INSIGHT: INEOS working hard to convince the UK of the benefits of shale

20 September 2016 17:00 Source:ICIS News

By Nigel Davis

LONDON (ICIS)--The rig shown here is drilling vertically past 9,700 feet (3,000 metres) into the Utica shale in the northeast of the US with the drill bit slowly being aligned to the horizontal. It will drill out to a length of 3,000m and the well will be prepared for fracking. The latest technology – the rig is highly automated – means that it can be walked a few metres to drill parallel wells. Combined, the wells will maximise gas production from the pad.

(Image source: Mark Simpson)
Image source: Mark Simpson

This is the sort of technology that INEOS and others want to introduce to the UK to help develop the country’s shale gas and oil resources. The Switzerland-based chemicals producer has big plans for its gas business focused on shale and on gas production facilities acquired in the North Sea.

This is about growing the company, not necessarily away from chemicals, but more towards essential chemical feedstocks.

Conceptually, the opportunity is immense and a private company like INEOS is one of the few that could make it happen.

INEOS has already spent some $2bn in bringing US ethane to Norway and soon to its cracker at Grangemouth in Scotland. It has begun trading ethane and wants to see that business develop regionally and globally.

These are exciting times for anyone involved with gas-based feedstocks. A trip organised by INEOS for national UK press and TV and a handful of chemicals journalists took in a rig in eastern Ohio where Paterson-UTI Energy is drilling the Utica shale for gas producer Consol Energy and a production site within the perimeter of Pittsburgh airport in southwest Pennsylvania operated by Consol.

The gas exploration and production business has been through a tough time in this part of the world with operations cut right back in the face of much increased US gas supply and gas prices that have remained low for longer than most can remember.

Consol Energy, however, believes things are improving. It says that the dry Utica shale – the rig is in rural Switzerland Township, in Monroe Country, eastern Ohio – can open up a new gas producing frontier as markets begin to recover. The Utica shale sits below the wetter Marcellus deposit.

The Swiss chemical giant unveiled the new hydraulic fracturing plans while showcasing its operations in the US this week. The company wants to file planning applications for core drilling in the East Midlands. Above, a shale well pad in Pennsylvania. (Image source: Mark Simpson)

Image source: Mark Simpson

The production site shown comprises six wells fracked in the Marcellus. Currently it is producing 30m cubic feet of dry gas a day and 570bbl/day of condensate, priced at between 50% and 75% of benchmark WTI crude, having begun production in July this year.

Fracked wells tend to produce strongly at first and then settle down to a lower flow which can persist for decades.

The site is five to seven acres in extent currently but will be re-grassed and contoured to an area of a between one and one and a half acres. Clearly, it is draining an area much greater than that. Consol says it can produce enough natural gas in a year to supply 100,000 homes.

These are the sort of statistics that INEOS wants to get across to local communities and others that might be affected by its own shale gas exploration and production efforts.

Drilling at a shale gas site can take between two and three weeks per well. Fracking can begin once the drilling rig has been removed and can take about one week per well.

The argument is, therefore, that disruption at and around the site can extend over a few months but production over many years.

INEOS has committed to paying those directly and indirectly affected by its fracking activities a proportion of its gas revenues.

Activity in UK onshore gas exploration can be expected to increase as INEOS and other exploration companies seek permission to begin drilling and fracking for gas.

The UK’s supply of gas from the North Sea is running out fast and the country’s dependency on imported gas is expected to reach 69% by 2018/19. The British government has suggested that it is broadly supportive of developing the UK’s onshore oil and gas potential.

The country has extensive shale deposits but needs to better understand their geology and gas or oil bearing potential.

The British Geological Survey has estimated that shale deposits in England contain 1,300 trillion cubic feet of gas and that shales in central Scotland contain 80 trillion cubic feet.

If just 10% of this potential could be realised it would supply a significant proportion of the UK’s gas need for decades. It would also help in the shift towards de-carbonisation of the UK’s energy mix if aligned with the push to nuclear power and renewables.

For INEOS, which currently uses about 2% of the gas consumed in the UK, shale gas development would underpin its manufacturing and help cut its energy costs.

The company wants to be conducting 3D seismic work on likely gas wells this year and has applied to drill five test core wells. Rock cores and seismic data will give it a better idea of the rock formation in which it might operate and the gas bearing potential, says operations director of INEOS Shale, Tom Pickering. Seismic work and vertical coring will be a £50m investment.

There is a local public to convince and hurdles to overcome before shale gas exploration and production can begin in the UK let alone be viable.

But INEOS believes it could be well into investigating the characteristics of shale gas reservoirs on the licence acreage it has acquired in England within two years.

In five years, it could have in place a “test cluster” of wells within a designated area and be on the way to having a project that could deliver gas to an INEOS manufacturing facility.

By Nigel Davis