Lloyds Register: Finding confidence in the unconventional

Aug 28, 2016
6 min read
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Opinion is divided on whether to exploit shale gas and oil, but one point is not in dispute: there is no single answer to energy poverty, energy security and global warming. If unconventional resources are to be part of the solution, then safe operations are critical to foster confidence in the industry. Now is the moment to focus on best practice from a technical and operational standpoint. This will provide a constructive framework to support the socio-political and economic debate.

Is shale energy an answer?

The case for and against is well rehearsed, with advocates pointing to North America. Much newspaper ink has been absorbed by reports of America gaining energy independence thanks to its vast reserves of unconventional oil and gas, liberated from shale rock formations using novel drilling techniques. But shale is more than a North American and Canadian story. Recently, other countries have declared large resources of unconventional hydrocarbons, notably shale gas, but also shale oil and coal seam gas. These include Argentina, Australia, China, India, Indonesia, Jordan, Poland, Turkey and the UK. International collaborations, such as the Global Shale Gas Initiative, are helping countries utilise their newly found resources. At the same time, technological developments, including floating LNG facilities that remove the need for logistical pipelines, may turn a regional commodity into an international one. Is a vital new energy source from diverse suppliers on the horizon?  

Of course, simply possessing unconventional natural reserves does not mean countries will tap into them. Producing energy from shale is a complex business. US experience tells us that the output from fracked wells declines quickly, increasing the need to drill new wells. Exploiting these resources in the open North American landscape is a different task compared with a densely populated country such as the UK. Winning over the public is key. Focusing on integrity and safety from the outset will help bridge the two-sides of the debate.


What should we do about safety?

Stakeholders involved in shale gas and oil extraction must address the valid concerns over public and environmental safety. Control the drilling and hydraulic fracturing processes is a significant issue, especially with headlines of earthquakes caused by operations. A study conducted by the Royal Society and the Royal Academy of Engineering for the UK government (June 2012) concluded that fracking was safe ‘as long as operational best practices are implemented and robustly enforced through regulation’.

While many may prefer conventionally sourced energy over unconventional sources – viewing the established as the safer option – it is worth remembering that oil extraction began without regulation. Now, take the UK as an example. The country’s oil and gas industry has one of the most rigorously regulated regimes in the commercial world. A decision on the shale industry’s future should be made in the knowledge that the right type of regulation can be established and for the most part is already in place. There are precedents elsewhere to draw on, especially in nuclear power. In terms of regulation and management, the nuclear sector has the controls in place to minimise potential risk from operational and environmental hazards. The oil and gas industry has these too.

The unconventional label is perhaps misleading. As we pinpoint key considerations for shale developments, many seem very familiar. Prudent well design; safe operating practices; the use of, and risks to, the environmental resources of air, water and ground; the impact of infrastructure; management of logistics; and community sensitivities are not new oil and gas challenges. The expertise and skills exist to deliver the services required for safe, efficient production. That is not to downplay community concerns surrounding shale developments. It is imperative to recognise these and look to engineering for solutions.

Fracking concerns, for instance, tend to focus on groundwater pollution and the disposal of chemicals and produced water but the correct application of technology can reduce the demand for water. Employing dynamic modelling and appropriate practices will help mitigate formation impact when drilling wells, as well as the overall scale of fracking operations. The answers are out there for the industry to allay concerns, while delivering efficient operations.

Independent technical authorities, such as Lloyd’s Register, are well placed to support industry here. Our responsibility is to help ensure all of our clients have the technical support and risk guidance they need to extract energy sources safely, responsibly and efficiently. In regards to shale gas and oil, our domain expertise on fracture studies, drilling operations, well integrity and exploration of unconventional hydrocarbons will prove particularly valuable.


Will global clarity help?  

We believe so. Currently, we are working with various industry stakeholders to produce a universally recognised standard for safe, sustainable extraction and supply of shale gas and oil. This benchmark will enable operators at any location to meet best industry practice. The work builds on recommendations to date to the wider energy industry. The aim is to create a full risk management global assessment framework, which, for the first time, will cover the entire operational life cycle.  

Such clarity is particularly important for upcoming energy sources. Here, the expectations of operators vary and compliance with international standards is often optional. Additionally, new energy tends to attract new companies, as well as existing players. These new entrants have less experience of operating high risk activities and would benefit from all the technical support possible.  

The International Energy Agency estimates $8 trillion will be spent on natural gas infrastructure between now and 2035 as countries and companies expand production, transportation and storage facilities. If the shale industry is to be part of this investment, then external confidence in it must be high. For this reason, safety and integrity are critical.