Tim Gould of the International Energy Agency outlined the prospects for unconventional gas during an Energy Ireland seminar and reviewed the main findings of a new IEA report entitled ‘The Golden Rules for a Golden Age of Gas.’
Although natural gas demand fell by11 per cent in Europe during 2011 due to the economic downturn, the International Energy Agency believes we are on the cusp of a ‘golden age’ of natural gas. The downturn has also played a role in reducing CO2 emissions in Europe over the past five years. The biggest fall of any country or region was in the US with a reduction of 7.7 per cent between 2006 and 2011. The reduction in the US also came about because of significant changes in the electricity generation mix with natural gas and renewables being the leading sources of incremental capacity. Within the fuel mix for generation in the US there was large scale substitution of gas for coal.
Advances in technology have led to a surge in unconventional gas supply in North America. Through an intensive process of hydraulic fracturing natural gas has been recovered in increasing volumes which in turn has made the price of natural gas in the US very competitive with other fuels. Many countries are considering how to emulate the success in the US, notably China, Australia, parts of Europe and Latin America. The new found gas from unconventional sources led to the displacement of LNG, which had been destined to be imported to the US, to other markets and coupled with the economic downturn led to a glut of gas around 2009-2010. As the unconventional gas was substituted for coal in the US, it left those supplying coal looking for an alternative market. This led to a surge in coal use in power generation in Europe last year.
Gould emphasises that “US unconventional gas is already having a substantial impact on Europe, even if, as we believe, the development of unconventional gas sources within the EU is something that will take some considerable time to move ahead.”
The unconventional gas resources are “fundamentally important” as they are more widely distributed around the world, particularly when compared to conventional oil and gas reserves which are concentrated in relatively small areas. The key attraction to governments is an indigenous resource and associated economic activity and also reduction in energy imports.
However, there are concerns that the production of unconventional resources might involve unacceptable environmental and social damage. There are major implications for local communities, land use and water resources. There are serious potential hazards including air and water pollution.
Gould adds: “In our view, the prospects for unconventional gas for many areas depend on the degree of consent from society that is yet to be achieved and if these social and environmental issues are not addressed properly there is the real risk that the unconventional gas revolution will be stopped in its tracks.
“The technologies and know-how do exist for unconventional gas to be developed in an environmentally acceptable way and for this to happen the industry has to win public confidence by demonstrating exemplary performance and governments need to be sure that the right regulatory and policy framework is in place.”
The ‘golden rules’ are principles that can allow governments, industry and other stakeholders to address these environmental and social impacts. The IEA report calls them ‘golden’ in that their application can ensure operators have a “social license to operate, paving the way for a golden age of gas”.
1. Measure, disclose and engage
“This is very easy to say and very difficult to do. It is very indispensable to the notion of public acceptance.” Many of the public concerns raised are related to a sense that the public doesn’t have reliable information. There is often a perceived lack of transparency about the chemicals used in the fracturing fluid in the US. The disclosure of those has gradually become the norm.
It is important to understand base line environmental indicators prior to drilling to identify any impacts. It is also important for the industry and government to highlight the tangible economic benefits in the parts of the country most affected by the development.
2. Watch where you drill
The choice of drilling site has above ground and below ground considerations. Above ground, there is a range of environmental and social issues particularly near centres of population. Below ground, operators need a very sound understanding of the geology, to avoid pre-existing faults and ay possible tremors.
3. Isolate wells and prevent leaks
Properly constructed wells are critical to avoiding environmental damage. It is important that operators are consistent in applying the highest construction standards for all their wells.
4. Treat water responsibly
A lot of attention is paid to avoiding the possibility of water contamination: avoiding the fracturing fluid migrating from the area that has been fractured, the gas-bearing formation, to aquifers which are usually much closer to the surface. The risk of surface spills is also considered and mitigated against.
5. Eliminate venting, minimise flaring and other emissions
Methane is a potent greenhouse gas. Preventing venting from unconventional wells is important and best practice is to capture all methane.
6. Be ready to think big
Unconventional gas development is an intensive industrial process. Environmental and social issues are of a scale which requires attention as you need many more wells to produce that same amount of gas conventionally. There should be an awareness from the start that this is potentially an industrial activity of a significant scale. Governments need to look at not just the impact of individual wells but the cumulative effects over a geographical area.
7. Ensure a consistently high level of environmental performance
Adequate staffing and support for regulatory bodies is essential. Skills and expertise and access to high quality data are essential for effective regulation to assure public confidence.
The IEA’s ‘golden rules’ can address the environmental and social impacts of unconventional gas development.
Gas from unconventional sources can transform energy markets by putting downward pressures on prices and broadening the diversity and security of gas supply.
The IEA sees natural gas as having a key role to play in enhancing energy security, reducing local pollution and in moving to a low-carbon economy.