BGS Finally Reveal Their New Bowland Shale Gas Estimates

It's finally here. We've been expecting it since January (date originally planned for publication), and the BGS have finally delivered. The definitive report on the amount of shale gas underlying Lancashire and Yorkshire in the Bowland Shale.

The headline figures: somewhere between 822 - 2,281 tcf (trillion cubic feet) of shale gas, with 1,300 tcf being the best estimate.

This map shows the area covered by the report:

The geographically astute amongst you will realise that this report only covers part of the UK. There is potential for shale gas in other parts of the UK as well, in particular the Southeast (centered on Sussex and Hampshire), South Wales, and parts of Scotland. Understandably, at present the media are treating this new number as a UK-wide number, but there could well be even more.

In case you are wondering what the green and red dots are on the map above, these represent existing oil and/or gas wells in the region. So onshore drilling isn't new to the area. The two maps below show the seismic lines and well logs used to create the report. You can see that there is a lot of data available - much of the wells and seismic will be legacy data from past exploration for the conventional fields shown above.

If you are a bit of a geo-geek, I really recommend you check out the UK Onshore Geophysical Library, where you can actually see all the wells and seismic data for yourself. They have a slick little interactive map viewer where you can plot all sorts of information.

So, what does 1,300tcf mean for the UK? The key thing to think about is recovery factors - how much of the gas can we actually get out of the ground. It has become conventional to assume a recovery factor of 10%. I'm not sure why, when US experience points to more like 20-30%, but lets be conservative and stick to 10%.

10% of 1,300tcf is 130tcf of produceable gas. Keep in mind that the UK's annual consumption is 2-3tcf. So 130 divided by 2.5 is 52 years of total UK gas consumption.

A different and perhaps more illuminating comparison is with the largest conventional gas fields in the world, which you can see here. 130 tcf of recoverable resource would place the Bowland shale as the 4th largest field in the world, behind only the Qatari Pars Dome and Russia's two largest fields.

If money, rather than volumes, is of more interest to you then consider: 130tcf is approximately 130 billion MMBTU. The current European gas price is something like $8 per MMBTU, so the total value of recoverable gas in the Bowland shale is something like 130 billion x $8 = $1,000,000,000,000, or $1 trillion dollars (cue much of this). Of course, that money will be shared out amongst the companies involved (and the many UK workers they will employ) and the UK government, which will take its cut via the taxman. It remains to be seen exactly how the government tax the shale gas industry - I hope they set up something similar to the Norwegian Sovereign Wealth Fund.

Of more immediate interest is the decision by the government to ensure that, as well as the taxman, local communities benefit from shale gas development. For every well pad, £100,000 will go to local communities, plus 1% of production revenues.

Let's examine those figures in more detail. A typical well pad might have 10 lateral wells diverging from a single pad. A typical total recovered volume for a single well in US is 3 bcf (billion cubic feet) per well (estimate from the recent IoD shale gas report). So a single wellpad might produce 30 bcf, or 30 million MMBTU, which at $8 per MMBTU is $240 million (or about £156 million). 1% of £156 million is £1.5 million. Add in the additional £100,000 fee and we're up to £1.6 million going to the local community, for a site covering a couple of hectares and looking something like this:

How does this compare in terms of electricity generation? 30 bcf of gas will generate 5,000 GWh of electricity. If a single well pad is operational for 30 years, that's an average of 166 GWh per year (in reality, more will be produced in the earlier years, with a decline through time). This compares with the average output of 150GWh that we get from from the UK's largest onshore wind farm, Scout Moor:

Many people assume that because I am broadly in favour of shale gas, I must be anti-wind. I am not: I think we should be doing all we can to develop and improve renewable energy technologies. Long term, all of our energy will have to come from renewables and/or nuclear technology. But the above two images show the challenge that this poses at present: we can get more energy from a single well pad covering a couple of hectares (a football pitch) than we can by plastering an entire mountain with 150m high turbines (and that's before we even get into intermittency issues etc).

Perhaps the UK government can spend some of its $1 trillion windfall on research on improving renewables, nuclear fission, or finally working out how to get fusion working...

IoD Report on UK Shale Gas

Big news for UK shale gas this week, as the Institute of Directors has released their report into the economic impacts of UK shale. This report focuses on how shale gas development will affect the UK economy, rather than safety aspects, which is a welcome change because it seems we spend a lot of time talking about potential negative impacts of shale gas, without remembering that there are significant gains to be made.

Here are the key headlines from the report:

The IoD’s previous report, published last year, looked at the number of jobs that shale gas production could potentially create. We now believe that it could be higher still. According to the detailed scenarios presented in this report of a potential production phase, investment could peak at £3.7 billion a year, supporting 74,000 jobs – not just for geologists and drilling specialists, but for construction workers, truck drivers, cement manufacturers, water treatment experts, and people working in local retail and service industries.

Jobs could be created in parts of the country that need them most – over the last decade, the proportion of working-age people receiving at least one out-of-work benefit has averaged more than 15% in the North West, compared to less than 9% in the South East. 

Shale gas production, with tax rates of up to 62%, could generate significant tax revenue, helping to offset a predicted future tax gap of 1.25% of GDP from lower Fuel Duty and North Sea receipts. 

Far from a “dash for gas”, the Department for Energy and Climate Change expects overall gas demand, for heating and industry as well as electricity, to remain roughly flat over the next two decades. This is consistent with carbon reduction of 45% by 2025.  But 76% of the UK’s gas is likely to be imported by 2030, costing £15.6 billion. In our central scenario, shale gas production could reduce gas imports to 37% in 2030, and the cost of imports could fall to £7.5 billion. 

I think this is a key point to keep in mind. At least some proportion of shale gas opposition derives from a concern that shale gas will displace renewable energy on the grid. In fact, the ideal for shale gas is that it replaces gas that we currently import from the middle east. As an example, renewable energy installation has boomed in the US in the last 5 years, despite (or even in tandem with) the shale gas boom. Producing gas domestically rather than importing is beneficial for many reasons: it boosts our economy, rather than that of Qatar; it improves our energy security; and potentially the shorter transport distances mean that this gas has a lower carbon footprint than imported LNG (which has to be compressed and shipped). The IoD estimate that shale gas could replace half of our imports, saving £15billion, and as noted in the report, could reduce our greenhouse gas footprint.

According to the Committee on Climate Change, if production is well regulated, shale gas can have lower emissions than imported gas. If shale gas supports the production of chemicals and other goods in the UK, global emissions will also be lower, as UK industry is very energy-efficient.

Natural gas has great potential as a transport fuel, particularly for lorries and buses. In the US, 19% of municipal buses run on natural gas. 

An abundance of gas could also encourage an increase in gas-fuelled buses and lorries, which have lower CO2 emissions than diesel.

Only a small amount of land is needed for shale gas development. One 2-hectare site could potentially support 40 horizontal wells and supply enough gas to power 747,000 homes at peak production. 100 such sites would take up just two square kilometres of land, and could supply around one third of our gas needs at peak. 

This is a very interesting conclusion. One of the principal concerns about shale gas is the surface footprint - that huge swathes of the UK countryside will be covered by wellheads. The UK Bowland shale is remarkably thick, much thicker than most of the US shale formations. This means that a greater volume of rock can be accessed from single well points. Operators are envisaging so called 'stacked laterals' (shown below), where multiple lateral wells are drilled on top of each other. This will substantially reduce the surface footprint of developments for a given volume of gas produced, because rather than 6 wells per pad, suddenly you are looking at 12, 18, 24 wells per pad.

Water use could peak at just 0.05% of the UK’s total consumption of 11,000 million cubic metres a year. 

As often mentioned on this blog, water use is a non-issue for the UK: water companies lose more water every day in pipeline leakages than needed for fracking.

The report finishes by highlighting the likely barriers to UK shale gas development. They recommend that some of the economic benefits of production are funneled directly to local communities, and that more is done to engage local people. Some of the above headlines will help I'm sure.