Regulation of shale gas exploration in County Fermanagh

Mike Young Geological Survey of Northern Ireland 17 th November 2011, Fermanagh DC, Enniskillen

Outline

• Oil and gas potential in Northern Ireland • Shale-gas: potential benefits and problems • Petroleum legislation and licensing • Shale-gas exploration in Fermanagh • Regulation of exploration • Standards and best practice

‘Conventional’ exploration model

Elements Organic-rich

source

rock Permeable

reservoir

rock Impermeable

caprock

Efficient

trap

Processes Source maturation Trap formation Hydrocarbon migration

‘Unconventional’ exploration model

Benefits of oil/gas development

• Improved security of energy supply • Local investment • Income to UK and Northern Ireland economies: 1. UK tax revenue from oil/gas production: • Corporation tax 30% • Supplementary tax 32% 2. NI royalties 7.5%

Shale-gas concerns

• Contamination of water supply • Excessive use of water • Disposal of used water • Air contamination • Seismic tremors • Noise • Visual amenity • Road traffic • Radioactivity and radon

NI Petroleum legislation

• • • • Petroleum (Production) Act (Northern Ireland) 1964 Petroleum Production Regulations (Northern Ireland) 1987 Hydrocarbons Licensing Directive Regulations (Northern Ireland) 2010 Petroleum Production (Amendment) Regulations (Northern Ireland) 2010

PPA1964 – enabling primary legislation

• Vests petroleum in DETI • Powers to grant licences to search and bore for and get petroleum • Ancillary rights to land access (not used to date) • Rights to compensation • Powers to make regulations (fees, licence areas, model clauses etc)

Exploration licensing

Petroleum exploration: • DETI licence is in two stages • The licence contains conditions and limitations • Licence gives licensee exclusive rights to an area • Part 1 allows only preliminary investigations • Part 2 is subject to planning and other consents No permission has yet been requested or issued for drilling or hydro-fracturing in Co Fermanagh

Exploration in Co Fermanagh

• Previous exploration • Tamboran licence application • Tamboran outline schedule

Previous exploration in the Northwest Irish Carboniferous Basin 1960s 5 wells (to 2100 metres) 1980s seismic survey, Dowra 1 hydrofraccing 4 wells (to 2000m) 2001-2 6 wells fraccing with N foam

Tight gas sandstone play

Source Carboniferous shale Reservoir Carboniferous sandstone and shale Caprock Carboniferous shale Traps 1.

Anticlines 2.

3.

Flower structures Basin-centred gas

PL2/10 Tamboran Resources Pty Ltd - 1 • Application made: 28 th Aug 2010 • Financial viability & capacity verified by DECC: Sept 2010 • Technical capacity & exploration strategy reviewed by DETI & DECC • Applicant interviews held at DETI Nov 2010 (DETI/DECC/BGS) • Non-statutory consultation: Nov-Dec 2010 – E-mail to Fermanagh DC: 18 th Nov 2010 – Advertisements in Fermanagh Herald & Impartial Reporter • Environmental (Habitats Directive Article 6) screening carried out by DETI: Jan 2011, approved by NIEA Feb 2011 • Licence executed: 1 st April 2011

Initial Term 1 st Renewal term

PL2/10 Tamboran Resources Pty Ltd. - 2

5 years Exploration (including well) 5 years Appraisal (further wells) 2 nd Renewal term 20 years Development/production

Drill or drop work programme – no firm commitment to drill

Years 1 – 3 (Part I) Desktop studies Re-process & re-interpret existing geophysical data Sample & analyse existing core material Drill shallow cored boreholes and analyse Resource assessment Environmental review DRILL OR DROP DECISION

If company opt to drill they must nominate an operator to be approved by DETI. DETI will carry out due diligence checks on technical and financial capacity and ensure that insurance cover is sufficient to meet all liabilities from operations

Years 4 – 5 (Part II) PL2/10 Tamboran Resources Pty Ltd. - 3 Finalise drill location, well planning, preparation & permitting Environmental Impact Statement for Well No 1 Drill well including coring, fracturing & testing Analyse well results & carry out second review of economic potentia Acquire further infill seismic data, if required Identify additional drilling targets Finalise drill locations, well planning, preparation & permitting Environmental Impact Statement for Well No 2 Drill second well to test shale gas target, including fracturing, multiple horizontal legs, flow testing & seismic monitoring Review economic model Preparation and submission of plans for 1 st Renewal Term or Relinquish Licence

Work programme is provisional – can change according to results or requirements (subject to DETI’s approval and/or instruction)

Tamboran operation

• Well pads up to 200x250 m for 16 wells • Well pad area reduces by half after drilling ends • Well pads 2 km apart, perhaps increasing to 4 km • 100 well pads to be developed over 10-15 years • Ultimate height of structures: 4 metres • Product: low pressure; 99% methane with little water vapour • No processing on-site, except de-hydration • Vapour recovery unit to recover emissions from water tanks • Water supply – four wells per pad

Regulation

• Regulatory bodies and roles • Regulation of licence activities • Regulation of drilling operations • Best practice

NI Shale-gas Regulators Forum

• GSNI / DETI • DoE Planning Services – Air Quality, Strategic Projects • NIEA - Environmental Protection Division; Water Management Unit; Drinking Water Inspectorate • NIEA - Industrial Pollution and Radiochemical Inspectorate • NI Water - Water Quality • DARD, Fisheries and Environment Division • HSENI

Regulation of licence activities -1

What can the Licensee do without consent?

• Desk studies – analysis of existing data, data re processing, re-interpretation • Laboratory analyses of existing rock samples • Walk-over surveys – geological mapping, outcrop sampling

Regulation of licence activities - 2

Additional consents required for: • Environmental studies & seismic monitoring (DETI/NIEA) • Fieldwork in ASSIs (DETI/NIEA) • Shallow drilling (DETI/NIEA) • Geophysical & geochemical surveys (DETI/NIEA) • Siting and drilling of deep exploration boreholes (incl. hydraulic fracturing) (DETI/NIEA/HSENI/Planning) • Test and produce hydrocarbons (DETI/NIEA/HSENI)

Regulation of drilling operations

• Planning permission, with Environmental Impact Assessment • Licensing of water abstraction, storage and disposal • Compliance with legislation: Health & Safety Environmental Health Pollution Prevention and Control Groundwater protection • Local Planning

Preparation for regulation

• NI Shale-gas regulators forum now collating legislation and regulatory procedures • Liaison with regulatory counterparts in GB, notably DECC • Incorporation of best practice: GSNI and regulators to review and collate results of current UK, European and US studies on fracking

Best practice and current research

- 1

1) New industry standards American Petroleum Institute (API) A series of Guidelines/Best Practice documents specifically for unconventional well construction and management HF1 – Hydraulic Fracturing Operations – Well Construction & Integrity (Oct 2009) HF2 – Water Management Associated with Hydraulic Fracturing (June 2010) HF3 – Practices for Mitigating Surface Impacts associated with Hydraulic Fracturing (Feb 2011) Std 65 Pt 2 – Isolating Potential Flow Zones during Well Construction (Dec 2010) RP 51R – Environmental Protection for Onshore Oil and Gas Production Operations and Leases (July 2009)

Best practice and current research

-2

2) Recent and ongoing regulatory reviews • ECC Select Committee – March 2011 • New York State SGEIS – new revised draft Sept 2011 • DECC Earthquake Report – Nov 2011 • US Environmental Protection Agency – interim 2012 • EPA Ireland – end 2012?

Wytch Farm, Poole Harbour, Dorset

• Largest onshore oil/gas field in Europe • Sited in AONB with nature reserves, Ramsar sites, Jurassic Coast World Heritage Site, etc • 80 wells producing since 1979 • Horizontal drilling laterally for 10 km • Natural gas piped to local network in 8” pipeline • Queen’s Award for Environmental Achievement, 1995

Regulation of shale gas exploration in County Fermanagh

Mike Young Geological Survey of Northern Ireland 17 th November 2011, Fermanagh DC, Enniskillen

Supplementary slides

Unconventional petroleum resources Conventional reservoirs have porosities of 10-25% and permeabilities of 1-1000mD All gas is free gas in pore space between grains.

In gas shales porosity is present as micro-porosity and permeabilities are 0.001 – 0.01mD Gas is present as free gas in micro-pores and as adsorbed gas attached to clay mineral grains In gas shales commercial flows of gas can be produced by drilling horizontally along the shale beds and then injecting a water-sand mix at high pressure into the shale. This hydraulic fracturing (fraccing) creates micro-fractures in the rock and allows the gas to flow into the wellbore and up to the surface.

Shale gas produces ~30% of US gas and approximately 15,000 shale gas wells will be drilled in the USA in 2011.

Northeast Permo-Triassic Basins Source: Carboniferous coal/shale Reservoirs: 1. Carboniferous shales 2. Carboniferous sandstones 3. Early Permian sandstones 4. Triassic SSG sandstones Caprocks: 1. Carboniferous shales 2. Late Permian salt/mudstone 3. Triassic MMG salt/mudstone Conventional Traps: 1. Tilted fault blocks 2. Anticlines 3. Fan deposits

NI Petroleum legislation

Hydrocarbons Licensing Directive Regulations (Northern Ireland) 2010 • implements EU Directive on conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons – MS retain right to determine areas available but no discrimination – Publication of areas available, application deadlines in OJ – Open licensing (NI) – Areas not to exceed the area justified from technical and economic viewpoints; duration not to exceed that needed to carry out activities authorised, flexibility to prolong this; exclusive rights not to exceed time needed – Criteria for licences to include technical and financial capability, exploration and production methodology, (price), other relevant non-discriminatory criteria – to be published in OJ – Impose conditions on activities, as justified by national security, public health, environmental protection, safety, need to secure tax revenues – Rules governing state involvement, abolish reserved rights – Annual publication of licence areas, licensees and estimated reserves

NI Petroleum legislation

Petroleum Production Regulations (Northern Ireland) 1987 Petroleum Production (Amendment) Regulations (Northern Ireland) 2010 • Model Clauses – general not specific – Work Programmes – Commencement, abandonment and plugging of wells; control of development wells – Storage tanks, pipes and pipelines – Avoidance of harmful methods of working (includes prevention of escape of petroleum into waters or water-bearing strata); notification of incidents; availability of funds to discharge any liability for damage – Safety, health & welfare of employees – Training – Records, samples, returns, confidentiality – Department’s rights of access & inspection, power to execute works, right of entry – Compensation for damage, provision of insurance (to cover Licensee and Department) – Powers of revocation, provisions for arbitration

DETI responsibilities and practices • Administer licensing regime according to PPA legislation – Regulations are wide ranging but bodies other than DETI may have primary responsibility for some aspects – DETI has primary responsibility for licensing system, ensuring proper conduct of exploration, appraisal and development, economic and technical issues • Environmental responsibilities under NI implementation of EU Birds and Habitats Directives – Natura 2000 sites

DETI’s responsibilities • Exploration , appraisal and development programmes – Technical Standards – Seismic risk – Compliance and enforcement • Financial & technical capabilities of licensees and operators – Insurance, bonds – Qualifications • Application for Consent to Drill – Well design, construction, cement & casing, testing, completion & abandonment • Co-ordination of consents/permits/licences?

Industry Standards American Petroleum Institute (API) • series of Guidelines/Best Practice documents specifically for unconventional well construction and management • • • • • HF1 – Hydraulic Fracturing Operations – Well Construction & Integrity (Oct 2009) HF2 – Water Management Associated with Hydraulic Fracturing (June 2010) HF3 – Practices for Mitigating Surface Impacts associated with Hydraulic Fracturing (Feb 2011) Std 65 Pt 2 – Isolating Potential Flow Zones during Well Construction (Dec 2010) RP 51R – Environmental Protection for Onshore Oil and Gas Production Operations and Leases (July 2009)

NI Energy Infrastructure

Exploration risks/ negative factors

Southwest play area Low permeability ‘tight’ reservoir Identification of traps Timing of migration and trap formation Northeast play area Poor imaging of sub-basalt structure Source rock – distribution and maturity Timing of migration and trap formation Post-migration leakage