Unconventional Gas Exploration in Scotland
Unlocking gas, unlocking doors
Scotland is no stranger to oil and gas exploration. It is the oil and gas capital of Europe and has been for decades. In the majority, the nation has unreservedly supported the industry that has brought unprecedented wealth to its economy and employment to its people. However, a new development in the industry has left its people and government divided: unconventional gas exploration.
It is fair to say that unconventional gas exploration is the current poster child of the energy industry. It is something that breeds an overwhelming fear in the hearts and minds of those that are likely to be affected by drilling campaigns. And it is a method of gas extraction that was the subject of a documentary that had its very own Oscar nomination.
The Gasland documentary was among the first to bring to the mainstream concerns about drinking water contamination, air pollution and other risks that some have linked to the practice of hydraulic fracturing – a process used to unlock unconventional gas reserves. The film’s lasting image was that of a Colorado homeowner lighting water from his tap on fire, which the documentary suggested was due to natural gas development nearby.
The scenes in Gasland are enough to make nervous the populations of countries in which unconventional drilling campaigns are planned or underway. Scotland is no different. And in Scotland – a country with the world’s best climate targets and supreme ambitions for renewable energy – the prospect of unconventional plays has been met with staunch opposition.
The age of unconventional hydrocarbons arrived on Scottish shores with news that Scottish and Southern Energy signed a deal worth up to £300 million with a company that specialises in extracting unconventional gas out of deep coal seams.
Dart Energy has signed the five-year deal to supply Scotia Gas Networks with methane that it expects to extract from its 329 square kilometre acreage near Airth in Stirlingshire using coal bed methane (CBM) extraction - similar to the methods and technologies used in the controversial US fields.
This is the first such deal of its kind in Scotland, coming on the back of a similar operation by another company called IGas Energy in Warrington in the UK. The deal, which aims to start producing gas from next year, is the culmination of seven years of exploration by Stirling-based Composite Energy, which owned the licence until it was taken over by Dart earlier this year.
Dart - a global specialist in CBM - has 15 CBM licences located across the United Kingdom with the most advanced of the company’s prospects being the Petroleum Exploration and Development License (PEDL) 133 in the Scottish Midland Valley.
PEDL 133 covers the 329 square kilometres acreage east of Stirling, approximately 40 kilometres northeast of Glasgow and 50 kilometres northwest of Edinburgh, covering a vast expanse of the Clackmannan coalfield that was extensively mined in the 19th and 20th centuries.
There have been 14 appraisal and development wells drilled on the licence using a combination of vertical and horizontal drilling techniques. And it is the most advanced project in Dart Europe's portfolio with commercialisation of the gas expected in 2012. Dart also has the right to begin exploring for CBM at sites in west and central Fife, although this is unlikely to happen until a later date.
Likewise, Berwick-Upon-Tweed based exploration firm Greenpark Energy has been test drilling a 25 square kilometre area from Canonbie in Scotland to Longtown on the UK side of the border where it has found methane reserves in unworked coal seams at subsurface depths of around 6-700 metres. The company anticipates that this particular concession - PEDL 159 - will provide 15 to 20% of the UK’s natural gas requirements, with the Canonbie field representing some 20% of this.
Permission has already been granted for 19 wellheads north of the border and a compressor station at the Graystone Flow plantation west of Canonbie. Work at each of the company’s drill sites is expected to benefit the local economy to the tune of £20,000, with an economic benefit of £380,000 in total. And similarly to Dart’s phased approach, the general CBM development programme on PEDL 159 is expected to be replicated across other Greenpark CBM licences.
CBM is described as unconventional gas because the coal acts as the source rock, reservoir and trapping mechanism (as opposed to sandstone in US shale treatments). During basin subsidence and burial, methane is generated when organic matter turns into coal, with the resulting gas molecules being physically and chemically bonded to the coal.
These bonds can only be broken by lowering the formation pressure by utilising a process known as hydraulic fracturing, or fracking, which involves pumping water and chemicals into seams at high pressures to help with extraction by fracturing formations. The water is then pumped to the surface, treated and discharged under licence. This entire process is geologically and technologically challenging and, until recent developments in offshore drilling techniques, prohibitively expensive in the UK and Europe.
The methane trapped in the coal beds is widely accepted as the cleanest burning of all fossil fuels. The gas is clean, and produces only half the carbon dioxide emissions of coal, making it a key part of tackling global warming. But it is the extraction process itself that requires careful consideration of the natural environment and local communities. However, CBM and the controversial extraction of shale oil and gas are likely to become more common as North Sea gas reserves run low over the next decade.
In the interests of economic health, the latent benefits of unconventional gas exploration in Scotland are undeniable given that the Scottish economy slipped deeper into the doldrums over the summer. In addition, conventional gas production is on the decline, too few power stations are being built and on top of this, renewable energy is growing fast but at high cost and is a long way short of meeting this shortfall.
With this in mind, policy makers in Scotland would have a vested interest in the recent unconventional gas discoveries south of the border in the UK. Cuadrilla Resources has fracked its way to what may be 200 trillion cubic feet (tcf) of gas in Lancashire’s Bowland Basin. By comparison, the Marcellus in the US - which underlies much of New York and Pennsylvania, along with portions of Ohio, West Virginia, Kentucky, and Tennessee - appears to have about 84 trillion cubic feet of technically recoverable gas.
The figure for the area near Blackpool, released by Cuadrilla, highlights the UK's emerging position as a new frontier for unconventional gas exploration, with onlookers predicting that it may be the best thing to happen to the British economy since the discovery of North Sea oil and gas; possibly since the Industrial Revolution.
And even more amazingly, this may be just the tip of the iceberg. Reports that the shale gas deposits in the North East of England may be larger still; and that those under the North Sea may dwarf even these. This means in turn that the UK energy industry will become more competitive, the cost of heating and lighting homes will fall dramatically, and that the economy suddenly now has an opportunity to grow even as those in much of the Western world are collapsing.
A Regeneris Consulting report compiled subsequent to the discovery further supported the benefits of this new kind of hydrocarbon exploration. The report stated that the additional employment generated as a result of shale gas extraction would make a significant contribution to the growth aspirations of the next decade and would address the demands from many local authorities for more higher quality and higher skilled jobs locally. Commercial shale gas extraction would, in the opinion of Regeneris, represent the single largest job creation project across Lancashire in the next 10 years.
This makes for compelling reading if you are a Scottish parliamentarian. And perhaps unsurprisingly, the Scottish government has therefore recognised that unconventional gas offers huge potential, but with one key proviso: that the development and use of unconventional gas is consistent with Holyrood’s environmental objectives.
The Scottish government has faced fierce environmentalist opposition following its decision to give Dart the green light for its drilling campaigns, with opponents repeating a well-rehearsed tirade of complaints. Earthquakes, exploding water, exploding prices, and a serious risk to Scotland’s fledgling green energy sector are all reasons why organisations are opposing hydraulic fracturing.
The director of WWF Scotland, Dr Richard Dixon, said that his organisation “already knows enough about the environmental problems associated with hydraulic fracturing to know that it should be banned in Scotland.” And it is in his opinion that exploration campaigns would be a “disaster for the climate and its production could contaminate groundwater” and that “Scotland should follow France’s example and ban it before it even gets going.”
On the subject of earthquakes, Cuadrilla's UK operations might have been linked to two small earthquakes this year, resulting in a temporary suspension of operations. The company has assembled a team of specialists to look into the tremors, spending most of the summer looking at all data available and assessing it. Even still, these tremors were too minor for most people even to have felt them, and until the results are published by the Department of Energy and Climate Change (DECC), the cause or causes of the tremors remain uncertain.
However, the main bone of contention is that hydraulic fracturing can contaminate drinking water aquifers or that gas can leak into homes (erroneously claimed in Gasland, but very unlikely with good practices and regulation). In order to appease these allegations, a joint UK and Scottish governmental committee in June of this year published the results of a 7-month long inquiry into unconventional gas exploration.
The report assessed the prospects, risks and hazards associated with shale gas - with the delegation visiting the site of Cuadrilla's UK exploration activities near Blackpool and also travelling to Washington DC and Fort Worth, Texas to meet state and national legislators, environmental activists and companies involved in shale gas exploration and production.
The report concluded that mitigation of the risk to water aquifers from hydraulic fracturing relies on companies undertaking the proper measures to protect the environment from pollution. It also stated that there is no evidence that the hydraulic fracturing process itself poses a direct risk to underground water aquifers and that hypothetical and unproven risk must be balanced against the energy security benefits that shale gas could provide to the UK and Scotland.
Moreover, the committee said that hydraulic fracturing itself does not pose a direct risk to water aquifers, provided that the well-casing is intact before this commences. Rather, any risks that do arise are related to the integrity of the well, and are no different to issues encountered when exploring for hydrocarbons in conventional geological formations.
Unconventional gas is proving to be a game changer in the oil and gas industry. In the space of just a few short years it has transformed the supply picture in North America and has the promise to do so in Scotland. Building on the expertise and technological know-how developed in the North Sea, Scotland is in a strong position to benefit from the potential growth in unconventional gas.
However, it is only in the last decade that we have seen the effects of shale gas exploration and production on a large scale - as the combination of hydraulic fracturing and directional drilling have made the resources economically viable. If Scotland does however agree to press ahead with unconventional gas exploration, it would not only be unlocking the methane trapped in its coal beds, but the door to future economic prosperity and job creation.