The UK Government has chosen to lift the ban on fracking and go ahead with exploring for shale gas.  We are lucky in this country - we have the accumulated knowledge of years involved the full life-cycle of gas extraction from global shales but somehow those insights are completely missing from the British press and indeed from within Government. This article reviews global experience and asks how appropriate shale gas could be for the future of the United Kingdom.

ALL CHANGE AT THE TOP

Last week, the UK Government announced the lifting of the ban on fracking for shale gas; this morning the new Secretary of State for Business, Energy and Industrial Strategy declared his intention to open up exploration for shale gas.  Is the UK Government correct that shale gas can solve (or be a part of the solution to) the energy crisis in the UK?  The British public have been sold on the idea that vast untapped volumes of gas are sitting under parts of the UK only months away, ready to extract through earth-trembling hydraulic fracturing (“fracking”). Many consider the environmental impacts of shale gas fracking a risk worth taking given the extreme extent of the current energy crisis.  It turns out that there is more to extracting gas from “unconventional reservoirs” than just increased fracking during an exploratory phase.

In October 2018, the Shale Environmental Regulator Group (SERG) was setup to advise the Government on shale gas extraction.   A year later, following an environmental impact study centered mostly around secondary seismicity resulting from fracking, a moratorium was declared on shale gas exploration.  SERG was moth-balled but the need for energy independence increased after Russia’s invasion of Ukraine in February 2022. Last week, we learned that fracking is no longer a constraint on decision making and indeed,  restricted fracking has been practiced routinely over the last half century in conventional reservoirs in both UK onshore, and offshore oil and gas fields, without incident.  Extraction of gas from unconventional reservoirs, such as shale gas, requires pervasive fracking, and crucially for the environment, requires drilling many more wells per acre than has ever before been attempted in Britain, or indeed in Europe.   Fracking is widely perceived as the hot issue with shale gas but there are challenges beyond just hydraulic fracturing or even high well-densities.  Challenges that penetrate to the heart of local communities.

AN ISLAND PERSPECTIVE

Production from unconventional reservoirs can work in a handful of large continental land masses with substantial areas of relatively flat-lying geology remote from human habitation (U.S., Canada, Russia, Australia, Argentina). In contrast, Britain is a small, crowded island where the countryside is already under threat from urban expansion. It is an island where the rock strata are gently folded into narrow strips not so easily exploited in a regionally consistent way that would allow oil and gas operators to balance their profit margins with large-scale operational efficiencies to make extraction economically viable; unless propped up by the British taxpayer at unsustainably high gas prices.  In fact, unconventional reservoirs as a commercial business do not yet exist on the continent of Europe, despite the existence of large land areas where the geology and land availability appear relatively favourable. The concept of unconventional reservoirs was born in the USA, located in isolated under-populated areas where vast expanses of relatively flat-lying land encouraged entrepreneurial investors to take advantage of the extremely liberal US land mineral rights usually owned by the surface landholder, and by lax environmental legislation. Land law is very different in Britain where “mineral resources” deeper than “6 feet” are owned entirely by the State and can only be exploited under license from the State.  The Americans recognise the impact on the environment in their country and designate certain areas of unconventional oil or gas extraction as “national sacrifice areas”.

CONSEQUENCES

Extraction of gas from unconventional reservoirs such as shale has five crucial knock-on effects:

1. The significant increase in the number of wells compared with conventional reservoirs means a substantial increase in infrastructure* for a lower overall financial return, which changes the business model from large profit margins to exceptionally high risk and small profit margins. The British government would be lobbied to provide tax breaks on production to offset high exploration costs and increase profit margins, thereby inflating the price to the consumer.
2. Resource management is completely driven by gas price and the cost to develop, which combines domestic gas pricing with global gas prices plus the cost from the local service sector. The regulator can freeze the domestic price but if the global price drops and the margins tighten further, something has to give in order to keep the business going. History has shown elsewhere in the world that neither the regulator nor the operator want to suspend operations because they lose significant value with each day delayed, tightening the margins even further. Chasing such tight margins increases the risk that there is no spare cash to maintain the high HSE standards publicly agreed in the contract that granted a license to operate the resource in the first place. Standards such as those ensuring that fracking does not compromise the internal seals in a well that prevents toxic chemicals used in the fracked interval from leaking into the water supply, or methane leakage. The local service sector will also be subject to inflationary pressures, placing the commercial viability at further risk.
3. These days, the number of wells seen at the surface is greatly reduced with the use of “multi-laterals”*. But the sheer number of wells drilled in any one area creates spikes in activity, which have the potential to drive mini boom:bust economies that can devastate local communities. The intensity of daily operations associated with supplying the drilling centres with materials for fracking (mostly water) and the associated waste management** demands temporary road networks to support convoys of truck movements through small towns/villages that will create significant (and potentially long-term) problems for local people. Either you change the landscape to suit the new use being put to the land or you accept that the land will be damaged and that the cost for repair should be included in the price. 
4. When the wells are exhausted, they are safely abandoned because the contract with the regulator includes a decommissioning process to restore the land back to its former natural state, with the costs included in the terms of the contract. Natural abandonment takes place when the gas has run out, which happens rapidly for shale gas because the resource density and ultimate gas recovery per well are so much lower than conventional resources. Shale gas, however, is also prone to forced abandonment or shutins, when the margins are too low to make a profit. Forced abandonment is a particular issue for unconventional reservoirs because of the huge depreciation on what is a capital expenditure intensive resource, so that even when the gas price recovers, the energy enterprise is unable to break through the margins (i.e. make a profit) unless the gas price remains higher for longer. Counter-intuitively, conventional resources can respond much more rapidly to fluctuations in gas price because there is less hardware to maintain in the ground during down-time. It also means that when we as customers and resource holders are ready to transition away from fossil fuels, conventional enterprises are far easier to decommission and clean-up.
5. Large amounts of fresh water are required to conduct daily fracking operations.* Britain is blessed with high rainfall but at the time of writing, much of it was under severe drought measures. Under such circumstances, the water would have to be brought in from other regions on a daily basis and disposed of offsite. At a time of drought and concerns about the capacity of the environment agency to monitor water disposal effectively, water management is top of the list of concerns for environment impact assessment. Recent experience of water agencies, sewage spills and lack of environmental regulator oversight or Government enforcement should be a cause for acute concern.

Of the five effects listed above, the first damages the environment in ways that affects all of us on the basis of space alone (increased infrastructure footprint). The latter four affect scale and longevity of that footprint: high gas prices mean rapid expansion; low prices result in suspension of infrastructure without abandonment to wait for better times. The local communities risk losing either way. Contractors either thrive and expand their footprint (re-fracking) or risk filing for bankruptcy and abandon their infrastructure without decommissioning, leaving the consumer or the taxpayer to carry the cost of the clean-up. There are safeguards that can be put into place to ensure that the potential for environmental damage is mitigated against but they all come at a price. The want of water and its safe disposal affects local communities directly. 

The five effects are all predicated on success: that commercially recoverable volumes of shale gas exist at all in the UK. As shale gas does not work anywhere in Europe, the companies who are exploring for shale gas in the UK understandably draw on regions of the world to set their expectations based on where shale gas has succeeded, mostly the USA. They fail to pick up reasons for failure in China, Poland, Sweden or South Africa. By searching for what works (such as organic carbon content or thermal maturity) and not for what has been known to fail (such as atomic hydrogen content or present day stress fields), they are only representing half of the story. When investigators’ subjective confidence in their judgments is reliably greater than the objective accuracy of those judgments, they are displaying over confidence. Part of the reason for over confidence is that the work is being conducted exclusively by exploration companies whose business models exclude “production” (the logistics and economics of maintaining extraction at commercial levels).  Put simply, if you invest more energy into a process than you can get out of it, you have a negative energy balance – the same applies to financial investment. We can only judge if shale gas has positive balance potential in the UK (or indeed anywhere in Europe), by examining the complete business life-cycle from exploration, through production to abandonment. That presently does not exist with any of the UK public agencies or in Whitehall. A simple full life-cycle desktop study involving knowledge holders could provide crucial insights before spending valuable tax-payer’s money on a high-risk venture.

WHAT SUCCESS LOOKS LIKE

Successful commercial exploitation of unconventional reservoirs in mainland Britain is a fine balance between geology, energy market, scale and location. It is easy to see how local authorities are impressed by spectacular (but highly speculative) “in-place” oil and gas volumes quoted by companies who have no means to support their veracity beyond modelling perceived analogues - often with many unconstrained or dubious assumptions - and attracting funds from investors who fail to appreciate the risk to returns. It is hardly surprising, therefore, that the public discourse is never truly balanced by the capacity or the cost to recover those volumes or indeed, the capacity or the cost to recover the damage to the environment, given that there is no precedent anywhere in Europe.  The simple message is that extraction from unconventional reservoirs - which rely on dense drilling AND pervasive fracking to work – has the potential to damage the environment and has the capacity to devastate local communities.  

There are other ways to balance profitability with social equity whilst preserving our environment AND securing energy independence.  In the long-term, we aim to achieve this through entirely sustainable means, which may include blending nuclear, geothermal, wind, solar and tidal sources. In the short-term we need the means to transition but so long as personal energy conservation is seen as an inconvenience and not a responsibility, as a society, we will not achieve our goals.  Bridging the gap to a future free of fossil fuels requires commitment as well as informed political vision. It may even require temporarily using existing proven petroleum systems to sustain energy supplies by extending the decline curve further than would be commercially desirable (brownfield development).   It is not necessary to expose the country to unconventional reservoirs as trading chips for the present. It just requires the recognition from our leaders that there is no quick-win (there is no existing distribution infrastructure) and that you have to embrace change to make it happen. It also requires that we as consumers adopt a more responsible approach to energy conservation. If Britain does elect to follow a path towards shale gas extraction, then let us at least have the discussion around full life-cycle thinking and the safeguards being taken to mitigate the impact on cost to the consumer and the environment.

WHAT CAN BE DONE?

We are now at a strategic decision point in our history to determine the kind of world we want our children to live in, including reduced emissions.  Ironically, Russia's war has accelerated the transition away from our dependence on fossil fuels, so where does shale gas fit the new landscape ahead of us?  The UK is fortunate in that we don't have an availability of gas supply issue (we don't depend on Russian gas) - we have a cost of gas supply issue .  There is no need to conduct an island experiment to bring more gas into the mix.  This is a time for real vision from our leaders informed by the depth of content knowledge and not just reacting to short-term need.  There is no shame in ignorance but wilful ignorance is a crime. 

A simple full life-cycle desktop study involving knowledge holders could provide crucial insights before spending valuable tax-payer’s money on a high-risk venture.

https://twitter.com/whathefracc/status/1574295212939251720?s=48&t=VDxRf4-DA0X77hb69dA7tA

*Each well pad would supply up to 18 individual multi-lateral wells, with each well consuming 4000 to 15000+ m3 of water injected in to the well for fracking. Each well pad will occupy 5-10 acres of land with flares, requiring gas infrastructure (pipelines) to gathering stations as well as access and accommodation for workers for a period of around 5 years before moving to the next pad as the operation expands in a grid pattern over the entire region.

**30-70% of the injected volumes return to the surface, requiring more trucks to evacuate, assuming an environmentally acceptable approach to disposal has already been agreed. Waste water includes added toxins for fracking, such as concentrations of nature toxins such as normally occurring radioactive materials (NORMs)

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