THE UK SHALE ENERGY CONFERENCE 2016

30 SEPTEMBER 2016

 The second UK Shale Energy Conference organised by the Scottish Energy Association (SEA) took place in the same week that the first ‘Dragon Ship’ carrying shale gas from the US reached Scotland and against the continuing Scottish Government moratorium on unconventional oil and gas extraction. With its focus on the key question – ‘Should Shale be Integral to the UK’s Energy Needs?’ over 70 delegates came together at Strathclyde University’s Technology & Innovation Centre to hear contributions from a range of speakers representing the energy industry, the economy, academic research, the environment and politics.

Opening the Conference, SEA Chair, Colin McNaught, reaffirmed the remit of SEA to support the energy industry in Scotland and its role in disseminating information, knowledge and experience. With the continuing Government moratorium and in the face of the forthcoming public consultation, it is vital that future decisions about shale gas are informed by best evidence about the resource and the part it could play in satisfying Scotland’s future energy and economic needs.

Moving on, Colin introduced the Conference Chair for the day, Ross Martin, Chief Executive of the Scottish Council for Development & Industry (SCDI). In outlining SCDI’s vision to create sustainable growth for Scotland, Ross advised that SCDI is still in the evidence-gathering stage and has not yet adopted a position on shale gas exploration.

First speaker up to set the broader economic context for the day was Professor Karen Turner, Director of the Centre for Energy Policy. Commenting that coverage in the press lacked context , Karen stressed the need to improve the quality and scope of the debate around fracking. It is crucially important that sensible questions are asked and that stakeholder’s work together to frame questions in a way that will engage the public. Issues for consideration include the use of gas as a vital feedstock for the petrochemical industry at Grangemouth ; the need to preserve jobs at Grangemouth (which contributes 4% of Scottish GDP and accounts for 8% of its manufacturing base), as well as the potential to create additional employment if domestic shale gas is used; the nature and impact of regulation; the potential for shale gas to assist in the fight against fuel poverty; the morality of using gas from non-UK regulated sources; the potential health and environmental impacts; and, the role that shale gas could play as part of the sustainable transition to a low carbon economy.

Columbus Energy’s remit and experience in attracting international investment into unconventional petroleum, was the subject of the next speaker, Columbus Director, Fraser Pritchard. Describing the company’s work in managing and financing underperforming resources into leading edge businesses, Fraser focused on the need to de-risk and create sustainable businesses that are capable of replication anywhere. Using examples from the Iberian Peninsula and South Eastern Europe to explain the vast array of factors and interplay that goes into successful models, Fraser highlighted the importance of aligning and managing stakeholders at all levels, aligning voices at national, regional and local level, the importance of collaborative approaches, the need to understand markets and to understand and minimise risk – all with a view to maximising ways to commercialise assets, de-risk capital and make it attractive to international investment.

Taking a wider look at the economics of UK energy, Chris Lewis as EY Energy Infrastructure lead, spoke about his research into future energy requirements and the role that shale gas might play. Setting the scene, Chris reminded us of our continuing heavy reliance on gas ( with 80% of households still heated by gas); the slow progress being made in developing district heating systems; power demand dropping but not by a lot and the UK becoming more reliant on imported gas. All this in a country, which has plentiful supplies of its own gas. In noting that shale gas represents a £33bn opportunity for the local supply chain over the next 20 years, Chris emphasised the importance of removing constraints and investing in key areas to take forward the enormous opportunity presented by shale gas. He also commented that the main challenge facing the industry at present is a positive political will.

International experience of shale gas exploration and its implications for UK onshore gas was the subject of the presentation by Mark Lappin of Complete Exploration & Development. Noting the pace with which shale gas has progressed around the world from almost nothing 10 years ago, Mark was keen to emphasise the scale and potential of the UK resource.   Having transformed US industry, Mark described how shale gas has turned around the fortunes of former industrial towns and cities, particularly in Pennsylvania and West Virginia and in heavily populated areas of Texas. Describing developments in China and Argentina, Mark reported patchier progress in Europe where shale gas struggles to attract public acceptance and a positive political will. France remains heavily reliant on nuclear power whilst the focus in Germany is on renewables and high standards of energy efficiency in buildings and homes. Mark stressed the important role that shale gas can play as part of an energy mix – lower carbon than coal, cheaper than renewable energy and a fuel source that can be easily switched on and off. With our appetite for cheap, reliable energy, we should be developing our own resources rather than relying on imported gas. Much of this comes from countries where regulation is not as strict as in the UK and takes away from jobs that could be created here in the UK.

The need for a continuing baseload supply remains and will so for the foreseeable future.

Understanding the geology of UK shales is a large part of Bob Gatliff’s work with the British Geological Survey (BGS). Collaborating with industry and academia, Bob spoke about current techniques and extensive research aimed at getting the best geological data available to improve our understanding of the geology of shale. Amongst the issues and challenges raised by Bob are the need to access more land for data, the development of 3D data and joining up data from different sources within a region.

Mike Cooper, Founder of Arenite Petroleum provided an overview of the issues faced by small oil and gas companies around regulation and public attitudes. Outlining the huge potential of the UK’s hydrocarbon resources, Mike described the shift in industry focus away from fossil fuels with a consequent loss of jobs, skills and infrastructure. The current moratorium has already resulted in a loss of capacity and should it continue, Scotland will not become an innovator and leader in the technology. Describing the increasing loss of installations in the Outer Moray Firth area, Mike stressed that decarbonising energy cannot happen overnight and that there has to be a transition period within which baseload energy is maintained.

Taking a step back in time, Graham Dean of Reach CSG reminded us of the local origins of oil and gas exploration and the Scottish pioneers who changed the world. In a fascinating account of the history of oil refining and the shale industry in his presentation entitled ‘Shale Gas Economics and the History of West Lothian’, Graham described how Scottish shale created the demand for oil. As a country with the longest history in the business, Scotland produced oil and gas from 1850 until 1962 at various locations throughout Central Scotland before refining operations were consolidated in Grangemouth.

Graham also referred to the enormous job opportunities and associated benefits that oil and gas has brought to the Aberdeen area. In a slide, which showed the stark contrast between Areas of Multiple Deprivation in Aberdeen and Glasgow, he highlighted the positive economic benefits that shale gas could bring to the Central Belt.

The timing of the Conference could not have been more appropriate for next presenter Hugh Carmichael of INEOS, as the first shale gas-carrying ‘Dragon’ ship arrived at Grangemouth from the US only days before. Hugh’s introduction focused on INEOS’s position as a world leading chemical company and on the process by which ethane from gas is converted into ethylene, an essential component in the manufacture of plastics for everyday use from pharmaceuticals, cosmetics and paints to computers, mobile phones and plastic bags. With dwindling supplies of North Sea gas and the Grangemouth facility operating at only half capacity for some time, imported gas is essential to maintain and grow the manufacturing operation. Importing US shale gas by a ‘virtual pipeline’ of ships and storing it in the recently completed largest ethane storage tank in Europe represents a massive opportunity for expansion and the creation of a long term sustainable future for the Grangemouth site.

In support of a cautious approach to the delivery of energy from a variety of sources, Matt Williams spoke of RSPB’s concerns about the threat that climate change poses to wildlife, the protection of wider biodiversity interests and the need for protection of individual sites and habitats. At a time when an estimated 60% of UK species are in decline, Matt noted that in order to meet legally binding targets to reduce greenhouse gas emissions by at least 80% and possible more by 2050, major changes to the UK’s energy system are required. These will include significantly increasing the proportion of energy that we use from renewable and low carbon sources, as well as greatly reducing our overall demand for energy.

The only speaker to voice outright opposition to shale gas exploration was Patrick Harvie, MSP, co-convenor of the Scottish Green Party. In a bid to end our reliance on unsustainable fossil fuels, Patrick suggested that in order to meet climate change targets and to protect communities and the environment, we need to leave all hydrocarbon resources in the ground. Patrick called for more effort to be put into developing a range of sustainable renewable alternatives and for greater energy efficiency in buildings and homes .

Speaking in support of the Conference theme, Alexander Burnett MSP Burnett described the present moratorium as political posturing with no basis in fact, and the opportunities which shale gas offers as a much needed stimulus to an economy ‘flirting with recession’. Choosing to ignore the findings of its own independent Expert Panel that fracking could be carried out safely, he described the present ban as illogical and based on a blinkered ideology that will prevent a jobs boom in Central Scotland. Commenting that the Scottish economy has currently the highest deficit in Europe, Alexander described the ban as holding back the energy sector and the Scottish economy. Ignoring the opportunity for the transfer of skills between offshore and onshore, Alexander also noted that the SNP is paying for jobs to be created elsewhere, that much imported gas comes from areas outwith UK regulatory control and of the continuing need for baseload power in the transition to a low carbon economy.

In talking about the benefits of onshore exploration and public perceptions about energy, Ken Cronin, Chief Executive of the United Kingdom Onshore Oil and Gas (UKOOG) reminded us of the importance and benefits of gas as part of the wider energy mix and economy. With some 84% of UK households currently heated by gas and around one third of electricity generated by gas, there are 500,000 jobs in the manufacturing and pharamceutical industries dependent on gas as a raw material. It is also important for food production (as a key component of nitrogen-based fertilisers) and a potentially much cleaner source of fuel for buses and trucks than diesel. Without further developing our own gas resources, the UK will become increasingly reliant on imported gas (already at about 50%), with a consequent rise in costs and loss of jobs and tax revenue. Commenting that renewable energy will simply not be able to meet total demand for electricity and heat in the foreseeable future, Ken noted the opposition that wind farms generate with some 70% being rejected at local level. The public needs to be better informed about the facts surrounding the energy debate and the consequences of abandoning our own sources – higher costs, job losses, the morality of importing gas from abroad (including Russia and Qatar) and the massive cost and disruption to the consumer of having to change household appliances to electricity-only.

The two ‘academic research’ contributions were delivered by Neil Burnside, Research Assistant and Rob Westaway, Senior Research Fellow , both from the University of Glasgow.

Neil Burnside’s presentation described his participation in EU- backed research aimed at developing best practice in assessing the environmental effects of shale gas extraction and exploration, and mitigating any potential adverse impacts. Talking about his work to monitor air and water quality and induced seismicity at a site in Poland, Neil noted that there is a greater awareness in Poland of where gas is sourced – Poland presently importing two thirds of its supply from Russia.

The main part of Rob Westaways’s talk centred on research into the causes of unexpected microearthquakes from fracking activity at Preese Hall in Lancashire and the emerging contradictory interpretations surrounding the occurrence. The event was significant in influencing adverse public opinion about fracking. Making a case for the better understanding and use of multi-disciplinary geoscience data, Rob described the geological and technical circumstances behind the event and highlighted the measures that might be taken to plan for future occurrences. Rob also raised questions around the impact that the moratorium might be having on research, development and investment into geothermal energy.

In highlighting the main points from the numerous presentations and in drawing the event to a close, Ross Martin expressed the importance of the economy and environment being two sides of the same coin in the delivery of sustainable economic growth.

The day provided an exceptional opportunity for the exchange of information and views about the wider future UK energy needs and the role that UK shale gas can play. Amongst the most enduring and important points raised were:

  • the importance of asking the right questions in the forthcoming Scottish Government public consultation
  • the crucial importance of asking sensible questions and for stakeholders to work together to frame questions in a way that will engage the public
  • the need for the public to be better informed about shale energy – the need for facts rather than myths
  • acknowledgement that there has to be a sustainable wind down of carbon sourced fuels in the journey towards a low carbon energy system and economy
  • the role that shale can play in creating more jobs, in the transfer of skills and employment from offshore to onshore and its support for the manufacturing sector
  • the role that shale can play in keeping the cost of energy low and in combating fuel poverty
  • the morality of importing gas from other sources when we have our own, plentiful domestic supplies.

Joyce Hartley, October 2016

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