the argument that we need energy security."
However he was unable to immediately name a community which is welcoming fracking.
Drill downRobert Gatliff, Science Editor at the British Geological Survey told the BBC it would still be some time before full scale drilling would start.
"The first stage, you'd review all the data you've got. Then you'd want to drill one or two exploration holes and then take samples of the shale and see exactly what the content is and see which have got the most in and which bits are likely to fracture best to get the most oil out."
An agreement to proceed with drilling would still be subject to planning permission and permits from the Environment Agency.
He said that although surveys suggest there is between 820 and 2000 trillion cubic feet of gas embedded under the UK, "there's no way we'd get all that out."
"If you look at what happens in the US, and that's where you've got to look because that's where they've drilled thousands of holes, they're not getting more than 5%," Mr Gatliff said.
"In Britain we're so crowded and we've got these beautiful areas, that reduces the amount we can get out as well."
AnalysisBy Norman Smith, chief political correspondent, BBC News Channel
Government sources have dismissed claims that new restrictions on fracking are designed to head off protests in Tory seats in the south of England.
The government has today announced new curbs on fracking in areas of outstanding beauty and has also given the environment secretary more power to intervene where there are disputes over drilling.
However sources deny that the announcement by the Energy Minister, Matthew Hancock, is designed to assuage anger from Tory voters in the south - where fracking has been threatened in areas such as Hampshire, Surrey, Sussex and Kent.
Sources say that Mr Hancock is "a countryside man" with a genuine desire to protect areas of natural beauty.
However he acknowledges there is a need to re-assure voters about the impact of drilling for natural gas.
They stress that the new restrictions will apply to National Parks and Areas of Outstanding Beauty across the UK and not just in the south of England.
It's understood the first gas from fracking is likely to be extracted early next year.
About half the UK is open for licensing, including parts of National Parks. But applications there will only be accepted in "exceptional circumstances and in the public interest", said the government.
The same rules apply for the Broads, Areas of Outstanding Natural Beauty and World Heritage Sites.
"Proposals for such development must recognise the importance of these sites," Communities Minister Lord Ahmad of Wimbledon said.
Tom Greatrex MP, Labour's Shadow Energy Minister, said: "With 80% of our heating coming from gas and declining North Sea reserves, shale and other unconventional gas may have the potential to form a part of our future energy mix."
But he added: "There are legitimate environmental concerns that must be addressed before extraction is permitted. Robust regulation and comprehensive monitoring are vital to ensure the public acceptability test is met."
The industry itself rejects these criticisms, arguing that, if regulated properly, fracking is a safe way to unlock huge resources of gas, which is a cleaner source of energy than coal.
In the UK test drilling has taken place in Lancashire and in the West Sussex town of Balcombe where last summer more than 1,000 people protested at a site operated by energy company Cuadrilla.
The north of England is the largest area identified as containing shale reserves.
The British Geological Survey has also pinpointed south east Scotland as containing significant shale resources.
Access rightsThe government is keen to promote fracking in the UK, and has already announced a number of incentives to help kick-start the industry, including tax breaks, payments of £100,000 per site plus a 1% share of revenue to local communities.
It argues that shale gas could be an important bridge to help secure energy supplies until renewable energy capacity is increased.
Others argue that while it may be cleaner than coal, it is still a hydrocarbon that emits CO2 linked to global warming.
The BBC's Environment Analyst Roger Harrabin said: "If environmentalists succeed in stopping fracking in the UK by stirring up local objections they will actually make the greenhouse effect worse in the short term."
"This is because Britain will continue to use gas for heating and as a backup to capricious wind and solar electricity. If the industry can't get British gas it will import liquefied gas - and the energy needed to turn gas liquid makes it worse for the climate than home-produced gas."
In the US, shale gas has caused energy costs to tumble, but questions remain about whether the American shale revolution can be replicated in the UK and elsewhere.
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