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    Testing Time for UK Shale Gas: Cuadrilla


Shale gas could be supplying UK customers next year in the best-case scenario, Cuadrilla's CEO has told an event in Asia.

by: William Powell

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Testing Time for UK Shale Gas: Cuadrilla

In the best-case scenario, UK shale gas could be flowing into the national transmission system next year, said the CEO of pioneering would-be UK shale producer Cuadrilla, Francis Egan. 

But there are some hurdles to clear first, he told the 121 Oil & Gas Investment conference in Hong Kong May 3.

The tests on the gas-bearing shale have so far proved that the geology is as good as the best in the producing wells in the US, he said. And the layers of shale are exceptionally thick, at 2 km, which allows for a number of horizontal wells to be drilled off the borehole. Also it is brittle, suggesting it will give the gas up easily. And the company is satisfied, based on tests in 2011, that the gas can flow to surface. "It ticks all the boxes," he said. Further the gas is very pure, 95% methane and no carbon or mercaptans, meaning it may enter the national transmission system as is. The nearest part of the gas grid is only a kilometre away. He said that if Cuadrilla could produce a total 6bn ft³ from each horizontal well, and the market price averaged $5-6/'000 ft³, and it could cut the capital cost per well, then it could be very profitable.

What will take time to assess is whether production will be economic, so the rest of this year will be spent on calculating the final yield per well, the cost per well, and the number of wells it can drill. In its favour are the higher prices in the UK, compared with the US; militating against it are the environmental monitoring costs and higher well costs – in the US, shale wells cost below $10mn compared with the $15-20mn in the UK. Cuadrilla would need to cut the costs to $10mn-15mn; it thinks competition between the oilfield service companies could achieve that. 

There are other reasons too why the safe production of UK shale gas would benefit the economy: currently the country imports a little over half its gas (with Norway and Qatar the main import sources), and this figure will rise as conventional fields deplete. The UK's future alternative conventional gas sources could include less politically stable Russia and Qatar and, given the vast amount of brainpower and expertise in Aberdeen where the upstream industry was born, and given the reduced carbon emissions from domestic gas compared to imports, Egan said he found it difficult to understand the objections. 

Referring to its wellpad in northwest England, he said: "Our site is the most intensely monitored one of its kind in the world." If the hydraulic fracturing causes a tremor of even 0.5 on the Richter scale, that will be enough to suspend operations, he said. And water injection will be done cautiously to check that there are no unacceptable environmental side-effects.

Cuadrilla is owned 47% by Australian drilling services firm AJ Lucas, 45% by US private equity firm Riverstone, and 8% by Cuadrilla employees past and present.