The U.K. had expected 2018 and 2019 to be pivotal years for U.K. shale gas. INEOS, Cuadrilla, and IGas all had an exciting array of prospects to drill, with energy heavyweights ENGIE, Total, and Centrica waiting in the wings. Domestic opposition to hydraulic fracturing (fracking) has caused a severe bottleneck and only three exploration targets have been drilled. That said, initial results have been fairly encouraging, with both Cuadrilla and IGas reporting some success.
Britain’s shale ambitions are largely driven by waning North Sea production and the current deficit against domestic demand amounts to around one trillion cubic feet (Tcf) per annum (in spite of a recent production surge) with the figure set to rise steadily over the next 20 years. One-third of gas imports come from either Russian fields or LNG supplies of mixed provenance.
The British Geological Survey has estimated around 1300 Tcf GIIP (P50) for the Bowland Shale in Northern England and 4.4 billion barrels (Bbbl) OIIP for the Southern Weald Basin. A further 80 Tcf GIIP and 6 Bbbls OIIP (P50) have been inferred for the Scottish Midland Valley but – due to the fracking restrictions – this basin is off-limits for the foreseeable future. Smaller coal bed methane (CBM) potential has been identified in Wales and the English Midlands, but Welsh parliament has also blocked fracking to limit this resource.
Cuadrilla kicked off U.K. shale gas exploration 2010 – 2012 and drilled four Bowland Shale targets in Lancashire but frack-induced seismicity at Preese Hall in 2012 led to a moratorium. This was lifted in 2017 when Cuadrilla returned to Lancashire to drill and frack at Preston New Road, which tested reasonably well at up to 0.2 MMcfg/d. This was despite only fully fracking and completing two out of 41 planned frack stages in the Bowland Shale; a further 13 stages were only partially fracked and not completed, whilst the remaining stages were not fracked at all, in order to manage induced seismicity. IGas and INEOS followed suit at Tinker Lane in Nottinghamshire, and although the well did not encounter the Bowland Shale, samples taken from shale beds within the shallower Millstone Grit exhibited excellent shale gas potential. The IGas-INEOS partnership has just concluded the Springs Road exploration well with promising results including a 250m Bowland Shale interval and further gas indications in the Millstone Grit and the deeper Arundian Shale. Downhole data is now being evaluated.
INEOS and Cuadrilla have led a broad appeal from operators for a relaxation in environmental standards which are seen by the industry to be highly restrictive, specifically in relation to induced seismicity. Although Central government would probably like to loosen the regulations, local and national opposition to both approved and planned activity, combined with the current Brexit-focused political landscape, means that it is unlikely there will be any respite in the near term. Perhaps this prompted Cuadrilla’s decision to abandon planned drilling at Roseacre Wood and focus on Preston New Road. Third Energy has deferred its plan to re-enter and frack Kirby Misperton 8 in Yorkshire.
English shale ambitions are also largely isolated. Scotland, Wales, Ireland, and most of Western Europe have either prohibited or suspended fracking or are in the process of doing so. France has taken it a step further and legislated to terminate all E&P, with Spain potentially set to follow, Italy has an ongoing 18-month moratorium which may result in a similar E&P phase-out, Denmark has stopped onshore licensing, and the Netherlands has suspended onshore licensing.
So, what remains? Poland has returned to unconventionals with active CBM evaluation ongoing between PGNiG and the coal mining sector, and a number of shale-potential blocks offered for tender in 2018 – 2019, while Ukraine is also offering new acreage including blocks with shale gas potential. Both Poland and Ukraine suffered setbacks to their shale ambitions when a number of U.S. majors withdrew in 2012 – 2015, so it remains to be seen how the necessary investment will be attracted.
Returning to Britain, what lies ahead? More than 12,000 sq km of shale acreage was awarded under the U.K.’s 14th Onshore Round in 2016. INEOS was the largest awardee and has clearly broadcast its intentions, with a reported 30 wells applications on its own and in partnership with IGas. INEOS owns Grangemouth refinery in Scotland and is keen to identify domestic condensate feedstock sources. Nonetheless, even if all the onshore operators fulfill their 14th Round drilling commitments, there will still only be around 50 shale exploration wells in the U.K. Compared to 74 in Poland, far less than the tens of thousands in the U.S., it becomes obvious that the U.K. will need to be fortunate to gather substantial data. This links with the energy supply perspective that unconventional reservoirs are not expected to become a significant part of the domestic energy mix in the near-to-medium term. Longer term, industrial development of shale is highly reliant on adequate data gathering and a consistent investment environment – it’s still too early to make a call on either. Early drilling results support further exploration of U.K. shale resources. The challenge now is increasing technical capacity and successfully managing public concerns. Away from shale, the Horse Hill oil discovery in tight carbonates near Gatwick Airport may provide some potential relief as successful development of this unconventional reservoir could stimulate onshore E&P.
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