Andrew Lukas, AJ Lucas Group Limited: Learning’s from the UK Market: How They Are Working with Communities
 

Andrew Lukas, AJ Lucas Group Limited: Learning’s from the UK Market: How They Are Working with Communities

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Andy Lukas, Executive Director, Engineering and Innovation AJ Lucas Group Limited delivered this presentation at the East Coast Gas Outlook conference. The event brings together industry professionals ...

Andy Lukas, Executive Director, Engineering and Innovation AJ Lucas Group Limited delivered this presentation at the East Coast Gas Outlook conference. The event brings together industry professionals and government representative to discuss opportunities and options to secure gas supply on the east coast of Australia. For more information, please visit the conference website: http://www.informa.com.au/eastcoastgasconference.

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Andrew Lukas, AJ Lucas Group Limited: Learning’s from the UK Market: How They Are Working with Communities Andrew Lukas, AJ Lucas Group Limited: Learning’s from the UK Market: How They Are Working with Communities Presentation Transcript

  • Learning from the UK Market: How They Are Working with Communities Andy Lukas, AJ Lucas Group Ltd East Coast Gas Markets Conference, Sydney Oct 2013
  • Today’s Presentation Learning from the UK Market: How They Are Working with Communities • What is the UK shale market and its resources? • What are the challenges UK developers are facing in exploring? • What is being done in UK to alleviate community concerns surrounding fracking? • What can Australian producers learn from the UK market?
  • What is on the community’s mind? • What is the shale gas “fracking” process? • What are the local environmental risks? (such as groundwater pollution, water usage, emissions, visability, “earthquakes” etc.) • What are the larger climate risks? • What’s in it for us?
  • Who is AJ Lucas? • Founded in Sydney in the 1950’s, now ASX (AJL) – specialist, niche engineering and construction in energy and water sectors – world leader in coal seam gas drilling, – oil & gas pipelines, water processing and water pipelines, – world leader in horizontal directional drilling – Investor in coal seam gas, shale – owner operator – large fleet of owned equipment to suit the pipelines, drilling ,HDD • Strategic partnerships: – China Petroleum Pipeline Bureau (CNPC)– CSG, shale gas, HDD, pipelines – Spiecapag – world leader in major high pressure cross country pipelines, – Cuadrilla > 400 tcf shale gas resource in UK – Xtreme Coil – North American coil drilling company – Groupe Marais – micro trenching technology for telecoms & power cables 4
  • Investor in Oil & Gas Fields Bowland Shale Gas UK 50% owner and active participant in Bowland > 400 tcf shale gas resource - exploration and pilot well planning and engineering as well as drilling and hydraulic fracturing Weald Shale Oil UK 56% owner and active participant in Weald shale gas and shale oil resource in UK – planning and engineering of exploration and pilot wells Monument County, Texas oil shale prospect interests Canning Basin, WA 8,000 sq.km in Western Australia Gloucester Coal Seam Gas: (sold) Formerly 75% owner and operator for exploration and pilot well development programme for Gloucester Sydney Gas: (sold) Formerly 20% owner - exploration and development of Hunter Valley CSG and Camden fields i0-50 JV with AGL. Wolleebee Creek Qld (sold) Formerly 15% owner of PEL651 in Surat Basin Page 5
  • Lucas owns 44% of Cuadrilla Exploration assets • Formed in 2007, UK company •Netherlands ≈ 680,000 acres • First to spot shale gas opportunity •UK Bowland basin ≈ 293,000 acres in Europe •UK Weald basin ≈ 57,000 acres • Acquired most prospective acreage •Poland ≈ 440,000 acres before anybody else identified the potential • Diversified acreage portfolio throughout Europe – spreading the risk • Largest acreage holding in Europe outside of the major oil companies • Partnered with government or industry-specialist funds • Ownership of own rig to reduce reliance on external service providers 6
  • Licenses in the UK, The Netherlands, Poland CUADRILLA EUROPEAN PLAYS PEDL165, EXL269 Bowland Shale Fm 293,190 acres Multi-TCF Shale Gas Noord Brabant Carboniferous, Triassic, Jurassic 476,666 acres Tight Gas, Shale Gas, Oil Shale KOSP (EDL244, EXL189) Kimmeridge Clay FM Limestone Oil Play 57,189 acres Unconventional Oil Noordoostpolder Namurian Shales 202,379 Acres Multi-TCF Shale Gas Lublin Trough (Pionki, Ryki) Silurian/Devonian/Carboniferous 446,741 acres Multi-TCF Tight Gas and Shale Gas
  • Today’s Presentation What is the UK shale market?
  • UK gas production supplies a decreasing share of UK demand
  • UK Uses > 4 tcf / year of gas
  • UK Uses > 4 tcf / year of gas Electricity is only about 1/3 of usage • 36% gas goes to heat ~ 1.4 tcf/year Use of Gas • 36% of gas goes to electricity and associated uses ~ 1.4 tcf / year Heat Electricity Industry Other • 28% to industry and other customers ~ 1.2 tcf/year (Department of Energy and Climate Change) 11
  • UK offshore and shale gas production and net gas imports
  • UK still uses a lot of coal UK coal plants are being de-commissioned, but in the meantime, our electricity depends on coal and gas (Gridwatch Oct 16 2013, 6:30am)
  • Today’s Presentation What is the UK shale resource?
  • Cuadrilla Gas Bubbling from New Core 15
  • British Geological Survey Study Upper limit 2,281 tcf Lower Limit 822 tcf Central est. 1,329 tcf Cuadrilla: PEDL > 400tcf
  • Cuadrilla in Bowland • Bowland Basin is a very significant shale gas resource play • Over 1000m (>3300 ft) thickness of shale • Shale is naturally fractured (free + absorbed gas) • Cuadrilla: Gas in Place (GIIP) > 200+ tcf • BGS: 1300 tcf – Many places GIIP > 1 tcf / sq.mile – 1000’s feet below aquifers – not enough energy to frac into aquifers – Very close to major pipeline infrastructure – Market ready for this gas • DECC/ HSE approved, in alignment with government policy 17
  • Today’s Presentation What are challenges for UK shale explorers?
  • Long Approvals Chain Approvals needed from: • Department of Climate Change is regulator oil & gas exploration – Three step approvals : exploration, production pilots, production • All exploration and development needs local government approvals – Councils are poorly equipped to evaluate • European law requires Environmental Impact Assessment • Environment Agency approves impact on water and disposal or waste • Health & Safety Executive approves well design
  • Exploration in the UK – how it works License is granted by DECC to explore DECC, EA, HSE are the national regulators Drilling must occur within 5 years Site temporary permission is granted by County Council An exploration well is drilled and tested Commercial viability of the well is calculated
  • Issues of Concern • Water – Aquifer contamination – Water use – Flowback water disposal • • • • Seismicity Landscape and community impact Emissions – local health impact, greenhouse gas Impact on renewables investment
  • Risks as EA represents What are the risks to air, land and water in the UK? Fugitive emissions of methane Clean water Production Platform Impact on water Aquifer resources from water taken from the environment Contamination of Confining groundwater due Layers to poor well design or failure Production Zone Contamination of groundwater due to mobilization of solutes or methane Tanks or Storage Lagoon Inadequate transport or processing of produced gas Water Table Inadequate transport or treatment of wastes &waste waters Contamination of soil, surface or groundwater due to spills of chemicals or return fluids (Source: Environment Agency 2013)
  • Risks as perceived: Water is the biggest issue (Source: BritainThinks, Lancashire Tracking Sept 2013)
  • Benefits as perceived: Jobs, future employment, investment Job creation 47% Cheaper energy 15% Reduced reliance on foreign gas 8% Future employment opportunities in the area for today's pupils and students 7% Investment in the local community Developing new skills in the community 6% 3% Can be developed without any public money 2% The development of a new industry for Lancashire 2% Cleaner than other fossil fuels 1% A proportion of the money generated would go into a fund to benefit the local community 1% None/no potential benefits Don't know 6% 3% Q. Which do you think is the most important potential benefit? [500 adults aged 18+ interviewed by telephone between 6th and 21st August 2013] (Source: BritainThinks, Lancashire Tracking Sept 2013)
  • Business model, are more likely to support) Women (who are more likely to be Men (who does anyone understand David beck,....Steve Sommers. Planning guys Business model, opposed) see earth tremors as the most see water pollution as the mostdoes anyone understand Herbert Huppert. David beck,....Steve important disadvantage (29% Women important disadvantage (33% Men Sommers. Planning guys Water...he will think about this and get back. Discussed Andrew Quarles and I going to Cambridge. Herbert Huppert. compared with 19% Men) compared with 24% Women) Water...he will think about this and get back. Discussed Andrew Quarles and I going to Cambridge. (Source: BritainThinks, Lancashire Tracking Sept 2013)
  • Perceptions of Aquifer Contamination
  • Water use – the scare story
  • Fracking water make-up
  • Fugitive methane
  • Seismic Risks
  • Shale battleground on hydrocarbons Greenpeace, Friends of Earth using shale gas as battleground against hydrocarbons Delaying tactics via Judicial Reviews
  • Today’s Presentation What is being done to alleviate community concerns about fracking?
  • Cuadrilla strategy • Engage early and often • Proactive engagement – Small and large meetings – Site tours – Presentations, community participation • Research, to better understand how the issues are seen – released to media • Communications – before, during, and after permitting and operations 33
  • Shale gas – different views Regulator • Controversial activity • Threat of judicial review Government • Energy security • Economic development • Taxes Community • Risk with no obvious gain • Disruptive Operator • Proven methods to mitigate risk • Need for exploration activity
  • Shale gas – different views Government • Energy security • Economic development • Taxes NGOs Regulator • Climate change • Controversial activity • Environmental risk • Threat of judicial review Media Operator • Polarising fight – good • Proven methods to for eyeballs! mitigate risk • Skepticism • Need for exploration activity The Resident • Anxious • Mostly undecided Community • Risk with no obvious gain • Disruptive
  • sentatio ly Tony. IT stra te Moreland. G g y review oing well Frac kit will all Need a para be gone tomorrow graph to de fend the sto Francis.... M r y, and et chairman of alkane , ro ger Macdow all . Meet hi Trespass. O and CEO ne ne let c take xt Friday chances I co Treasur y, ne ur t eds legislativ e fix C Prove hris CBRE worgas on valuation Bowland can be that shale king from the s ral rights, vs private ownership th. In iea Cuadrilla strategy developed safely, and in an environmentally Des Corr responsible,eia. community-acceptable fashion 1. Technical 2. Socio-political Prove that gas is present, technically recoverable, of a predictable quality and quantity Earn the social license to operate Takes the risk out of the technical side. 36
  • Correct bad imagery
  • Industrial Education 38
  • Conventional and Unconventional
  • Fracturing makes path through nano sized pores
  • Sustainable development Meeting present needs without compromising the future Environmental sustainability Security & diversity of supply Sustainable development Economic efficiency Social acceptance (Framework -- Brian HorsfIeld, Helm Holtz GFZ Center Potzdam 2013)
  • Well Integrity – triple layer thru aquifer
  • Water Use - the reality is very small ore or after etc Turks water etc. private ownership Hydraulic fracturing and its associated operations account for 6.15% of the life cycle freshwater consumption
  • The reality 4KM (2.5 mi) 8” wellbore (Credit: Ground Gas Solutions 2012)
  • Seismic risks Injection can lubricate faults, cause small tremors Cuadrilla’s two events: 1 April 2.3 ML and 27 May 2011 1.5 ML Subsequently we have 1. Conducted 3D survey (better a-priori knowledge of faults) 2. Planned to hydrofracture in smaller stages 3. Placed seismometers and tiltmeters in arrays around sites (realtime data) 4. Agreed a “traffic light” mitigation system, at 0.5ML threshold
  • Seismic Risks – the reality (Davies et al, 2013)
  • Is fracture height a cause for concern? – Maximum fracture length circa 588m/1919 ft – The top of the Bowland shale is at a depth of circa 6000 feet (Davies et al, 2012)
  • Fugitive methane – the reality National Academy of Sciences “The study finds that natural gas sites release 0.42 percent of methane produced -which equals 48 million metric tons of carbon dioxide equivalent (CO2e) per year, or the emissions from 10 million automobiles -- into the atmosphere. That value is slightly lower than U.S. EPA's current estimate of 0.47 percent.” (vs “3.6% to 7.9% of the methane from shale-gas production escapes to the atmosphere in venting and leaks over the life- time of a well.” – Howarth et al) (“Measurements of methane emissions at natural gas production sites in the United States” NAS Sept 2013 “Methane and the greenhouse-gas footprint of natural gas from shale formations” Howarth, Santoro, Ingraffea, 2011) )
  • Fugitive methane – the reality Green completion methods eliminate fugitive methane issue fter s water etc. wnership Dart rebuttal.... Hydraulic fracturing and its associated operations account for 1.17% of the life cycle GHG emissions (Marcellus operations) Laidlaw Egan ... Do spade word before or after High level to start with, sedimicity etc T urks water etc. mini Ipcc. Every claim w rebuttal State ownership mineral rights, vs private ownership Dan Lewis. Philip booth. In iea Pbooth@ica.co.uk (Laurenzi/ Jersey ExxonMobil LCA 2013)
  • Dart rebuttal.... GHG Emissions – the reality Laidlaw Egan ... Do spade word before or after High level to start with, sedimicity etc Turks water etc. mini Ipcc. Every claim w rebuttal State ownership mineral rights, vs private ownership Dan Lewis. Dart rebuttal.... iea Philip booth. In Pbooth@ica.co.uk Laidlaw Egan ... Do spade word before or after High level to start with, sedimicity etc Turks water etc. mini Ipcc. Every claim w rebuttal State ownership mineral rights, vs private ownership Dan Lewis. Philip booth. In iea Pbooth@ica.co.uk (Potential Greenhouse Gas Emissions Associated with Shale gas Production and Use- DECC 2013)
  • Cuadrilla water makeup and management • What goes in – Mains water from United Utilities (already has a biocide) – Polyacrylamide (classified as non hazardous by the EA) , to reduce friction and improve the suspension of sand in the water – Sand • What Comes Out – Very salty water – Various minerals from the rock, metals – very dilute solution – NORM (Naturally occurring radiation) – Flow back water is classified as non hazardous by the Environment Agency – is captured, processed at industrial facility • We are aiming for a water recycling model
  • Getting better imagery 52
  • The beginning of moderate consensus “We have to face it: North Sea gas production is falling…So UK shale gas could increase our energy security by cutting those imports. First, fracking has real potential to drive energy bills down…It’s simple – gas and electric bills can go down when our homegrown energy supply goes up. “Home-grown gas, just like home-grown renewables and new nuclear, also provides jobs for our people and tax revenues for our society. Secondly, fracking will create jobs in Britain. In fact, one recent study predicted that 74,000 posts could be supported by a thriving shale-gas industry in this country… “Nobody can say, for sure, how much Thirdly, fracking will bring money to local onshore UK shale gas resource exists …so we neighbourhoods. can’t bank on shale gas to solve all our energy challenges.
  • Strongly support State ownership mineral rights, vs private ow nership an Lewis. Philip booth. In iea booth@ica.co.uk Laidlaw Egan ... Do spade word before or aft er High level to start with, sedimicity etc Turk s water etc. mini Ipcc. Every claim w rebuttal 44% 15% 0% 10% 20% Strongly oppose 23% 34% 21% 10% 40% 50% 60% 70% 12% 12% 31% 30% 10% 11% 22% 29% 11% 80% 90% 100% % of respondents . Oct-12 33% Oppose e i nera l Pboo wis. Phi ri th @ica. lip booth. In ghts, vs pr co.uk i ea Dec-12 Neither support nor oppose 56% 23% Aug-13 Support i v a te owner s hi p Dart rebuttal.... Support for fracking has increased while opposition is slightly reduced (Source: BritainThinks, Lancashire Tracking Sept 2013) pihsre . cte reta
  • 56% support, 20% oppose, undecided moving to support Strongly support Support 23% Aug-13 33% Strongly support Support 23% 21% Aug-13 Dec-12 0% 10% 29% 20% 30% Oppose Neither support nor oppose Oppose 23% 22% 34% 31% 40% Strongly oppose 23% 33% 34% 15% 21% Dec-12 Oct-12 Neither support nor oppose 50% 60% 22% 70% 10% 10% Strongly oppose 10% 11% 10% 12% 12% 11% 80% 12% 11% 90% 100% % of respondents 15% 12% 31% 11% 29% Q. Thinking about everything we have discussed, how much do you support explora on, in your area, to understand the poten al for natural gas from shale in the UK? [500 adults aged 18+ interviewed by telephone in October 2012} ] [December 2012 base: 503; October 2012 base: 1,001] Oct-12 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% (Source: BritainThinks, Lancashire Tracking Sept 2013)
  • 59% men support, 39% woman support (Source: BritainThinks, Lancashire Tracking Sept 2013)
  • Today’s Presentation What can Australian Producers Learn from UK?
  • Cuadrilla’s Message Shale gas is sustainable development
  • Forces at work – need to work together Hijacking dialogue The goal Sustainable development of shale gas Wildly Exaggerated risks Required support Government leadership Planning and permitting authorities Grid authorities Anti fossil fuel Ideology Community parish councils Skill and supply chain Scaremongering Industry itself 59
  • What can we learn, going forward? • Proactive, early engagement is best – EIA studies are essential • Government, regulators, local leaders must work together! • Pick a frame and stick to it – A local offer, with environmental certainty – Jobs and future skills are real benefits – Water is the most important issue • Encourage collaboration – Government, regulators, local leaders must work together • Find a meaningful benefit narrative – US – energy anxiety – South Africans – the next gold industry – Brits – protecting lifestyle (growing Govt & Independent energy anxiety)
  • Safety and regulation • Gas from unconventional sources is about safety and ensuring it through regulation • Needs political leadership to formulate and impose effective regulation to be seen to be looking after the interests of the general public. • Properly engineered and executed unconventional gas extraction is safe. • The government to exercise wisdom in the distribution of the economic and social benefits throughout the community. • We need to create sufficient vested interests across the community. We, the community, should be the beneficiaries of its commercial exploitation. • In the 1970's, NSW and Queensland were confronted by the introduction of irrigation, water licences and new farming techniques. At the time, these were threatening to the status quo. Where would agriculture and farmers be today had it not been for new technologies in water and farming introduced 40 years ago? • Unconventional gas development is analogous
  • We need to talk! • • • • • • • • National conversation about community benefit and safety in relation to our gas resource and its extraction. At the community level, it is not possible to tell whether shale gas or coal seam gas is a long-term threat, or a long-term benefit. Media opportunists amplify the anxieties of protesters, and unfortunately government and industry present the substantial local and national benefits in a disordered way. Is there a consistent story? The "story" needs to be one people are allowed and guided to gather for themselves; and not be harangued in the process. The industry and government need to give people a method or process which allows them to access information sessions in a productive way. Deliberate misinformation needs to be eliminated What's needed is a query -based process, allowing people to ask questions and hear the facts from all sides in response to their issues.