Fracking industry enters critical period

Lancashire homes could be heated by shale gas produced in the area by next year, according to a Cuadrilla director – although he emphasised that this would be as part of the testing process and not full-scale production.

Matt Lambert, Cuadrilla director of government and public affairs, said that now the fracking company had fought off a challenge in the High Court over the planning application at its Preston New Road site near Blackpool, it aims to move to exploratory drilling within a couple of months to assess flows of gas.

That could mean fracking for gas – injecting sand, water and chemicals into rocks at high pressure to release it – at the end of the year and testing early in 2018, “with connection to the grid part of that, if all goes well”, said Lambert.

The High Court’s dismissal on 18 April of activists’ application for judicial review of Cuadrilla’s planning permission marks the start of a critical phase for the fracking industry.

After lengthy delays, Cuadrilla can now begin testing the flow rates of gas at Preston New Road. It also proposes testing at another site nearby, Roseacre Wood, while Third Energy plans to start fracking later this year at Kirby Misperton in Ryedale, close to the North York Moors National Park.

Cuadrilla has faced daily protests at Preston New Road by residents and anti-fracking campaigners, who have also targeted companies in Cuadrilla’s supply chain. They are protesting about the environmental and social impact of fracking, and point out that Lancashire County Council voted against fracking, only to be overruled by central government.

Flow testing at Preston New Road will provide the first real-world data of the UK’s reserves of shale gas, and thus the viability of the industry.

Cuadrilla estimates there could be 200 trillion cubic feet of shale gas trapped in its licensed exploratory area in the North West. But until flows are tested, it is not known how much of that estimate is technically recoverable, nor how much of it is cost-effective to extract.

“We know the rocks are rich but don’t yet know flows and that’s really crucial because if you get hardly any gas then that’s not commercial,” said Corin Taylor, senior adviser to trade association United Kingdom Onshore Oil and Gas.

Cuadrilla has stepped up its PR efforts at Preston New Road, erecting a viewing area allowing users a “safe position from which to observe work on the site and from which to conduct peaceful and lawful protest, if they wish”, it said in a statement.

Last week the company set up a portal on its website allowing members of the public to read monthly data on traffic, noise, air quality, surface and ground water, and seismicity at Preston New Road.

The company said: “The design of the portal has been guided by the priorities set out by local people during the public consultation undertaken for the planning application for the project.”

In 2013 scientists from the British Geological Survey estimated there is likely to be 1,300 trillion cubic feet of shale gas in the ground in the north, a figure broadly in line with Cuadrilla’s estimates.

Taylor said the UK uses 2.5-3 trilliion cubic feet of gas a year for heating, “so if you could get 10 per cent of that out of the ground it would be equivalent to 40-50 years’ supply”.

He said that gas heats 84 per cent of homes in the UK and 60 per cent of homes use gas for cooking. It is meeting nearly half the UK’s electricity generation needs and is also used in industrial heating, for processes requiring very high temperatures.

“We do need a mix of energy. We’re supportive of renewables.”

Gas heating is cheaper than electrical or oil heating, he pointed out, and where gas use displaced coal, it was contributing to reduced carbon emissions.

“We represent gas producers but we would never say gas is the only energy option,” said Taylor. “We do need a mix of energy. We’re supportive of renewables, we’re supportive of nuclear. We think we also need more energy efficiency. But we also think that gas plays a very important part in our energy mix and will continue to do so.

“In 2000 we produced all our gas from the North Sea and exported some. Now we import half and that will go up to three quarters in 2030-35 without shale.

“Replacing some of those imports is the key benefit for shale. It could potentially cut imports in half. And not only have you got a secure domestic source of energy but you’re providing tax revenue and jobs.”

Estimates of shale resources and reserves do vary though. Last month AJ Lucas, the Australian construction engineering group that owns 45 per cent of Cuadrilla, admitted to the Australian Securities Exchange that an interim report from a consultant it engaged “estimated a still very large but significantly reduced GIIP [gas initially in place] resource compared to that estimated by Cuadrilla” at the Bowland Prospect in northern England.

The company has advised investors that “previous GIIP statements should not be relied on until planned further drilling and analysis are undertaken”.

Andrew Aplin, Durham Energy Institute professor of unconventional petroleum, believes the British Geological Survey may not give the full picture because it analysed the total gas resource rather than the reserve that can be extracted.

He said the question of whether gas prices are high enough for the UK industry to become profitable – in the absence of government subsidy – was a “concern” for companies.

“To produce 25 per cent of UK gas consumption by 2030, we would need to drill 300 wells per year for 10 years.”

Although there have been claims that Saudi Arabia was deliberately keeping the price of oil down to make US shale oil extraction uneconomic, the American industry has become more effective at fracking, partly through economies of scale. But Aplin warned that it was difficult to read across from the US, because the UK lacks a fracking supply chain at the moment and cannot benefit from economies of scale, and it “rightly” has a tighter regulatory environment.

Aplin emphasised the challenge facing the UK industry if it was to make a contribution to UK energy needs from a standing start. “In order to produce perhaps 25 per cent of UK gas consumption by 2030, we would need to drill 300 wells per year for 10 years – 3,000 wells in total.

“This is based on US production rates per well – and the caveat is that we have to assume that UK wells will produce at similar rates. Without UK production data, we don’t know that.”

Aplin said those 3,000 wells would be concentrated in some areas of the UK but nevertheless the impact on the countryside would be considerable. On the other hand, the energy and jobs pay-off could also be large.

As with estimates of shale reserves, studies on the employment opportunities of fracking vary considerably. Taylor said Ernst & Young’s 2014 report was the most comprehensive, putting a figure of 64,000 jobs, although other studies produce a much lower figure. Those jobs range from specialist drilling services through to ordinary civil engineering work and security and catering.

There will be limited jobs growth in the early exploration phase but employment in the industry is likely to grow during production. Extraction at shale gas wells tails off much more quickly than for conventional drilling, but the need to continue drilling new wells could sustain employment.

Many of the specialist services would come from national or international companies, acknowledged Taylor, limiting the benefit to local economies.

“Obviously you can’t have 100 per cent of your supply chain locally but every company will want to hire local companies where they can, partly because it helps when it comes to building relationships with people locally – local decision makers and so on.

“It then becomes an issue of procurement – have you got a procurement policy that allows local SMES to bid? There are a number of companies that say as long as procurement requirements are met they would prefer to choose local companies.

“Cuadrilla has 400 local companies registered on its portal to be notified of contracts. There is definitely an interest in this industry from the local supply chain.”

Recent direct action by campaigners against supply chain companies has brought some success in persuading them not to do business with Cuadrilla. Lambert called it “intimidation” but insisted that following campaigners’ initial success companies were now putting up a “robust” response.

He said contracts were flowing to local businesses, jobs were being created and training, via internships, was about to start.

“Most people – not just business – are pretty fed up with protests and the road being blocked and just want us to get on with it,” he said.

For others, the greater problem is bureaucracy. With Ineos last week having given notice of application for a Derbyshire shale gas well, Taylor urged government to speed up the planning process.

“The biggest issue is not money – it’s the planning system,” said Taylor. “And I don’t think we’re the only industry to say that.

“We don’t need a subsidy but the planning system has been slow. It’s taken some sites several years to run through the system. Like housebuilding and a lot of industries we would say we need to look at making the planning industry move more smoothly and reducing the times it takes to get decisions.

“It’s been taking a year rather than the 16 weeks it’s supposed to take. Anything the government can do to take that decision back to 16 weeks would be the most important thing for the sector.

“The recent High Court decision was very positive. Judicial review is a normal part of the process. You can appeal if something was turned down and people who don’t want it to happen can appeal if it was approved. The legal arguments were heard and went in our way, which was very encouraging.”

More of our coverage of fracking can be found at:

bigissuenorth.com/news/2017/04/protester-complains-of-police-assault/

bigissuenorth.com/news/2017/04/local-force-pays-police-fracking/

bigissuenorth.com/news/2017/03/supply-in-demand/

bigissuenorth.com/news/2017/03/row-fracking-protest-policing-bill/

bigissuenorth.com/news/2017/03/tidal-wave-force-fracking/

Photo: worker on shale gas drilling rig (Bartek Sadowski/Getty Images)