Fracking push on hold after twin earthquakes

Australian
29 July 2011, Page: 22

MARK Miller was hoping to lead an energy revolution in Britain. Then earthquakes intervened. Mr Miller, an oil industry veteran from Pennsylvania, is one of a small band of pioneers seeking to replicate North America's shale gas boom in Europe. His company, Cuadrilla Resources, has imported a technology used to great effect in the US to try to turn Blackpool, a seaside resort on the west coast of England, into a new Klondike for gas.

The technology, called hydraulic fracturing, or 'Tracking", is controversial. It involves injecting huge volumes of water, sand and chemicals deep into porous shale rock, creating fissures or fractures that allow the gas trapped inside the rock to flow out. Critics worry that fracking can contaminate groundwater and even cause gas to leak from nearby household taps.

After months of cajoling, Mr Miller, a 57-year-old petroleum engineer, thought he had managed to persuade the locals that fracking was safe. Then, this northern spring, the area around Blackpool was shaken by two tremors. After the second, Cuadrilla Resources suspended its fracking operations, pending an investigation. Some researchers have delved into possible connections between fracking and earthquakes. But Cuadrilla Resources says no such connection has been proved, and Mr Miller says he is sceptical there is any link.

Even so, one of the most closely watched energy projects in Europe is now on hold, and the publicity has dealt a blow to the image of shale gas, already under attack from environmentalists on both sides of the Atlantic. The quakes left residents in the Blackpool area "angry and distressed", said Philip Mitchell, chairman of the local Green Party. "They have told me they feel like guinea pigs".

Some were more sanguine. "If they find gas then I don't think there's anything wrong with what they're doing", said one elderly man who lives in the village of Singleton, a stone's throw from the Cuadrilla Resources site. "I worked for years in the nuclear industry, so I'm not bothered by these things".

Fracking could bring a measure of energy independence to Europe by reducing its increased reliance on gas imported from countries such as Russia, which in the past has turned off the spigot over pricing disputes. But Cuadrilla Resources's tribulations show the challenges of developing shale gas deposits in Europe, where conventional gas reserves have declined. Europe is also more densely populated than the US, meaning a greater number of people would be likely to live near fracking sites.

Mr Miller likes to compare the county of Lancashire, where Singleton is located, to the Barnett, Marcellus and Haynesville shales in the US, where vast new gas reserves unlocked by fracking have transformed energy markets. When Cuadrilla Resources started drilling last year, "we were amazed at how thick the shale was", he says. "There was almost 1000 feet more of it than we'd expected, and the thicker the rock, the more gas there is".

The widespread use of fracking was a game-changer for the North American energy industry, allowing the US to become a net exporter of gas and, in 2009, to overtake Russia as the world's largest producer. Last year, the US pumped 4.87 trillion cubic feet of shale gas, equivalent to 23% of its total gas production. Europe, too, is thought to have huge production potential. One London think tank estimates there are enough recoverable reserves of unconventional gas in Europe to meet its gas demand "for at least another 60 years".

That potential has attracted some of the world's biggest energy companies. Exxon-Mobil has been chilling for shale gas in northern Germany. ConocoPhillips has teamed up with Britain's 3Legs Resources to explore in Poland's Baltic Basin. But there are many obstacles. Environmentalists in several countries, including Britain, are pushing to restrict fracking. And although the British government this week rejected calls for tough new controls on the practice, France last month became the first country to ban it completely.

Cuadrilla Resources, founded in 2007, was initially focused on shale gas in the US. But by then, land prices in the likeliest areas were already too high. So it shifted its focus to Europe instead. "We knew there was similar geology there", Mr Miller said. Britain, whose untapped shale reserves are thought to be substantial, seemed to be the perfect destination. With backing from Australian mining company ASLucas and US private equity firm Riverstone Holdings, Cuadrilla Resources acquired a licence covering 280,000 acres in Lancashire's Bowland Shale in 2008.

Last year, Cuadrilla Resources made Britain' first shale gas discovery near Blackpool. In the ensuing months, it started fracking there to see if it could get the gas to flow. The company says its procedures are safe. To prevent leaks into the local aquifer, it is drilling 1000 feet below the water table, underneath rock that has held back the gas for millions of years. "It would defy physics" for any of that gas to seep into ground water, Mr Miller said. Cuadrilla Resources also puts an extra layer of steel and cement into its wells to better isolate the exposed rock formations. But in the end, the biggest threat to Cuadrilla Resources's operations came from an unexpected source: the two small earthquakes that shook Lancashire on April 1 and May 27.

In Singleton, people had been generally supportive of fracking, but some changed their minds after the tremors. "They should have investigated how it could affect the earth before they went ahead", said one local woman. Cuadrilla Resources assembled a team of independent experts to determine if there was any link between fracking and the tremors, which it stressed had caused no damage and no physical injuiy. Meanwhile, Mr Miller began a series of public meetings to try to calm local jitters. The Cuadrilla Resources chief executive said he didn't expect to be quite so much in the public eye. "I thought it would all be about well design and raising finance", he said. "Sometimes you feel you're a spokesman for the global oil and gas industry".