Shale Gas - a European Perspective

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27 June 2011

Three issues are vital to the successful exploitation of shale gas in Europe. First, how the industry deals with the environmental effects of exploration and production (E&P). Second, how it assesses and provides for compliance with EU environmental regulations. Third, how it secures favourable public opinion, to ensure its wider licence to operate.

All three issues are interlinked. To have a long-term future in Europe, this industry needs a better understanding and a more effective approach on each of them.

Interest in European shale-gas E&P is increasing, although a very different regulatory framework will apply to that in the US, and this has been greatly underestimated by many investors in European projects.

Cuadrilla Resources is the first company licensed to undertake shale-gas exploration in the UK, at sites near Blackpool. But large reserves are attracting investment and interest in France, Poland, Germany, Hungary and elsewhere. In many cases, governments share the strong interests of developers to exploiting their resources.

But the techniques involved in extracting shale gas on a commercial scale are controversial. Hydraulic fracturing (fracking) involves injecting a mixture of water, sand or ceramic beads and chemicals down, then horizontally, into the rock at high pressure, to fracture it and release the gas.

There are significant environmental issues associated with fracking techniques, many of them concerned with water use and contamination. These are some of the main concerns:

Groundwater and surface water contamination – fracking necessarily involves drilling down through aquifers and groundwater bodies to reach shale-gas deposits at much greater depths. While measures such as concrete liners are used to prevent leakage and contamination, some studies (Duke University, April 2011) have found methane contamination of groundwater. Concerns have also been raised over the potential contamination by chemicals used in fracking, for example from fractures in the pipes, blowouts or flow-back of contaminated water. Individual reports from the US give various examples of groundwater contamination;

Chemical usage and contamination, and potential health effects – the US House of Representatives House Democrats released a report on 16 April citing concerns about the chemicals used in fracking. The report claims the 14 leading oilfield services companies used 718 million gallons of fracking products, not including water, and that these included 2,500 products containing 750 chemicals. The report pointed to the inclusion of 29 known or possible carcinogens, Btex (benzene, toluene, xylene and ethylbenzene) compounds, Safe Drinking Water Act contaminants and hazardous air pollutants.

Companies have been slow to release details of the components used in fracking fluids, some considering it proprietary information. Among the key recommendations of a University of Maryland report last year are that the 2005 exemption of hydrofracking from federal water law should be repealed; and that there should be full public disclosure by gas companies of fracking fluids’ chemical composition, backed by a comprehensive penalty system;

Volumes of water used in the fracking process – a report commissioned by the UK Department of Energy and Climate Change in December 2010 on the country’s unconventional hydrocarbon resources, notes that up to 1 million gallons of water, treated in various ways and containing ceramic proppant, resin-coated sands and other chemicals will be required in an individual shale-gas well to fracture the shale and keep the fractures open. This process may need to be repeated every four to five years in producing wells.

About a third of the water is returned to the surface. While it may be possible to recycle some, at the moment the process requires freshwater. A January 2011 report by the Tyndall Centre raises similar concerns and points out that there are many areas of the UK where water is over-abstracted. The same concerns apply in other European countries;  

Treatment or disposal of waste water – treatment, storage and disposal of water is identified as a significant issue in the Maryland University Report and others. Disposal options for this waste water in the US, some of which is highly saline, have included dumping on roads in place of road salt, which keeps them ice free, but has implications for water bodies into which the runoff drains;

Seismic activity – activity around shale-gas sites has not received much attention in studies to date, although the incidence of a small earthquake at or near one of the exploration sites in the UK has led to suspension of drilling and an investigation by the British Geological Survey (BGS). The BGS said it could not say whether the minor earthquake of 2.2 on the Richter scale was directly attributable to the exploratory drilling, but that minor seismic activity was to be expected at sites where water was injected into rock under pressure at depth. Again, this may or may not be significant, but could be important in terms of public acceptance of fracking activity within a community; and

Wider environmental concerns – the overall greenhouse-gas emissions of shale-gas production have been considered in studies such as that undertaken by Cornell University in November last year, which identified 30% more methane emissions than conventional gas production from flow-back return fluid. Other studies such as by the Tyndall Centre consider this issue further.

Some reports, such as from May’s UK House of Commons Energy and Climate Change Committee, reflect confidence that these environmental issues can be properly addressed through operating-licence conditions. Other reports are much more critical. What really matters is that the shale-gas industry is able to demonstrate that it has addressed environmental issues effectively, that it can meet the demands of EU environmental regulation and that it deserves public confidence and support.

For more information please contact William Wilson at Burges Salmon on 0117 939 2289 or email william.wilson@burges-salmon.com.

This article was first published in Petroleum Economist Unconventional on 17 June 2011. 

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