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LONDON


disproportionate to the actual harm to health, safety and the environment – and failure to attain Privilege to Operate will also shape future legislation and the expectation of regulators.


Jon concluded by sharing a number of key lessons, which included: Understanding Risks


• Identify the critical path items; bring together technical and non- technical perspectives


• How do the views of local people compare with those of authorities, consultees, NGOs and pressure groups?


• What are the potential conflicts and what project impacts could they have?


• How will risk management be maintained across project phases?


Engagement/Disclosure • Start early to build trust; lack of communication creates suspicion


• Be honest about the options and timelines; balance open disclosure against the risk of raising expectations


• Plan and engage collaboratively (as an industry) to avoid mixed messages and stakeholder fatigue.


Environmental Considerations • Recognise uncertainty and be open about data gaps


• Link the Environmental Impact Assessment (EIA) with the Social Impact Assessment (SIA) – they are interdependent


• Use local knowledge; make the engagement programme work for you. The Corporate View


• Consider up-front the full cost of potential delays, local opposition, reputational damage and legal challenges, and try to balance preventative costs against remedial actions (monetising risk)


• Look at internal stage gates: what are the drivers and incentives at handover – are they based on securing approvals, or on the overall ‘health’ of the project?


• Proactively use the EIA, SIA and Environmental, Social & Health Impact Assessment as a process of internal engagement and alignment.


Key considerations for shale gas development in Europe


‘Shale gas and its potential market in Europe’ was the focus of the after- dinner talk, presented by Chris Burns, Senior Geoscientist with GCA.


Chris set the scene with a broad-brush reminder of the basics of unconventional gas and oil, defining shales as “usually marine, deltaic or lacustrine deposits, often laterally extensive, with a wide range of properties and permeability usually on the nanodarcy scale. The gas occurs in natural fractures, pores and adsorbed to mineral or organic matter.”


He recapped on the ‘unconventional gas story so far’ in the US, explaining that of the country’s ~24TCF/Y current natural gas production, some 58% (~14 TCF) comes from unconventional reservoirs, including shale, and that the EIA forecasts this to rise to 70% by 2035. The expansion in US unconventional development is driven by new technology, which enables improved horizontal drilling, fracturing and ‘Smart’ completions, he said. In terms of Barnett shale activity, some 13,500 gas wells were completed between 1997 and 2009. The vast majority of these, since 2004, are high- producing horizontal wells, whose design maximises both wellbore contact with the reservoir and the number of frac stages, resulting in a larger stimulated reservoir volume.


Chris discussed the shale gas potential worldwide and in Europe, and current European shale gas exploration targets (see slide). Taking Poland as an example, he described how shale gas potential is assessed, and he then compared the country’s gas production and consumption with those of Spain and the UK, explaining that Poland’s gas imports amount to ~380bcf/y, while Spain’s and the UK’s equate to ~1293bcf/y and 1800bcf/y, respectively. In all of these countries the gap between domestic production


The next part of the presentation focused on resources, reserves and shale gas development. Chris stated that the increasingly common use of the word ‘reserves’ in the media in relation to European shale gas is inaccurate: “We know there are copious shale gas resources in Europe, but until commerciality is demonstrated there are no European shale gas reserves, contrary to what you might read in the press! To book reserves a producing well is required – plus a few other things,” he said. These will include a requirement to demonstrate commerciality, and development plans that will typically need to be actioned within five years. He suggested that reserves booking in Europe will probably not start before 2015, with Poland being the likely contender.


He then outlined the process of resources classification and the forecasting techniques used in the unconventional context. Before going on to discuss the planning of a European shale gas project and potential commercial issues involving the influence of gas spot prices on a project’s break-even potential, he highlighted some key points to consider: • Should reserves and resources be defined the same way in unconventional reservoirs as for conventional ones?


• What specific criteria must be met in order for a discovery to be declared?


• What are the potential problems with a US-style project approach using well offset locations?


• Given lack of production history, what is the most appropriate method of predicting EUR?


• Can we accurately measure reservoir parameters? • Can reservoir simulation assist? Are enough data available? • How do we estimate recovery factors?


Finally, Chris discussed possible barriers to shale gas development in Europe. These include political, environmental and social issues, particularly around the well pad and frac spread surface footprints, the use of water and potentially hazardous chemicals, and induced seismicity – although, as he pointed out, there are many measures that can be put in place to mitigate environmental concerns. Another possible barrier comes in the shape of global shale gas/LNG competition, notably from the US, North Africa and Russia.


He concluded: “There is certainly a potential market within Europe for shale (and other unconventional) gas. The current problem seems to be proving that it can be extracted at economically viable rates. However, we need to start thinking now about how to quantify them to be in a position to justify development, and we also need to understand the development costs (including political, environmental and social issues) and break-even prices – while at the same time bearing in mind that there is competition from elsewhere in the world.”


You can download both presentations from the SPE London Past Events section at: http://london.spe.org


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and consumption is widening: he pointed out that according to the Natural Gas Market Review OECD (2008), Europe, overall, is dependent on natural gas imports for 42.7% of its consumption and this is predicted to rise to 54% by 2015.


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