"Breaking the Code" of Shale Gas/Shale Oil in the UK

Ian Roche, Managing Director, Aurora Petroleum Ltd., said he had prepared his talk at the European Unconventional Gas Summit in the context of presentation about unconventional gas in Poland, Ukraine and the UK.

He first slide showed the "Enigma cipher machine" - used by the Germans to encode messages just before World War II, whose code had originally been broken by three Polish mathematicians, not by a gentleman in the UK as was commonly thought.

Still, counter to that history, he said: "I would argue here that there are strong indications that the first commercial shale gas development in Europe will be in Lancashire, in the UK."

He said a huge amount was known about UK onshore geology, going back over 200 years. "There are lots of basins of different ages, a lot of the country is well understood, also a long history of onshore oil and gas exploration.

Mr. Roche showed a map of conventional oil and gas licenses, CBM and shale gas, noting that they were all held under the same system. He showed an area which would be licensed in what he termed the "14th round" which was expected toward the end of 2013.

He gave a rundown of the stratigraphy of shales in the UK, noting the British Geological Survey had highlighted Lower Paleozoic, Cambrian and Namurian shales in terms of unconventional potential, as well as a number of units in the Jurassic and Mesozoic.

"The focus area for exploration has been these marine shale basins in Northern England," he said, but gave mention to the Midland Valley of Scotland, where it was less of a marine section.

He showed the audience some "bings" - leftovers from a pretty substantial oil shale industry in Scotland, which was active in the second half of the 19th century. "This was essentially digging up oil shales and then heating them up to produce oil. I was astounded: 8 tons of shale deposit waste for every 10 barrels of oil. That's quite a lot of digging, really."

It was a huge industry at one stage, he recalled, but reminded us of the thick-yet-immature source rocks.

Regarding the Bowland shale, he showed Cuadrilla Resources' licensing area in Lancashire, as well as Aurora's license.

"What's most exciting about the Bowland shale is the extensive thickness of shales and, having penetrated in wells in sections over 3,000 feet thick, it's really got people's attention," commented Mr. Roche.

"Can Bowland produce both gas and oil?" he asked. "I would contend that it can."

He showed a "de gassing" piece of a core sample and said one should always put their core in a fish tank, because it made a good photograph.

He also showed a photo of black oil seeping out of the surface, oil which was sourced from the Bowland shale at a site where there was conventional oil production in the middle of the 19th century.

"Aurora have actually been active as part of a re development project on this shallow oil field whose reservoir is in the Triassic, but it is sourced from the Bowland shale," he explained. "It's very shallow depth, but a good, light oil. We're doing some current work to try and type this oil to sections within the Namurian section."

"It's not just ourselves and Cuadrilla that have been studying it," he said of the Bowland shale. "The Department of Energy have taken a very extensive study of the whole of the Northern England basin, including the Bowland basin. They've done a great job on this - it's due to be out soon, but the summary is out. They've really gone back to the basics on this, using seismic and well data, and it will form the basis of the government's view on the resources in the basin."

Mr. Roche offered his take on what the reaction had been to the UK's unconventional oil and gas potential, recalling some media headlines.

"'You could be sitting on a goldmine'; 'It could be the North Sea Mach II'; 'It could affect your house price' - that's not a positive, but generally there are some positives to be seen economically. I think some of the papers are seeing the economic benefits, but it's only time that there are some other, contrary views," he said, showing a satire of shale gas "reducing your 'denizen of the deep'."

He continued, "You do read some extreme things; my favorite non satirical one is that New Zealand didn't have earthquakes until hydraulic fracturing - it's an opinion, probably not scientifically supported."

The serious point was, he said, that satire itself came form public unease, and there were issues that the industry had to address with government.

"One of the things we're a bit tired of reading is that it's a 'totally unregulated' or that it's 'self regulated'. Actually, there's really extensive regulation in the UK; it has one of the premium regulatory regimes, probably in the world for oil and gas, because we have an extensive offshore industry.

"And because we have an offshore industry does not mean that the onshore industry isn't regulated. There's a long history and it's regulated by a large number of bodies," he explained.

He said the UK government had recently rushed to put in place new administrative body, to be controlled by DECC, called the "Office of Unconventional Gas and Oil."

"I see this less as a structural change and more a reassurance to the public that they are on top of this," he said. "It's a case of perception.

Mr. Roche reported that best practice guidelines were being developed by the UK onshore operators group for shale exploitation. "This is about advertising something that already exists," he explained. "There's nothing new in the guidelines but rather a re statement of what we intend and what we do."

He showed a chart of shale gas production in the Marcellus shale in Pennsylvania, explaining that it had reached UK offshore natural gas production within four years. "It's outstanding. I was sure the graph was wrong. They drilled 4,500 wells in that period of time."

The UK he said, had drilled only 2000 wells since 1919, "so, we're going to have to get a shift on if we want to do a Pennsylvania."

Could a shale revolution happen in the UK? he queried, comparing it with the growth of the UK railways in 19th century, which drew a great deal of investment, even if it didn't happen quickly.

"In 1847, 60% of domestic growth went towards the railways. It went from a standing start to being the powerhouse of the industrial revolution," he recalled. "Shale is having that sort of impact in the US and could have that effect in the UK as will; it certainly couldn't hurt."

Mr. Roche concluded that it was "early days" for UK shale.

"There are numerous targets, the UK has an excellent regulatory regime - a lot of history with oil and gas, excellent infrastructure with connections to Europe. The Bowland shale is the most advanced thanks to our near neighbors, Cuadrilla, and the activity they've done. That is likely to be first commercial shale play in Europe," he said.