26 Jul 2010

A new energy source for Britain?

Business Editor

Channel 4 News gains exclusive access to the UK’s first Shale gas well, a new way of extracting natural gas from underground rocks which could profoundly change the energy market.

These techniques have already revolutionised the US energy market, and shale gas wells will soon be appearing all over Europe, report Siobhan Kennedy and Ben King.

The gleaming white tower of the Cuadrilla rig stands in a former wheat field a few miles from Blackpool in Lancashire.

Within days they hope to start drilling ,or “spudding” the well in industry jargon. The company hopes that within a few years, shale gas from Lancashire and other parts of Britain could contribute between five to 10 per cent of the country’s gas needs.

Chris Cornelius, co-founder of Cuadrilla Resources, told Channel 4 News: “I think we’re quite confident that we will find gas it’s just whether we find gas in economic quantities.
“I think it’s very early days. It will take a lot of exploration and a lot of effort by small companies like us and larger companies as well. But ultimately we are hopeful that we would find certain deposits here that would add to the net reserves of the UK.”

No time for the Pleasure Beach

Around the tower are arrays of pumps, filters and generators, all brand new and gleaming like a lovingly restored traction engine at a steam fair.

The kit is all built into containers so it can be easily moved to the next locations, near here in Lancashire and then at the group’s other prospective sites in Holland and Poland.

Another container is fitted with bunk beds, when drilling starts, the site will operate 24 hours a day. There will be no time to visit Blackpool Pleasure Beach, which is just visible from the top of the rig.

The founders of the company are English, though they started prospecting Spain. Hence the name “Cuadrilla”, Spanish for a group of friends. They have raised around £100m to drill on several sites across Europe, from backers including the giant private equity firm Carlyle.

Gas rig

Where’s the gas?

The gas they’re targeting is trapped in 10,000 feet below the surface in rocks called the Bowland shale, which runs from Pendle Hill near Preston to the Irish Sea.

“Several wells were drilled here by British Gas in the early eighties. They penetrated through the Bowland shale and the old indications were that there was gas in that shale. So we decided that this area would be prospective, and after about a year’s worth of work we decided that this was the place to start,” said Mr Cornelius.

They are at the very beginning of a long process, and it could take years before any of the gas they find is being used in Britain. But the technology they are using has already changed the dynamics of America’s gas market, taking the country from growing reliance on imports to a position of near self-sufficiency.

David Finlayson, energy consultant at IHS CERA, said: “Shale gas represents around 45 per cent of the US domestic supply, and that will probably increase to 60 per cent within the next couple of years.”

The industry estimates that shale gas,together with other “unconventional” gas resources, such as methane from coal seams, have the potential to produce more than 2,000 trillion cubic feet of gas, enough to meet America’s gas needs for the next 100 years.

The increase in supply of gas in America has helped to push world gas prices down, which has contributed to the modest fall in domestic bills which British consumers have recently enjoyed. So successful have the shale gas drillers been that the major oil companies are scrambling to buy them up.

ExxonMobil spent $41m to buy the shale gas specialists XTO. Shell has spent $4.7bn to buy East Resources. The energy majors are now targeting Europe, as the next frontier for shale gas exploration. Around three wells, including the Cuadrilla’s facility, have been opened, and more are due to follow.

Alexander Fraser, an executive at 3 Legs Resources, which is drilling in Poland in a joint venture with the energy giant ConocoPhillips, said: “There has been a bit of a land rush for the past couple of years. The majors effectively were too late at getting into the opportunity in the US, and by the time they realised quite what the significance of shale gas was in the US market, all the available land positions has been taken.”
Shell is also drilling a shale gas well, in Southern Sweden.

Controversy

Back in the US, shale gas is becoming increasingly controversial. Gasland, a documentary shown on HBO last month, documented some alarming and spectacular pollution incidents, allegedly caused by shale gas drilling, including tap water so contaminated with methane gas that it catches fire.
However, the Washington-DC based environmental think tank the Worldwatch Institute argues that hydraulic fracturing is not necessary polluting, and that most of the documented incidents are the result of clumsy drilling and poor regulation.

In fact, they argue that generating energy from shale gas may even have a lower environmental impact than burning coal, as it produces less CO2 and other greenhouse gasses per unit of energy produced.
Chris Cornelius is adamant that his own operations will be safe.

“I think there are certain cases in the US where certain operators have been documented as having some issues and they do exist. But I think we have done everything here working with the Health and Safety Executive and the Environmental Protection Agency here in the UK to ensure that doesn’t happen on Cuadrilla’s location,” he said.
As Europe’s energy reserves dwindle, the appeal of new sources of will become ever greater. Gas wells like the one in Blackpool are certain to become a more common sight across Europe in the coming decade.

How shale gas works
Unlike conventional gas, which collects in porous rocks and can be released simply by drilling wells into the right rock formations, shale gas is locked in the matrix of less porous rocks. It can only be accessed with a specialised technique, called ‘hydraulic fracturing’.

The gas companies drill downwards into the gas-bearing rock, as much as ten thousand feet below the surface. They then drill horizontally for thousands of feet more. To "fracture" the shale, they pump in a mixture of water, chemicals and sand at very high pressure.

The water opens up cracks in the rock, and the sand grains lodge in them and keep them open. This creates space for the gas to flow out of the rocks. It then travels back up the well bore, and is collected at the surface over the following months.

Geologists have been aware of shale gas for decades, but it was not thought possible to extract it economically.

A US engineer, George Mitchell, pioneered the technique in an area called the Barnett shale, near Fort Worth in Texas. It is now one of the most productive gas fields in America.