Why Shale Gas is the Best Hope for Our Energy Future

Citizens of the world, consumers of energy and environmental stewards, our mission is to build a sustainable, environmentally friendly and economically viable energy source.  By design, few of us are in love with fossil fuels. But what we must be; are realists. As the search for the best energy solution(s) today continues, time-and-time again the compass points north to Natural Gas.

Why, because, key industrial centres are sitting on vast shale gas energy opportunities. This is no longer a fantasy but a vision that can benefit the world today, not tomorrow. Natural gas production, from hydrocarbon rich shale formations, known as “shale gas,” is one of the most rapidly expanding trends in onshore domestic oil and gas exploration and production today.

Countries including Argentina, Australia, Brazil, Canada, China, France, Mexico, Poland, South Africa and the United States have an abundant domestic resource base of technically recoverable shale gas. Secondarily, natural gas is clean; in fact the cleanest of all fossil fuels (see following chart). Certainly, being an organic compound, it has a carbon footprint. Natural gas emissions levels of carbon dioxide (“CO2”), carbon monoxide (“CO”), nitrogen oxides, sulfur dioxide, particulates and mercury is anywhere from 40% to 100% cleaner than coal. And with the exception of CO, natural gas is anywhere from 28% to 100% cleaner than petroleum.

Source: Natural Gas Issues and Trends 1998

Furthermore, the economic impact from developing shale gas has a multiplier effect far beyond just the supply chain from wellhead to exports. This “Shale Gale” as we call it in the U.S. has the potential to support more than 1.6 million jobs and generate more than $933 billion in federal, state and local government tax revenues over the next 25 years.

Using the U.S. as an example, natural gas has transformed the outlook of U.S.’s energy mix.

U.S. Shale Plays have:

• Created 600,000 jobs in the U.S. in 2010
• Added about $1,000 in disposable income per household
• Introduced higher paying job at about 23.00 USD per hour
• And contributed about $77 billion to the nation’s economy

Source: IHS Global Impact

When you put these benefits together, you get what is called the Triple Bottom Line, an integration of values for measuring success: success in terms of economic, ecological, and social benefits. Shale gas is an endeavour of national social responsibility.

• People – in terms of an improvement towards labour, the community and region
• Planet – in terms of benefits towards the ecology and the environment
• Profits – in terms of real economic benefits enjoyed by the residential, commercial and industrial sectors

It’s unique to have a resource that benefits these somewhat conflicting constituencies. This sets the stage for both opportunities and challenges. Opportunities, in terms of, jobs, economic value, and government revenue! And downstream challenges in developing an adequate infrastructure and stimulating demand.

The world is at a crossroad. A crossroad of how to balance the tremendous quantity of undeveloped resources, with the complexity of developing an infrastructure to support demand, while protecting the community and the environment

In many countries, coal is primarily used to generate electricity. It is this sector that can immediately benefit by developing shale plays. As the demand for electricity grows, new gas-fired electrical power generation stations can replace the need for coal-fired plants.  In the U.S., the Levelized cost of gas-fired stations is about 6.6 cents per kWh verses 9.5 cents for coal-fired plants. A double benefit by using natural gas – cheaper and cleaner electricity production!

Long-term opportunities to stimulate domestic demand include an infrastructure supporting natural gas fuelled vehicles.

The world is proceeding with due caution to develop their shale plays. The dilemma is how best to manage the risks to the community, environment and economy while developing a valuable resource and markets.

Shale gas development has raised many concerns by industry critics and citizens. New gas developments bring change to the environmental and socio?economic landscape, especially where gas development is a new activity. With these changes have come questions about the nature of shale gas development, and the ability of the current regulatory structure to deal with this development.

Purported issues include its impact on:
• human health and safety
• the environment
• fresh water reserves
• air quality, and
• seismic activity.

All valid concerns to think first and drill later! To this end, regulatory agencies, policy makers, and the public need an objective source of information on which to address these issues.

Now let’s demystify a few critical aspects of development. Time to separate fact from fiction! Let’s begin with hydraulic fracturing, simply because it’s essential to shale gas completion and central to many controversies over its production.

Both horizontal drilling and hydraulic fracturing are established technologies with a significant track record; horizontal drilling dates back to the 1930’s and hydraulic fracturing has a history actually going back to the 1860’s, when nitroglycerine was used to stimulate shallow, hard-rock oil wells, it was surprisingly very successful and not so surprising very hazardous and often illegal.

Fracturing fluid is a proprietary slurry consisting of at least 98% water and sand with the remaining 2%, or less, of chemical additives, each having a specific function. Although there are dozens to hundreds of chemicals, which could be used as additives, there are typically no more than 12 used in the fracturing process.  Most of the additives are commonly used household or personal care items, which pose little or no health risks.  However, a limited number are hazardous, and only one routinely used additive, ethylene glycol, is poisonous if swallowed in sufficient quantities. It is important to note that ethylene glycol is widely used as automotive antifreeze.

For this reason, the ingredients of the fracturing fluid must be transparent. Legislation should be put in place to: have the operators disclose the makeup of the fluid.  Also, of prime importance, are the corresponding regulations to ensure proper injecting and disposal methods.

Pure, clean groundwater! Nothing can replace it. This is why fresh-water aquifers need to be protected through legislation. The concerns around groundwater contamination are primarily centred on one fundamental question: Are the fractures such, that they do not contact underground sources of drinking water?

Source: MIT Research Study, Natural Gas, Chapter 2

Protection is afforded by casing and cementing, where Casing isolates fresh water zones from inside the well and Cementation seals the annular spaces within the casing to create a hydraulic barrier to fluid migration. In addition, there are natural barriers in the rock strata that act as seals holding the gas in the target formation.  A fundamental precept of shale gas geology is to ensure sufficient separation and effective sealing between the shale layers and overlying aquifers.

It is important to mention, that credible investigations into complaints of water contamination attributed the problem to poor casing construction and cementing as well as the close proximity of the shale layers to underground water supplies. Also, inadequate Fluid Management including handling, injecting and disposal were also to blame.

So to adequately protect people and the planet, there needs to be a Regulatory Framework that addresses every aspect of exploration and production that takes into consideration:

• the geology
• casing and cementation
• contractor qualification
• ground water testing
• and public disclosure of chemicals.

Multi-stage fracturing is water intensive and can use up to 20 million litres of water per well. Therefore, it is critical, that large quantities of fresh water are available.

This chart shows the “Comparative Water Usage of Several Major U.S. Shale Plays” by sector.

Here we see that shale gas production, represented by the shaded column, is, in fact, the lowest consumer of water. Public systems are by far, the primary demand sector. And where heavy industry is present, industrial and mining operations, require substantial quantities of water. Even the irrigation and livestock sectors utilize more water than the shale gas industry.

Most of the water used in hydraulic fracturing comes from surface water sources such as lakes, rivers and municipal supplies.  However, groundwater can be used to augment surface water where it is available in sufficient quantities. Alternate strategies include trucking in the water, building ponds and reservoirs to capture rain, recycling water and contracting with local public works and farmers. These are some of the innovative ways the industry is obtaining, monitoring and regulating water usage. Finally with new technologies to the rescue, such as “super fracking,” as it’s called, it is possible to reduce water consumption in half.

Of utmost concern are natural gas emissions from production. This is driven by its, effectiveness in trapping heat in the atmosphere, and its corresponding impact on climate change.

The EIA reported that total atmospheric methane emissions from all sources constitute only 10% of all other Greenhouse Gas (“GHG”) emissions. CO2 was by far the predominate greenhouse gas; at about 83%. Furthermore, not all atmospheric methane comes from natural gas systems. Only a third of the atmospheric methane emissions come from wells, pipelines and storage tanks. Other major sources of methane emissions come from fermentation, landfill and coal mines.  Therefore, shale gas contributes about 3% of the total greenhouse gas inventory.

Similarly, MIT reported, “according to EPA inventories released in 2010, in 2008 GHG emissions from natural gas systems were 126 teragrams (one teragram is equivalent to one million metric tons) of CO2 equivalents (CO2e), less than 3% of total CO2 equivalent emissions from all energy sources and activities.” Natural gas systems include production, processing, transmission and distribution of conventional and unconventional (shale gas) natural gas.

Furthermore, many producers and pipelines have already deployed relatively inexpensive methane detection and capture technologies and are able to realize profits from the use of these techniques.
To find the right answer you first have to know the real problem. One thing we all can agree on, doing it wrong will lead to problems.

A fair number of investigations into the complaints concluded that the problems were avoidable and as I mentioned earlier traced to:
- Inferior casing and cementing
- Insufficient separation between gas-bearing rock and water supplies
-  And lack of oversight and adherence to best practices

Other reported problems were subsequently found to be erroneous, lacking merit, or not representative of the industry.
- MIT reported there were only 42 complaints of contamination out of 15,000 shale wells drilled in the US – a 3 tenths of 1% problem.
- Also, Cornell University’s initial report stating that shale gas has a higher GHG footprint then coal was subsequently retracted. A new report concluded that its footprint is in actuality 1/3rd to ½ that of coal,
- and finally some law suits involving methane contaminated water were subsequently dismissed for lack of evidence.

The answers lay in the fact that modern shale gas development is technologically driven and must be treated as such. Unproven cost cutting measures and process deviations are unacceptable.  60 plus years of experience tells us, shale gas can be safely managed and controlled. Done right it is a low risk proposition.

So our quest for answers has brought us to two simple words – “BE SMART.”

Be smart and ensure:

• Adequate oversight
• Adoption of rules and codes
• Onsite safety and emergency preparedness
• Programs to train and certify workforce
• Adherence to best practices
• and Use of Qualified operators

Like it or not, renewable energy has a long way to go to make an impact on any one country’s energy mix. Natural gas, being the least disruptive fossil fuel, could serve as a ‘bridge’ to a low-carbon future. It’s a cushion, but not a complete answer

Under a scenario, that envisions a worldwide momentum towards stick policies aimed at cutting greenhouse gas emissions; electric utilities and other sectors of the economy will have no other choice but to adopt natural gas as a logical alternative. Natural gas will buy time to further develop, cleaner fuels. Hopefully there will be something at the other end of the rainbow, whether its 25 years or the end of the century.

In closing, the shale gas industry creates jobs, economic value, and government revenues. Additionally, it also provides broader macro-economic impacts for both households and businesses. This is especially true in industries, that are intensive users, of natural gas as a feedstock, such as the chemical industry, and industries that significantly benefit from lower cost electricity.

And along the way, society, unknowingly, becomes an environmental steward striving to sustain our environment.

Shale gas development is “SAFE,” “MANAGEABLE” and “BENEFICIAL,” now and for the future.

By. Dr. Barry Stevens