Examination of Witnesses (Question Numbers
1-70)
Nigel Smith and Professor Richard Selley
9 February 2011
Q1 Chair: Good
morning, and welcome to the Committee. I think we are going to
make a start with you, on your own, if that is okay, because I
am sure you have time constraints and I am afraid we do as well,
so we will press on.
This is the first public session of our inquiry into
shale gas. You will have to treat us, certainly me, as a new reader
and not intimately familiar with a lot of the technical aspects
of this. It is one of the reasons why we wanted to embark on the
whole process. If some of our questions seem basic, you will have
to take account of the fact that it is a new subject, though I
think a lot of us have been interested in energy issues for a
very long time and are familiar with most of the sort of policy
background. I wonder if, to begin with, you could just explain
a bit more about what is meant by "unconventional gas"
and, in particular, is it the way gas is extracted, or the source
from which it is extracted that makes it unconventional, or perhaps
both?
Professor Richard Selley:
In the ordinary way, petroleum forms from mud, from shale, in
a huge area of the earth's crust where it has been buried, and
oil and gas migrates up to the surface and dissipates in natural
seepage. Occasionally it is trapped underground in what we would
call conventional traps like an upfold of rock, and there we can
measure the porosity and permeability, calculate the amount of
reserves and extract it.
Non-conventional hydrocarbons include a range
of things, one of which would be shale gas, where there is gas
that is still in the shale, which is what we are all about today.
There is also oil shale, where again there is oil still trapped
within the shale; coal bed methane, where there is methane gas
trapped within coal seams; tar sands, such as the Athabasca tar
sands and the Malagasy tar sands at Bemolanga; and gas hydrates.
Q2 Chair: Are
there great differences therefore between different types of unconventional
gas?
Professor Richard Selley:
Different types of unconventional gas. There is shale gas; there
is also what is called tight gas in tight sands—low permeability
sands. There is gas in gas hydrates. This is a particular form
of ice, which contains methane gas within it, which is probably
far more important than shale gas.
Q3 Chair: Why
is there now therefore a sudden interest in shale gas?
Professor Richard Selley:
Shale gas has been produced since 1821 in the Appalachians. What
has driven the renaissance of shale gas has been an increase in
energy prices in the States obviously, but also technology. In
particular, that would include the ability to drill horizontally.
In the old days, when I first went in the oil industry, all we
could do was drill straight down, now we can drill horizontally.
You can actually steer the drill bit almost like driving a car
along the particular horizon of rock that you are interested in.
That is a big improvement.
Fracturing, which is a very old technique, as
old as Moses, has been used in the oil industry since the 1940s,
but there are new techniques of fracturing. Also, seismic has
improved. One of the problems with a lot of non-conventional petroleum
is it is very hard to work out the reserves, unlike conventional
petroleum in a conventional trap. You can image the oil and gas
and you can see over a period of time how the fluid contacts move
as it is produced. With non-conventional resources, especially
shale gas, it is very hard to work out how much is there. The
analogy that I have often used is that you should think more about
water supply, aquifers and hydrogeology, than about conventional
petroleum geology. However, with seismic now it is possible to
image some of these shale gas "reservoirs" within major
shale gas formations.
Q4 Dr Lee: Morning,
Professor. A question on exploration: how tried and tested is
this exploration?
Professor Richard Selley:
Shale gas exploration has been going on since 1821, when it was
really a cottage industry, very low tech, virtually being done
by farmers, no fracturing or anything like that. The technique
now has improved in leaps and bounds in terms of the drilling
mud systems, the fracturing techniques that are available, the
drilling techniques and, in particular, the number of wells that
you can drill off a single pad, so you are minimising the environmental
impact: you can get now up to 16 wells off a single pad.
Q5 Dr Lee: To
what extent are these new techniques tested before business starts?
Professor Richard Selley:
Yes, this is the nice thing about UK shale gas exploration, of
course. It has been tried and tested in the States, and they have
drilled hundreds if not thousands of shale gas wells using the
new technology, using the new drilling technology and using the
new artificial fracturing technology, so there is a wealth of
experience that we can draw on in this country without making
any mistakes that they might have made.
Q6 Dr Lee: That
is a nice caveat at the end. That was the purpose of my question.
To a certain extent, we drill blind, do we? Are we sure that the
techniques that have been used in America are applicable to the
geological environment that one would find in Britain?
Professor Richard Selley:
Even in the States the cliché is "there is shale gas
and there is shale gas". There are different types of shale
gas formations that respond differently to different types of
fracturing.
Dr Lee: So that is potentially
yes.
Professor Richard Selley:
It will be a learning curve—
Dr Lee: So it is potentially
yes to that question.
Professor Richard Selley:
Yes.
Q7 Dr Lee: In
terms of each well, how often do you do the fracturing process—the
hydrate fracturing process?
Professor Richard Selley:
I am not a plumber; I am a geologist. I suspect you will be hearing
evidence from reservoir engineers who can answer that better than
I do, but it is possible to repeat fracture over a period of years,
what is called a workover.
Q8 Dr Lee: Is
the expertise in that area predominantly based in the US?
Professor Richard Selley:
At the moment, but of course now Shell are drilling wells. They
have already drilled a shale gas well in Sweden. There is a lot
of drilling activity going to take place this year across the
rest of Europe, probably in South Africa too.
Q9 Christopher Pincher:
Professor Selley, you say you are a geologist, so you might not
be able to answer all of this question, but have a go. It comes
in two parts. First of all, how deep on average are shale gas
drill wells? Secondly, given that you have to drill vertically
and then drill horizontally, is there any significant cost implication
of that horizontal drilling, which must be much more technically
challenging?
Professor Richard Selley:
Yes, indeed. It is more expensive to drill horizontal wells than
a straight up and down well, yes.
Q10 Christopher Pincher:
In terms of the depth one normally goes?
Professor Richard Selley:
The depths will vary. The early shale gas wells were virtually
from the surface. Do you prefer feet or metres, Chair?
Chair: I am relaxed with
either myself, but if we want to be 21st century we should probably
use metres.
Professor Richard Selley:
There have been shale gas wells produced drilling within tens
or hundreds of metres. Now, it is not uncommon to go thousands
of metres—way below the aquifer, if that is your next question.
[Interruption.]
Chair: Mr Smith, welcome.
We made a start as all of us probably have some time deadlines
we have to meet, but I hope you were not unnecessarily troubled
by the security getting in. We have just made a start so far.
We are asking a series of questions and feel free—please
both of you feel free—to answer them, but if one of you
prefers to leave it to the other, that is also fine.
Q11 Dan Byles:
Leading on nicely from your point about the aquifers, there has
been quite a lot of media hype, I think, about shale gas being
blamed for all sorts of things from mini earthquakes to flocks
of dead birds to burning water from the taps. Is there any evidence
for any of that?
Professor Richard Selley:
I am glad you asked me that question. The famous one that is in
the Gasland film, which many of you I am sure have seen on television—the
Weld County event. the Colorado Oil and Gas Commission carried
out a report on those gas seeps in 2008, and they concluded that
it was shallow biogenic gas—marsh gas. that is. Of course,
you do not hear about that on television because it is rather
dull to have a talking head say, "Well actually, it has been
there already."
The other example that has attracted attention is
the Parker County one in Texas, the Range Resources well, where
again there are claims of aquifers being polluted. Again, that
pollution had occurred before any shale fracturing went on. The
gas that has been recovered contains not just methane but also
nitrogen, and that does not occur in the Barnett shale, the deep
shale that has been fractured. That is almost certainly from the
Strawn shale, which is much shallower. When you look at these
individual claims, they often showed up what we call the Francis
Drake effect: it is something that has already been there, but
the oil company gets the blame for it.
Q12 Dan Byles:
Can you just elaborate a bit more? You said it is not coming from
the deep shale, but it is potentially coming from another shale?
Professor Richard Selley:
From shallow shale that was conventionally drilled a number of
years previously. It is nothing to do with recent shale gas fracturing.
Q13 Dan Byles:
Is there any evidence that either gas from shale gas drilling
or the fluid used as part of the fracturing process, either of
those products, have ever contaminated drinking water supplies?
Professor Richard Selley:
Not that I am aware of, but I do not claim to know everything.
Q14 Dan Byles:
Are there any other risks associated specifically with shale gas
that would not be associated with conventional gas or conventional
hydrocarbon exploration or drilling that you are aware of? I keep
looking at Professor Selley, but obviously these questions are
open to either of you.
Nigel Smith: The
Tyndall report has mentioned a few examples. I think we need to
look into them carefully to see whether they apply to the UK or
Europe. Some of them will not apply, I think. One that I have
looked into, the one in Ohio that they mention—number 2—is
a conventional well anyway. It is targeted at conventional sandstones,
deeper than the shales, so we do not know exactly where the gas
is coming from originally.
Q15 Dan Byles:
Would you agree with that, Professor Selley?
Professor Richard Selley:
Yes.
Q16 Dan Byles:
Just one final question, Chair, if I may. Some people have referred
to the casing used to separate the well from aquifers; do you
think that it is that casing that would protect aquifers, or do
you think that is not necessary and, because of the levels of
the depth that you are drilling, that is a non-issue?
Professor Richard Selley:
That casing is routine anyway and I am sure you will hear expert
evidence from Cuadrilla on this. In any well that is drilled to
several thousand metres, you will have, within the zone of the
aquifer, three, maybe four, steel cylinders with concrete between
them because as the well is drilled, they will drill down, pull
the drill string out, set some casing, pump down cement and cement
it in, go in with a narrower drill bit, drill another few hundred
or thousand metres, go in with a second string of casing, pump
in cement, and so on. In the shallow zone where the aquifer is,
and we are only going to be talking here of to 300 metres, you
have got three or four concentric tubes of steel cemented in place.
It is quite difficult; it would be quite an agile methane molecule
to get through that.
Q17 Albert Owen:
If we could go now to the UK prospects, you mentioned earlier,
Professor, Shell exploring in Sweden, but what are the prospects
for Britain and are we relying too much on comparisons with the
US, which we have read a lot about in the papers that we have
been given?
Professor Richard Selley:
I think the BGS have done a very detailed study on that, but I
am quite in favour of the Weald, the Jurassic shales of the Weald,
as well as the carboniferous, which is being looked at at the
moment. I am sure there is more potential outside the Cheshire
basin, yes, indeed.
Nigel Smith: I
agree with that, yes. There are probably four good plays that
they could try—well, three good ones, and one very risky.
The first one would be the Namurian; the second one would be the
Weald and the Wessex Basin the Professor was talking about; the
third one is also quite risky, and that is the Cambrian play in
central England, going into Wales; and then the fourth one would
be looking in the fold belts, which the Americans are starting
to do now, so there is evidence that you can produce gas even
within fold belts.
Q18 Albert Owen:
The basis of my question is: are we looking too much to America?
Can we not research and fund the research in the UK here specifically
for the prospects of the United Kingdom?
Nigel Smith: We
have done as much as we can with the data that we have. The problem
is that, with the legacy data that was acquired for conventional
hydrocarbon exploration, they targeted the limestones, the sandstones,
the reservoirs. For example, the cores are nearly all in that,
the cuttings and even the side wall cores, so there just is not
enough evidence about the shales and how they are going to perform
as a reservoir.
Q19 Albert Owen:
Professor, you mentioned Sweden and Shell going out there. Is
that an area we should be looking at as a Committee?
Professor Richard Selley:
It is very interesting because the particular rock formation in
Sweden and northern Poland is something called the Alum shale.
We have that equivalent and this is what Dr Smith alluded to:
Cambrian shales in the Worcester Graben, which are time equivalent
of a very well known organic rich shale.
Albert Owen: It would
be worthwhile us looking at that in greater detail as well as
the Americans.
Professor Richard Selley:
Indeed, yes.
Q20 Albert Owen:
The other question I wanted to ask relates to exploration companies.
They are going to come along, but you have identified to the British
Geological Survey work on sweet spots and places where they can
go and get immediate results. Should we be pointing them towards
that or should there be greater research?
Professor Richard Selley:
The "sweet spot" is a colloquial term, meaning within
a reservoir where we already know we have got petroleum. You can
often identify areas with very high porosity and permeability,
often seismic, and those are referred to as sweet spots. They
are within a reservoir rather than a whole sedimentary basin where
the term we would use for that is a "play".
Nigel Smith: If
you are drilling out the whole source rock, there will be places
where you get higher productivity. They will be the sweet spots.
If you can predict them in advance, great, but a lot of cases
you will not be able to.
Q21 Albert Owen:
It is a bit hit and miss then.
Nigel Smith: Well,
you will know where the source rocks are—they will be quite
well mapped out.
Professor Richard Selley:
The nice thing is that now with seismic, it is possible to identify
some of those sweet spots from seismic. Especially the latest
trick is, while you are fracturing, you can have your geophones
listening to the shockwaves coming back and the fracturing energy
source will help you to define the sweet spot. Then you are going
with your cunning drilling and you aim straight for it.
Albert Owen: Fascinating.
Q22 Dr Lee: I
am looking at this rather beautiful DECC map of shale gas resources
of Great Britain in colour. You said you had a legacy of data.
How accurate is this map?
Nigel Smith: I
think that probably the oil companies are going to go in close
to the existing boreholes so, if you can see there, there are
a few red spots and green spots showing the actual gas discoveries
or gas fields. Then there will be lots of other wells that are
being drilled deeply into the carboniferous in northern England,
and I think the oil companies will be going in close to where
those existing wells are.
Q23 Dr Lee: It
has already been mentioned that you can drill—was it—16
times from one site?
Nigel Smith: Sixteen
wells, yes.
Q24 Dr Lee: Is
there a tendency just to sort of move slightly further away and
try again or is it, "Right, okay, we're going to go 100 miles
down the road and try it"? What is the sort of strategy?
The reason I ask, I just wonder whether, say it went over my constituency:
are they going to try in Crowthorne and go down the road to Sandhurst
and then across to Fitchampstead? I am going to end up with a
constituency full of trucks?
Nigel Smith: Cuadrilla,
they started with a big licence in Lancashire and it covers all
of what we call the Permo-Triassic Basin, the West Lancs Basin,
which stretches from the coast to Pendle Hill and the Carboniferous
outcrops. They have got three wells they are going to put down.
They have already drilled one. They have got two more that are
about five kilometres apart. They are going to start in one area
where they think they have got a good—where is the best
target. If it is not successful there they will try somewhere
else within their licence.
Q25 Dr Lee: Is
there a strategy of how far away they go? I mean, this is huge
swathes of British countryside. It is not like you have got a
small target. Is there a tendency, "Right, we have done Berkshire;
we will go to Hampshire"? Do you think?
Nigel Smith: It
is difficult to know. We will have to wait for the next round
of licensing from DECC.
Q26 Dr Lee: It
is just that the uncertainty of the data slightly concerns me
and that this might end up being a bit of a "close my eyes
and throw a dart."
Nigel Smith: No,
it will not be.
Professor Richard Selley:
To a certain extent that is the risk of petroleum exploration.
We can have ideas, we can have fantasies and decide, well, we
think the gas or the oil is there, but it is a high risk business.
Dr Lee: The difference
being that we are dealing with populated areas, not the North
Sea.
Professor Richard Selley:
Chairman, can I put this into perspective? There is a line of
oil and gas fields around the Weald paralleling the North Down
to the South Downs. There are fields there that have been producing
oil and gas for 100 years. Not many people know that.
Q27 Dr Lee: What—from
shale gas?
Professor Richard Selley:
No, this is conventional petroleum.
Nigel Smith: Also
it is true in the East Midlands as well. I mean, that helped in
the Second World War effort. Does anybody know there was an oil
field at Formby? These things were developed. BP have done a brilliant
job at Wytch Farm drilling out laterally, even offshore, yet,
quite a few people in the general public do not even know it is
going on.
Q28 Dr Lee: In
terms of water contamination, how many tests have been done in
those areas since?
Nigel Smith: I
do not know of any water contamination in any of these onshore
fields.
Q29 Dr Lee: If
you are not looking, forgive me, you are not going to find it,
are you?
Nigel Smith: No,
but it would be reported. You cannot keep anything quiet these
days, I would say. The local authority would find out.
Q30 Chair: I am
interested in your references to these areas that we are not aware
of. You said that north Weald, I think, was an area where oil
has been produced.
Nigel Smith: Yes,
Palmer's Wood.
Professor Richard Selley:
Yes, along the North Downs.
Q31 Chair: Are
the volumes meaningful? Given what the potential is, we are told,
from shale gas and, indeed, the expected demand for gas in the
next 20 years, are the volumes that are being produced in these
quite sensitive areas without anyone noticing significant?
Nigel Smith: Only
at Wytch Farm, I would say.
Professor Richard Selley:
Wytch Farm in terms of the volumes, but they have a significance
out of all proportion to their reserves in times of war. The Nottingham
oil fields, for instance, in the Second World War, were crucially
important to this country at that time. There is a security angle
to this.
If I can just come back to Wytch Farm for a
moment, it is worth pointing out that I think Sandbanks is an
estate with the highest property values in the country and yet
there is an oil field underneath it, and I wonder how many people
know that.
Chair: Yes, it raises
a new line of inquiry.
Q32 Dr Whitehead:
I am trying to understand the combination of the relative economics
and extractability of shale gas. Certainly, in terms of the techniques,
it appears that there would be likely to be a fairly rapid decline
in output after you have undertaken the initial fracturing, and
presumably as a reasonably small area of capture from each fracture,
which therefore limits the output per drilling. What are the decline
rates like in terms of that?
Professor Richard Selley:
That is an interesting question. I looked into this because in
the old cottage industry style shale gas production, a single
well would produce for 30, 40 years, but at a very low rate, but
one well would do for a housing estate or a farm or a school,
or something like that. I have been trying to get data on decline
rates for modern high tech fracturing. The USGS has produced data
on this and done a lot of modelling, but it is all fairly short
term—for three or four years, something like that. As I
say, I am only a geologist, not a plumber. I think the reservoir
engineers could give you better answers to that decline rate.
Nigel Smith: There
is a decline rate in all exploration anyway. In some of the biogenic
shales in America, there are much shallower wells and they have
a different profile to these fractured shales from greater depth,
like the Barnett, so they all have a different decline rate.
Q33 Dr Whitehead:
I mean I take the parallel of Wytch Farm, which I am reasonably
familiar with because I happen to live fairly near it. That is
a couple of wells and a nodding donkey with some horizontal drilling
out, so it is a very tidy long-term operation. The question of
decline rates with shale gas suggests to me the possibility that
you would have a large number of wells in a particular area, which
would then be in various rates of decline, and presumably would
then have to be capped off and made safe, and then moved on, or
is that a mistaken view of what a shale gas exploitation process
might look like?
Nigel Smith: I
think they are going to fracture probably every three or four
years and there is going to be a jump in production again. It
is going to go like that. It is going to be an overall decline
but there are going to be jumps. They will do their best to keep
it going as long as they can.
Q34 Dr Whitehead:
You say "as long as we can". You mentioned, Professor
Selley, a well that would conventionally last for about 30 or
40 years, which seems quite a short time in terms of conventional
production. Is that right?
Professor Richard Selley:
No, I do not think so.
Q35 Dr Whitehead:
The process of refracturing, I presume on the basis of the steerability
of drills that, roughly speaking, what you would do is you would
have one horizontal drilling and then your refracturing would
be at various angles around the central drill. Is that right?
Is that how it would work?
Nigel Smith: The
difference from some of the old exploration is that they used
to do it all from vertical wells. Now they will be drilling horizontals
and they will be perhaps splaying out in different directions
from one pad site. They are going to do a much more thorough job
over a much larger area before they move on to the next point,
or if that is in the next licence the other company will do it.
Q36 Dr Whitehead:
Do you have or is data known about the extent to which, if you
have one drilling point, then with refracturing around that drilling
point there is presumably a likely finite life for that whole
operation to reach the point at which refracturing, because everything
has in fact been gathered as it were, becomes unsustainable?
Professor Richard Selley:
I think it might be sensible to address those questions to the
engineers when you have them in to give evidence, rather than
us.
Q37 Christopher Pincher:
I was also taken by this rather fine colourful map of the onshore
deposits, but can we talk about offshore shale gas for a moment?
The briefing note I have says that "UK onshore basins are
small in comparison with UK offshore basins". Can you say
what the magnitude of difference is between offshore and onshore
deposits?
Nigel Smith: I
cannot offhand, but I would say five to ten, something like that.
It is massive, the North Sea.
Q38 Christopher Pincher:
That is where it is—in the North Sea?
Nigel Smith: Well,
that is where they start, yes, where the existing infrastructure
is. They might start drilling from the onshore into the offshore
or perhaps across a bay or something like that, where they can
connect up their wells. I think that is quite likely. I mean,
they have already drilled once in southern England from the coast
into the offshore. They have also drilled on the Moray Firth from
the onshore towards a field that is offshore, so there is a precedent
for that, but the oil companies say it is the cost. I am sure
they will make proposals or think about developing shale gas offshore,
but it is the cost at the moment that stops them.
Q39 Christopher Pincher:
What do they say is the cost? What sort of price are they talking?
Nigel Smith: I
have not seen the figures. They will know the cost. You can ask
them perhaps.
Q40 Christopher Pincher:
Given your background and experience, and given that you said
that there is shale gas in the North Sea where we have conventional
drilling platforms, what do you think the opportunities are for
drilling for that gas offshore compared with onshore? What is
the relative opportunity?
Nigel Smith: I
would say it is more in terms of time—20 years forward,
perhaps.
Q41 Christopher Pincher:
As I understand it, if we drill offshore, then we would be pioneering
because nobody else is doing that. Why is that? Has nobody else
found any offshore shale gas anywhere?
Nigel Smith: Bear
in mind the Americans are the only ones who have any production
at the moment. There are one or two other discoveries in Argentina.
There was one mentioned recently, but they are the only people
who are producing from shale. They have got a huge continent to
work on, massive basins, not a lot of deformation in those basins,
so they are going to pick off the easy things first, learn how
to do it, and then eventually we will all be able to go offshore.
Q42 Christopher Pincher:
Professor Selley, do you have a view?
Professor Richard Selley:
I think it all depends on the economics. I am sure the technology
is there to look for and produce shale gas offshore, but I suspect
at the moment it is an economic issue rather than a technical
one.
Q43 Christopher Pincher:
Based upon the economics, at the risk of leading witnesses, given
that America, the only other interested party in shale gas at
the moment, is focusing onshore because that is where they have
their deposits, and because you say that we have a magnitude of
opportunity different offshore, do you think we should be putting
our efforts into offshore shale gas production rather than focusing
on onshore?
Nigel Smith: I
like to walk first before I run.
Professor Richard Selley:
Quite.
Q44 Christopher Pincher:
What sort of challenges? You have alluded to some of the challenges
drilling onshore for shale gas. Are there any different challenges
drilling offshore?
Professor Richard Selley:
You don't have people for a start offshore.
Q45 Christopher Pincher:
You mean residents complaining, yes, right. Are there any others?
Nigel Smith: It
is easier to acquire seismic as well: straight lines, 3D surveys,
they already exist so in a lot of ways the data is better offshore.
Q46 Christopher Pincher:
Is the fracturing easier to achieve offshore than onshore for
any particular reason?
Nigel Smith: There
will not be any environmental problems there either, I would say.
As for the saline water, it depends how saline it is. Maybe you
could just put it into the seawater.
Q47 Dan Byles:
We had Professor Dieter Helm giving evidence a few weeks ago and
he said, in his opinion, increasing use of conventional gas sources
around the world meant that for policy planning purposes we could
now consider gas to be an unlimited resource. I am curious to
know what your thoughts are on that.
Professor Richard Selley:
I preface my remarks by saying I am a geologist, not an energy
expert, but the quotation I came across yesterday was that the
United States' gas reserves are now energy equivalent of the oil
in Saudi Arabia.
Q48 Dan Byles:
Is that the remaining oil in Saudi Arabia or the oil that Saudi
Arabia has in stock?
Professor Richard Selley:
Good question. I think the remaining oil. I am not endorsing that.
I am just passing that on—a factoid.
Q49 Dr Whitehead:
Could I ask a question about cost, but on the basis of trying
to understand the relationship between the recovery process, from
what I assume is a very substantial but diffuse, what might be,
field of shale gas, as opposed to a far more limited but concentrated
field, say, of conventional gas? The process of conventional gas,
as you say, would be to make a discovery, find the trapped pocket,
which may be large, put one or more wells down into it and extract
the gas over a period of time, whereas shale gas recovery presumably
would have to, as it were, repeatedly approach whatever the field
is by a whole series of relatively small fracturing operations.
Professor Richard Selley:
That is why earlier I said it may be more useful to use the analogy
of hydrogeology than petroleum geology. Looking for oil in a conventional
sense, with seismic, we can map the trap. We can now image the
oil and the gas within it, and we can see those fluid contacts
moving as the field depletes. The trouble is with non-conventional
hydrocarbons, and shale gas in particular, it is very hard to
define the limits of the productive reservoir. These shale formations
go on for hundreds of kilometres; one does not know the extent
that they could be producing.
Q50 Dr Whitehead:
It just appears to me on the basis of just that fact comparison
that the relative costs of extracting conventional gas from a
field and undertaking shale gas extraction must be very substantially
different, as will the environmental activity relative to the
two in order to allow that extraction to take place. Presumably,
therefore, if you look at the life cycle cost of both techniques
then shale gas inevitably, however easy the extraction may look,
must come in at substantially greater, I guess.
Professor Richard Selley:
It is interesting, the States now, the shale gas boom is over
because the gas price is so low that the number of rigs that are
actively drilling for shale gas is declining and they are moving
on now to oil shale exploration instead.
Dr Whitehead: There presumably
is a point at which to some extent sort of shale gas exploration
defeats itself.
Professor Richard Selley:
Market forces.
Q51 Dr Whitehead:
What is that point? Is there analysis?
Nigel Smith: If
the gas price goes down the more marginal, more difficult, expensive
fields will be dropped, but the good ones will carry on. That
is how it would work.
Q52 Dr Whitehead:
How do we know which is a good one?
Nigel Smith: The
companies will know. We do not need to know.
Professor Richard Selley:
We are just geologists, not economists.
Q53 Dr Whitehead:
I presume from a geological point of view you have mentioned the
difference between being able to pretty much determine what a
conventional gas field is looking like, its extent and its extraction
rate and its likely available reserve, which you cannot do as
far as shale gas is concerned. I am almost reminded of the notion
of sticking pins repeatedly in a pin cushion to see—
Nigel Smith: I
think we know roughly where the shale is. There are places in
Derbyshire, for example, where you would not drill, but to the
south you might, to the north you might. I think it is fairly
well defined based on existing exploration. There are always going
to be successful fields and less successful fields.
Q54 Dr Lee: I
think this is probably the fastest we have gone through a series
of questions at one of our meetings since I have been here because
of the succinctness of your answers—maybe it is the style
of a geologist, but it seems that you are pretty certain about
things. There is a certainty to your information.
Nigel Smith: No,
there is no certainty.
Q55 Dr Lee: Forgive
me for this open question from an ignorant position, but is there
anything you are not sure of, that you are concerned about or
that you have concerns about? Is there any uncertainty about the
exploration of shale gas?
Professor Richard Selley:
Surely, repeatedly in our evidence we have passed, ducked the
question and said, "You would do better to ask the engineers,
better to ask the economists," and so forth.
Dr Lee: But the engineers
are relying upon your work.
Professor Richard Selley:
Yes.
Dr Lee: You must have
an opinion.
Professor Richard Selley:
Yes, we have an opinion, yes.
Q56 Dr Lee: Which
you are not prepared to share? What I mean is you deal in fact,
which is fine, you are scientists; but is there an area where
you think, "I wonder what will happen when they drill there."
Professor Richard Selley:
Yes, I mean it is experience.
Q57 Dr Lee: Geologically,
is there a concern? Are we sure about where the aquifers are for
sure, 100%? Are we sure? Without wanting to suggest for a second
that it necessarily contaminates water, my point is the level
of uncertainty that I am trying to get down to from a geological
perspective.
Professor Richard Selley:
I think what we can be certain about geologically in terms of
shale gas in this country is that we are able to map the shale
units. We can do that from outcrops, studies from boreholes, studies
from seismic. We can measure how much organic carbon they contain,
where we have got well data.
As to the extractability of gas from those shale
units, that is a matter for the engineers. Again, I return to
this: think hydrogeology rather than petroleum geology. If we
were looking for potential petroleum geology, yes, we can map
the traps. We can now generally see the oil-water contact and
the gas-oil contact, and the engineers, as that field is depleted,
you can often see those surfaces moving. There we can be pretty
robust, but if I come back to shale gas, it is much more fuzzy.
Think hydrogeology, think aquifers, rather than a confined, restricted
trap.
Q58 Dan Byles:
I just want to briefly come back to the points that Alan was making:
what we think the medium to long-term impact on the energy markets,
the economics of energy of shale gas are. I think we are all aware
that higher energy prices mean that more marginal oil and gas
fields are worth exploring, when energy prices come down they
are not. Do you think that large reserves of shale gas in the
United States will effectively have a sort of capping effect on
prices? As prices reach a certain amount, suddenly it is worth
digging out the shale, which has a dampening effect again. Is
that a reasonable thought?
Nigel Smith: Yes,
I think so, because the other sources of gas that we are relying
on, I think the price will tend to come down if they do not have
to supply the US.
Q59 Dan Byles:
Basically, shale gas is going to almost put a bit of a ceiling
on gas prices that perhaps was not there before? Whenever gas
prices spike suddenly it is worth going and tapping a source.
Overall, is it a fair summary of your view that there is currently
no real evidence that shale gas is any more dangerous than any
other sort of hydrocarbon or exploration. It is another source
of energy to be tapped for the UK when the economics say that
it is right to do so, based on price and cost? Is that a fair
assessment?
Nigel Smith: Yes,
I agree.
Q60 Albert Owen:
Earlier on, Professor, you were describing to us—from my
perspective, I am very elementary in this—but you were talking
about coalbed methane as another unconventional type of gas. Is
it an "either/or" here? The way you describe how coalbed
methane would be available, I presume it is in existing coalmines,
and they are easy to get to. I know you are going to say it is
probably for the engineers or it is economics, but I am just saying,
from your perspective, do you think it is easier to tap that and
get that resource out than it is to speculate in the way that
we have been about the shale gas?
Professor Richard Selley:
There is quite a long track record of coalbed methane extraction
abroad and in this country. It began when they discovered that,
when the coalmines were operating, they were venting all this
methane into the atmosphere anyway, so why not collect it and
use it? It is a different technology.
Q61 Albert Owen:
They know the seams. It has all been mapped out. It has all been
dealt with. Surely, that is easier to find and probably easier
to extract than shale gas?
Nigel Smith: There
are a lot of licences at the moment where companies are looking
for coalbed methane, but there is a problem in the UK and Europe
compared with America. It comes back to the point you were making,
Phillip, that we do not know why. It is probably the permeability
of the coals are much lower in Europe and for the UK compared
to America. I am looking at exactly the same age of coals. I am
not comparing Carboniferous coals with Tertiary coals. It is the
same carboniferous coals.
Q62 Albert Owen:
Do you see it as an either/or or do you think we can be exploring
both equally?
Nigel Smith: I
think Nexen and Island Gas, for example, is one company that is
operating in Cheshire and Lancashire. They have been looking for
CBM and they are starting to develop the first pilot field now
at Doe Green. They are also thinking about the shale gas underneath.
There could be a trade-off because you are trying to dewater the
coal seams before you can produce the gas. There is a nice graph
that you can see where the water is declining as the gas increases.
That is the best scenario. It may be you could use that water
that you have extracted from the coal to start injecting into
the shale deeper down. It could work very well together.
Albert Owen: That is interesting.
Q63 Christopher Pincher:
A question about gas consumption. Since the turn of the century,
we have become a net gas importer. By 2009, about 32% of our consumption
was imported. I just wondered if we maximise the potential for
onshore shale gas, and also offshore, what impact could that potentially
have on our import rates? What could the offset effect be?
Nigel Smith: I
think if we went offshore, we could become sufficient, but not
just in the onshore, no. It is going to be a small contribution,
I think.
Q64 Christopher Pincher:
You are saying if we went offshore and we explore this to its
full potential, we could effectively reverse the import effect
that we have had since the turn of the century?
Nigel Smith: It
is a difficult prediction but I will stick by it. What about you?
Professor Richard Selley:
It is security of supply. The opportunity for developing indigenous
gas resources onland in this country is a tremendous one from
the security point of view. I do not think that is a point that
needs to be laboured.
Q65 Chair: Even
though that might be more expensive than the alternative sources?
Professor Richard Selley:
Indeed. What price can you put on security?
Chair: That is clearly
a political judgement.
Q66 Dr Whitehead:
In terms of its exploitation onshore, one of the arguments, for
example, on offshore wind as opposed to onshore wind, is the question
whether, provided the cost is not too disproportionate, having
large wind farms well offshore is preferable to having a smaller
number of wind turbines on top of a whole series of hills. Is
there a similar analogy with shale gas exploration? When it is
in my mind, it is assuming that one is looking in a geological
formation for shale gas in a slightly uncertain way, that there
would therefore perhaps be in a particular area two or three dozen
wells producing over a period of time, producing the same sort
of energy output as you might get from a number of wind farms
or you might get from one well of conventional gas.
Professor Richard Selley:
Pass. I am only a geologist.
Q67 Dr Whitehead:
You have no view or opinion on what that would look like? That
drilling process in terms of the geological formations that one
is looking at?
Q68 Chair: Would
we understand all this better if we funded some more research
into surveying for shale gas?
Professor Richard Selley:
Absolutely.
Nigel Smith: Of
course.
Q69 Chair: Now
there's a surprise. If it is possible to stand back and look at
the alternative ways in which we might want to spend our money—clearly,
you have got a professional interest in all this—but would
that be a sensible thing? Obviously, we are looking at a completely
blank sheet of paper in terms of what we might conclude when we
have done this inquiry. We are coming to the end of this session,
but my impression is there is a huge potential there. It may be
expensive. There are a lot of uncertainties. Would it be a sensible
use of money, in terms of giving a return on it to try and reduce
that uncertainty by funding a bit more research?
Professor Richard Selley:
Yes.
Q70 Chair: What
could we hope to learn if we did that?
Professor Richard Selley:
It is a cliché in shale gas that there is shale and there
is shale. The petrophysical properties of the shale vary from
rock formation and from place to place. By that I mean the porosity,
the permeability, the degree to which they will respond to fracturing.
There are critical physical properties that we need in a shale.
If it is too soft or it is still too clay, it is not going to
fracture. If it is too indurated and metamorphosed, it will not
fracture at all. There are lots of petrophysical properties of
the shale that we would need to research.
Nigel Smith: We
also need to know about the gas contents of shales, so that when—I
mean, if there was money, for example, for boreholes—we
drilled into the shale, we would take the cores, package it up
so it could be analysed and find out exactly how much gas is in
the different shales. It is the sort of work the oil companies
will be doing, but we can contribute.
Chair: Thank you very
much. It is illuminating for us. I think some of us are starting
from a fairly limited base of knowledge on this issue, but you
have helped us quite a lot. Thank you for coming in.
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