Outreach & Policy

The Energy and Climate Change Committee has launched an inquiry into The Impact of Shale Gas on Energy Markets. The submission produced jointly by the Geological Society of London and the Petroleum Exploration Society of Great Britain can be found below. You can read the terms of reference for the inquiry here: http://bit.ly/XXF34D. The society were asked by the committee to identify a witness to appear in an oral evidence session. Richard Davies spoke on behalf of the Geological Society. Following the evidence session, the society was asked to provide some supplementary evidence which can be found here: Supplementary Memo - The Impact of Shale Gas on Energy Markets

Submission to Energy and Climate Change Committee Inquiry: The Impact of Shale Gas on Energy Markets

Submitted 8th October 2012

1. This submission has been produced jointly by the Geological Society of London and the Petroleum Exploration Society of Great Britain:
   
   i. The Geological Society of London (GSL) is the national learned and professional body for geoscience, with over 10,500 Fellows (members) worldwide. The Fellowship encompasses those working in industry, academia and government, with a wide range of perspectives and views on policy-relevant geoscience, and the Society is a leading communicator of this science to government bodies and other non-technical audiences.
   
   ii. The Petroleum Exploration Society of Great Britain (PESGB) represents the national community of Earth scientists working in the oil and gas industry, with over 5,000 members worldwide. The objective of the Society is to promote, for the public benefit, education in the scientific and technical aspects of petroleum exploration. To achieve this objective the PESGB makes regular charitable disbursements, holds monthly lecture meetings in London and Aberdeen and both organises and sponsors other conferences, seminars, workshops, field trips and publications.
2. Since the start of 2011, our two organisations have worked together when appropriate in communicating with the government, parliamentary committees and others on matters relating to petroleum geoscience. Both our organisations routinely bring together the best geoscientists from across academia, industry and government to exchange and debate research findings, through scientific meetings and publications.
3. Several of the questions in the Committee’s call for evidence are outside the competence of the GSL and PESGB. Our submission focuses on the geoscience relating to shale gas exploration and extraction, and on the interface between geoscientific and other factors (e.g. economic geology). Others are better placed to advise on matters such as likely downstream impacts on gas markets.
   

   What are the estimates for the amount of shale gas in place in the UK, Europe, and the rest of the world, and what proportion is recoverable? Why are these estimates so changeable?

4. The answers to these interrelated questions depend not just on geological knowledge of what lies beneath the Earth’s surface, but also on economics and technology. Estimates of geological resources are always uncertain, and vary over time, but the level of uncertainty is currently greater for shale gas than for conventional hydrocarbon resources.
5. Estimates can be made of the total resource in the ground, based on geology and on information gathered through exploration and production activity. The technically recoverable resource is smaller, and will vary depending on the technology available at any point in time. ‘Reserves’ refers to the amount of a resource which can be economically extracted using current technologies and under current regulatory regimes, and will therefore also depend on cost of extraction and market price.
6. It is known that there are large sedimentary basins in the UK, containing significant shale formations in which natural gas is likely to occur. Although in general our knowledge of the subsurface of the UK is more extensive than that in most other countries, work to explore specifically for shale gas remains in its early stages. Shale gas occurs in different types of geological formation from conventional hydrocarbons, in more extensive and less clearly defined ‘plays’ rather than discrete reservoirs. The way in which natural gas is trapped within shale also differs from conventional gas. The hydrocarbons industry has well-established techniques to locate, characterise and quantify conventional resources, but not all of these are readily transferable to shale gas. The geology of shales, and the nature of the pore systems within them, is variable and complex, and techniques to assess their permeability and porosity are relatively undeveloped. As a result of all these factors, data about the extent and ease of recovery of shale gas resources in the UK are limited, and geologists’ interpretations of these data vary widely. The same is true of other countries outside the US, to varying degrees.
7. DECC has now commissioned a British Geological Survey (BGS) team to provide a more detailed analysis and estimate of the entire Bowland Shale gas total resource potential (gas-in-place) to better understand the potential future contribution to the UK energy mix. This work is due to be completed by the end of 2012 and will provide an independent assessment of the total resource.
8. The United States Geological Survey (USGS) has surveyed the considerably more extensive sedimentary basins in the US. They have developed geology-based assessment methodologies to estimate the quantity of as yet undiscovered hydrocarbon resources (both conventional and unconventional), in the US and globally. For example, in June 2012 they reported an estimated mean undiscovered natural gas resource of 3.9 trillion cubic feet within five East Coast basins (see http://pubs.usgs.gov/fs/2012/3075/). This analysis formed part of a nationwide project to assess domestic resources in hydrocarbon-bearing basins using a standardised methodology and protocol. Estimates of this kind are necessarily very approximate. They can subsequently be refined in light of data gathered through exploration activity, and later in the production phase. (It is true, though unhelpful, to say that the total quantity of technically recoverable resource in a shale gas play or conventional reservoir cannot accurately be known until it has all been recovered.)
9. The proportion of resource in place which is technically recoverable can vary by as much as a factor of 10 (see US Energy Information Administration report at ftp://ftp.eia.doe.gov/natgas/usshaleplays.pdf, for example). Recovery factors vary not just between plays, but from well to well, and are understood more poorly for unconventional hydrocarbons than for conventional resources, especially outside the US. This is due in part to the fact that decline curves (the rate at which gas flows from a well throughout its lifetime) for shale gas differ considerably from those for conventional gas (and will also vary from case to case).
10. The economics of shale gas and conventional gas also differ. Conventional gas requires high effort to find, but relatively low effort to produce. Shale gas is relatively easy to find (in that we can expect to find it in many shale formations, and these are widespread), but requires high effort to produce. The economic and regulatory environment will determine the amount of effort which it is worthwhile to apply both to finding and producing resources. Feedbacks such as that currently operating in the US (where the huge amounts of shale gas coming onto the market has depressed prices) may exacerbate fluctuations in reserves (economically recoverable resources). 
11.  Furthermore, there are feedbacks between technological and economic drivers. For example, as the shale gas industry matures, new technologies are likely to improve its ability to target ‘sweet spots’ in gas plays, meaning that drilling and completions will become cheaper and more efficient, reducing production costs.
12. Geoscientists are used to dealing with uncertainty, whether due to incomplete data, or the conceptual and structural interpretation of these data. Indeed, such uncertainty drives research and further data gathering. However, uncertainty can also undermine public and stakeholder confidence in cases where economic and environmental risks and benefits must be weighed, especially where the regulation and governance of novel technologies is under examination, and can disrupt market mechanisms. It is important that geoscientists work with other specialists and decision-makers to communicate effectively to the public the nature of such uncertainty and how it can be constrained. In the case of shale gas, geological uncertainty may relate not only to the extent of shale gas resources, but also to the possible effects of its extraction (e.g. extent and nature of induced seismicity and fracture propagation). These uncertainties are only likely to be significantly reduced through conducting further research and data gathering in the context of careful, well-regulated exploration.
    

    What are the prospects for shale gas in the UK Continental Shelf?

13. There is likely to be a significant amount of offshore shale gas in place, and evidence of gas in offshore mudlogs in shales is not uncommon. However, we are not aware of any targeted data collection to date to quantify this, although potentially useful background data will have been gathered in the context of conventional exploration. We understand that a proposal is under consideration for BGS to carry out a detailed offshore assessment for a particular area.
14. Although the existing North Sea expertise and infrastructure for conventional hydrocarbons would confer some advantage should the UK attempt to exploit offshore unconventional resources, this would nonetheless require us to pioneer offshore shale gas exploration and production, which would be no small undertaking. (Given the extent of onshore resources in the US, they have no need to look for offshore resources.) It is highly unlikely that it would become economic to drill wells offshore at the spacing presently required to produce shale gas at volume, so any future offshore production is likely to depend on the development of new technologies.
    

    What is the potential impact on climate change objectives of greater use of shale gas?

15. The July 2012 report on ‘Climate impact of potential shale gas production in the EU’, prepared for the European Commission by AEA, provides a useful overview of the widely varying conclusions of existing studies of carbon emissions resulting from the extraction and use of shale gas. It notes that this variation is largely due to authors’ selection of narrow sets of data, different interpretations of such data and different framing assumptions. It also points out that ‘overall, the emissions from shale gas are dominated by the combustion stage’ (p iv). Shale gas and conventional gas are the same substance, albeit found and extracted in different geological settings, so the emissions from their combustion are the same. Emissions at stages prior to combustion include fugitive emissions of methane (a considerably more potent greenhouse gas than carbon dioxide) at the point of extraction, those resulting from processing (e.g. liquefaction), and from its transmission/transport. Fugitive emissions at the well site have been found in some studies to be higher than for conventional gas.
16. Looking at the range of studies, it is uncertain whether total emissions from shale gas are greater or less than those from imported conventional gas, for instance. In fact this is likely to vary from case to case, as the level of fugitive emissions will depend on factors such as well integrity and the design of production processes, and those resulting from transport will depend on its mode and distance. As with other potential environmental impacts of shale gas extraction, appropriate and effective regulation is required to minimise fugitive emissions. The comparison with coal is more clear cut – emissions resulting from the extraction and use of shale gas are considerably less.
17. This does not mean that natural gas (whether conventional or unconventional) can be extracted and used with impunity, in the absence of carbon capture and storage (CCS). Both nationally and globally, we will continue to be dependent on fossil fuels for several decades, and if the resulting carbon emissions are not abated, this is likely to have very significant negative effects on our environment. The geological record contains abundant evidence of the environmental changes associated with rapid periods of release of carbon into the atmosphere in the deep past. (See the Geological Society’s Climate Change Statement at www.geolsoc.org.uk/policy_statements.) We agree with the comments of the chair of the Energy and Climate Change Committee that given sufficient care and attention, shale gas could be safely produced, but that the emergence of shale gas as a major fossil fuel increases the ‘urgency of bringing carbon capture and storage technology to the market and making it work for gas as well as coal’ (Select Committee Announcement 45a, 23 May 2011).
    

    Other comments

18. Since the Committee’s previous inquiry into shale gas, GSL and PESGB have been active in communicating the relevant geoscience to public and other audiences.
19. The Geological Society held a public briefing meeting in June on the geoscience relating to shale gas, its extraction, and the potential environmental risks. This meeting was well received, and attracted a wide audience including elected representatives and officials from local and central government, and those from regulatory bodies, NGOs, water utilities, and the hydrocarbons and energy supply chain. A statement resulting from this meeting, as well as all the presentations and additional material, can be found at www.geolsoc.org.uk/shalegas.
20. Among other activities, we have also submitted joint responses to the DECC consultation on the expert review on induced seismicity, and to the Royal Society and Royal Academy of Engineering review of the risks associated with shale gas extraction.