Senior executives from five shale gas companies are promoting what they see as the business benefits of fracking in North Yorkshire this afternoon.
The invitation-only event at the prestigious Scarborough Spa has been organised by the Onshore Energy Services Group, which represents the would-be supply chain for a shale gas industry.
The programme includes presentations from INEOS, Third Energy, Cuadrilla, IGas and Egdon Resources, along with the industry-body UK Onshore Oil and Gas and the drilling company, PR Marriott.
Opponents of fracking have held two demonstrations outside the seminar, which we are reporting separately here. Here you can read live updates from inside the event.
At some point your operations will stop because of the cumulative effects are too great to allow for further permissions, competition from renewables, an accident or company failure. What will happen in these circumstances. Where will the funds come from to compensate the public that suffer?
The panel’s response
John Dewar said: “You don’t need to worry about the economics of the oil and gas industry. That’s our concern.”
“We are used to spending billions of pounds in exploration and appraisal. That’s the nature of our business. Don’t worry if it is not successful. It is part of our licence to go and clean it up. We have insurance.”
“Whoever takes us over will have to fulfil that licence. We have a commitment to restore . When people say the industry is not economic. What do they know. I’ve been in the industry 40 years. This is our business. Leave it to us.”
If companies went down, so be it, he said. Other companies would step into their shoes while the gas was there, Mr Dewar said.
John Blaymires said: “That same question was raised about the North Sea and shale gas in America.” He agreed that the commercialism of shale gas had not been proved but none of the operators would be here if they were not optimistic. Success was not guaranteed but the collapse of the oil price was partly down to the success of the US shale gas industry. The challenge for the UK was to create a supply chain that did was the US companies did.
Tom Pickering said: INEOS was importing ethane which had no economic value in the US.We have spent just over £1bn on the import facilities in Norway and Scotland. Grangemouth uses the same amount of power as Edinburgh, Glasgow and Aberdeen. You may not take methane into development immediately, he said. “Knowing you have a resource you could bring into play allows you to negotiate more effectively.”
Mark Abbott, of Egdon Resources, said the company had to demonstrate a financial capacity to handle work whenever it was drilling. It used insurance products for environmental damage. It is a routine thing that we look at before we take on any work.
If fracking is so safe and so good, why is Yorkshire the guinea pig and why do other countries have a moratorium on fracking
John Dewar said Yorkshire wasn’t a guinea pig.The UK had already had a moratorium after Cuadrilla fracked at Preese Hall, he said. The industry did not need the reports commissioned by the government which, he said, concluded fracking was safe.
Fracking was a political, not an engineering problem, Mr Dewar. You need the resource and the need for the gas and if you’ve got those you will find a way to get it out. Right now we are being led by politics and pressure groups, he said.
I’m hearing defence, damage-limitation, managing the messages that go out. What I’m not hearing is a positive positioning that is going to change the perceptions. It is in your hands. I’d like to hear more good news.
John Dewar said engineers tend to plan for the worst and hope for the best. He said the Bowland Shale is 5,000ft thick – that’s 5,000 reasons for being positive. We’ve picked five zones that have great interest. You’ll know by the end of the year how successful we have been.
Why don’t people defend something that will be completely safe when we spend billions on green grants? Drilling a hole in the ground 2-3 inches is not beyond engagement in a cohesive energy policy.
John Dewar, operating officer, Third Energy
Mr Dewar said he had worked in the onshore oil and gas industry for 40 years. He said he loved the industry and he would love for the children of people in the audience to have the opportunities he had.
His company, Third Energy, is applying to frack a well at Kirby Misperton in Ryedale. The decision will be made on 20 May 2016.
“This is probably my last opportunity, my crowning glory, an opportunity to put a lot back”, he said
He said what he called the scaremongering myths about fracking was being debunked one by one. “The truth will out”, he said.
He said Third Energy spend more than £1m a year in the local community.
“It wasn’t by design that we are going to be the first company to frack a well in the UK. We were quite happy to follow in Cuadrilla’s footsteps, he said.
If we are successful we will be fracking the well in the third or fourth quarter of the year.”
He referred to concerns raised about fracking. “It gives me great pleasure to take anyone of them and bin them”, he said.
He said the scene in the film Gasland in which tap water was lit on fire was a fake.
“We let that film be made and we didn’t take any action on it. It has grown arms and leg and we have suffered for it.”
“We [the industry] play with a straight bat”, he said. “We don’t need to lie”.
He said the fracking operation at KM8 would not be using up Yorkshire’s Water. Nor would it be obvious – it could easily be hidden, he said. He added that one well pad was equivalent to 87 large wind turbines or 1.52m solar panels. He asked the audience “What would you rather have?”
Mr Dewar said suppliers provided lights, fuel, cabins, water, cleaning services, scaffolding, communications, transport, cranes, local engineering, cranes, security, accommodation.
The north east should grow a third leg to add to tourism and farming, he said. “We are sitting on an enormous opportunity. Let’s grasp it.”
Mark Abbott, managing director, Egdon Resourcesces
Mr Abbott said the company had drilled or been involved in the drilling of 28 wells since the 1990s.
The company has interests in five licences and two from the 14th round operated by Third Energy.
Its plans include drilling from the area around Robins Hood Bay into the North Sea. It was looking to submit planning and permit applications in the second half of the year. Drilling was likely to be in the winter to avoid the tourist season. If successful, drilling was likely in 2017.
At Kirkleatham, it was preparing to apply for an extension of consent to drill more wells in 2017. In the Westerdale area, it was looking for a new site outside the North York Moors National Park from which to drill lateral wells.
Mr Abbott said Egdon outsourced all specialist work, including drilling, planning applications and waste management, and it used almost exclusively UK consultants.
John Blaymires, chief operating officer, IGas
Mr Blaymires said IGas operates from Caithness in the north, into the East Midlands, producing 1,500 barrels a day. The company also produces 1,500 barrels a day in eight fields. He said this was done “safely and responsibly”. Quite often, he said, people don’t realise we are there.
“As an industry we have not sold ourselves and we are on the back foot today.”
We are reliant on the supply chain, he said. Companies like IGas mostly coordinated the work of people in the supply chain.
Over the next five years, we would like to have reached pilot production and into full production but we can’t do that without the supply chain.
Into development, each pad would have 10 wells and there would need to be 100 pads, he said.
John Blaymires said IGas had one 14th round licence north of York. It already operated in the Gainsborough region, supplied by “an enormous” number of supply chain companies.
“Your prize is the UK and Europe. If you think big enough the UK is at the forefront of shale in Europe. Everyone is watching the UK on shale gas. France has enormous volumes. As does Germany. But they are not pursuing it. But if the UK shows it can be done they will follow. For you as the supply chain there is a market for you.”
IGas had an operating expenditure of £20m per year on our oil and gas fields. This included maintenance, office and administration, land, environment and permits, transport, all needing third party supply chain support.
John Blaymires said the north of England had the skills to serve the oil and gas industry. The industry did not have to go to Aberdeen for its services. But he said the industry needed to grow the skills required.
The issue that caused most concern to communities were noise, light and traffic, he said. There were lots of opportunities to look at how to ameliorate those concerns to show the industry had the communities concerns at heart.
Security of supply was vital, he said. We are standing on more gas than is left in the North Sea. In terms of balance of payments, security of supply, that has to be a very important thing, he said.
“At the moment there is not a supply chain for shale gas but there are pieces of it. There is no reason why North Yorkshire cannot be the centre of excellence. We can grow a supply chain and create an equivalent to Aberdeen for the north of England which can export skills to the rest of Europe.”
“We have some time, but not a lot of time, to develop a supply chain to support the industry.”
Eric Vaughan, well services director, Cuadrilla Resources
In the north Cleveland basin, Mr Vaughan said Cuadrilla was committed to doing 50km 2D seismic surveying, 50sq km of 3D seismic surveying and drilling one firm well.
In the southern Cleveland basin there was a commitment to do 70sq km of 2 seismic surveying, no 3D and no firm wells.
He said hydraulic fracturing did not need to use water-based fluid. It could be oil-based, acid or liquid gas. The water did not have to be fresh water, it could be waste or sea water. The key was to ensure it had no bacteria in it. In the UK, the chemicals had to be disclosed in the UK and non-hazardous to ground water.
The sand used in fracking mostly came from quarries in Cheshire, he said.
Some wells had more fracks but with lower volumes. Others used fewer frack treatments but used more fluids.
He described the frack at Preese Hall in Lancashire which had six frack pumps amounting to 16,000 horse power .He said fracking could be done safely and could be done in what he described as congested areas. They might be done differently, he said, and gave as a example acoustic walls around the site.
Tom Pickering, operations director, INEOS
Mr Pickering said INEOS proposed to use shale gas as a fuel in its business and as a feedstock.
He said the company’s Runcorn chlorine plant used as much gas as the city of Liverpool. Products in wind turbines and solar panels came from gas, he said.
If that prize for gas exists in the UK and there is a good economic case then it deserves to be explored and understood, he said.
INEOS is committed to nine core wells and six fracked wells, 500 sq km of 3D seismic surveying and 200 sq km of 2D surveying, he said.
The company now had commitments in Scotland, Cheshire, Nottinghamshire and Yorkshire. It was meeting parish councillors in the three English regions. It had already met local media.There would later be exhibitions and meetings in the regions, he said.
Mr Pickering said INEOS would be advertising for tenders for contract work and was in favour of small and medium sized businesses.
We are the name on the tin but we rely massively on the conduct of the supply chain to ensure that the men doing the work behave appropriately, the things that we build have the integrity that we have promised.
The seminar continues at 3.20pm
A member of the audience asked how many elected councillors were present. One person put their hand up. He asked why are the planning committee not here? He suggested school students should be shown round drilling rigs.
Paul Matich said, while working with Cuadrilla, encouraged schools to visit drilling sites. He said:
Everyone who has ever visited a drilling site has always left with an improved opinion of it.
Glynn Williams said it was a shame that it was such a divisive issue and the industry needed to communicate more.
Ken Cronin, of UKOOG, said his organisation and the operators had been very active on community engagement. There was also opposition to solar farms and quarries. He said the industry had met 16,000 people last year.
“We will continue to talk to people and educate people but the reality is we need to get these sites up and running so that people can see they are not Frankenstein’s monster”
The question about local councillors was not answered by the panel.
One person asked for three key bullet points on the benefits of the industry.
Paul Matich said the minute the industry reacts to opponents it will give opponents what they want. We have to tolerate this [protest] until the local police is prepared to do something about it. We have to show the industry in the best possible light, he said.
Lorraine Allanson predicted opposition would end when the industry start and people saw that life went on as normal opposition.
Tim Englefield, Scarborough University Technical College
Mr Englefield, the principal designate, said Scarborough UTC would be delivering engineering skills training. He invited the gas industry to sponsor courses. He said the UTC offered opportunities for 14-18 year olds. The aim is for our learners to walk out of our front door into the front door of local employers, he said.
The college was due to open in September 2016. It was the best-kept secret in the region, he said.
The UTC had come about because local employers felt the present system was not providing them with the skills they needed, he said.
Lorraine Allanson, Rains Farm Holidays
Miss Allanson said more than 20 years ago opponents of a local electricity generating scheme had frightened local people about the impacts of the scheme. They were wrong, she said. You can’t see it, hear it or smell it. Nothing has happened, she said.
She said her business had been transformed in 2o14 by a phone call from a company employing people working in the gas industry of North Yorkshire. This had created work for her staff and trade for her suppliers.
The Bowland Shale offered so much opportunity for the north and could create a year-round business, she said. She was “so excited” she said but then hit a brick wall” because people locally had, as she put it, “swallowed the bitter pill” of opponents.
Her business had benefited and she was proud to be associated with the gas industry, she said.
Miss Allanson said the anti-fracking movement was well-organised and supported by green groups. They were entitled to their opinion. But they should act in a fair way, she said.
Claims of destruction do not impress because I’ve heard it all before, she added.
They now had a weapon of mass destruction, social media, she added. She had formed Friends of Ryedale Gas Exploration. Was I totally bonkers or a person of vision, she said.
It was 100% wrong to say FORGE was funded by the gas industry. She had formed the group because she was frustrated with the failure of the industry to stand up for its cause.
Local anti-fracking groups were founded by Londoners, she said, and in some cases they still called the shots, she alleged.
Local businesses should support the industry on 20 May for the decision on Third Energy’s application. The protesters were saying there would be 1,000 people there, but how many would be local?, she asked.
The opponents’ line in the sand protest was digging a grave for British industry. Yorkshire was ready to welcome the shale gas industry now, she said.
Paul Matich, PR Marriott: establishing a supply chain
Mr Matich said PR Marriott was a privately-owned drilling company operating from Chesterfield. It had drilled 100+ water wells, in addition to oil and gas wells.
He said there were many opportunities for many small businesses.
If there were long-term opportunities, Marriotts had developed apprenticeships and training schemes.
When we run a rig we run it 24 hours a day seven days a week. With a local supply, we can pick a phone up and people will come out, he said.
He said it was very helpful to his company to secure materials and services locally.
Examples included: site clearance, construction equipment, fencing, excavation, sourcing the membrane, even before a well was drilled, he said. Transport was also important, he said.
Most people we bring to an area are not locally so we need hotels and restaurants, he said.
There are 30 people on a rig and they need to be housed.
Mr Matich said: We need engineering equipment, steel, fuel supply (the rig uses quite a lot of fuel”), management for local waste and waste fluid, safety and electrical equipment, water supply. They could all be provided by the local supply chain.
Skills were exportable, he added, because the UK worked to high standards.
A three-year programme for one rig and one workover rig generated £2.8m of spending, Mr Matich said.
We can’t do everything from the rig so we rely on the supply chain.
There are huge opportunities, massive benefits to North Yorkshire for employment and training, he said.
A speaker said Yorkshire tourism was worth £7bn a year. Bad publicity could knock tourism on the head. He added that institutions were cutting investment in fossil fuel companies. So how does taking more gas out of the ground help us reduce our CO2, he asked.
Andy Mortimer, of Third Energy, asked people in the audience if they knew where his company’s operations were. Most of the activity will take place without anyone even noticing, he said.
Ken Cronin said the negative impact of fracking on tourism was a myth. He added that globally there were 2,500 coal fired power stations planned to be built. The only way to get coal off the system quickly was to replace with gas. The biggest reduction in greenhouse gases had been in the US because of shale and renewables.
Lee Petts, of OESG, said tourism and the shale industry could co-exist.
If people could see the industry operating that would settle a lot of arguments.
He described how his company, Remosol, had worked with Cuadrilla on waste water. He said Cuadrilla had decided not to use recovered water in its fracking fluid, even though this would save money.
Andy Mortimer, Third Energy: 14th licensing round
Geologist, Andy Mortimer said he would not be speaking to the conference if a shale industry would cause pollution. He said fracking was a “force for the good”.
He said 53 billion cubic feet of gas was already being produced in the Yorkshire region.
Mr Mortimer said the government had not officially awarded the licences issued in the 14th round but the paperwork was expected in the next month.
He said the initial term of the licence was for five years for exploration. The middle term, of five years, was for appraisal. The final term, of 20 years, was for production.
Mr Mortimer explained that companies were required to sign up to work commitments in the first term included environmental and geological studies, seismic data collection, drilling wells and in some cases fracking.
He said the second term would include drilling more lateral wells and more fracking. In the third term, the oil company would apply for a production licence and develop the area for production.
During the 14th round, 93 licences were awarded. Only 18 were outside northern England. There were 22 operators. Only of them was an oil major. 63 licences were for unconventional oil and gas. INEOS and Cuadrilla were the most successful businesses.
The first phase work commitments included 40 wells, of which 10 were in North Yorkshire all by INEOS.
The 14th round licences were awarded in areas where the shale was not too deep or too shallow, he said, and the shale was at its thickest.
Activity is not going to be tomorrow, he said. It would be in the next two or three years. Most of the work in North Yorkshire would be by INEOS and Cuadrilla
But in addition, Third Energy would redevelop Ebberston Moor. Most important activity will be the fracking of KM8, he said.
Mr Mortimer said £250m would be spent by the oil and gas companies on business activities in the North Yorkshire region.
Ken Cronin, UK Onshore Oil and Gas: The size of the prize
Mr Cronin, the chief executive of UKOOG, said North Yorkshire had a long history of producing oil and gas safely.
He said there was an estimated 100 trillion cubic feet gas in place in northern England. The UK consumes 3 trillion cubic feet a year, he said. The volume that could be produced was unknown.
Mr Cronin said the UK was increasingly dependent on imports – nearly 50% of consumption, costing £18m a day. If we don’t develop shale we will continue to import more gas, he said, rising to 92% by 2035. The cost could rise to £10bn a year.
The UK would be missing out on economic developments and environmental benefits because of the emissions of liquified natural gas. Are we happy as a county to benefit from gas produced somewhere else, he asked.
Gas is crucial and will remain so. 80% of homes are heated by gas. 61% of homes use gas for cooking. Half a million jobs depend on gas as a feedstock, Mr Cronin said.
More than half the population want to prioritise gas produced in the UK, he said. Two-thirds agree that natural gas has a role to play in becoming a low carbon economy.
Even we had 100% renewable electricity system we would still need large amounts of gas, Mr Cronin said. We will use more gas in 2035 than we do now, he said.
Yorkshire and Humber consume 10% of UK electricity and 12% of UK gas but has only 9% of the population. Yorkshire has the second highest gas consumption in the UK, after London, he added.
100 shale gas pads could reduce UK import dependency by half, Mr Cronin added.
Mr Cronin told the audience about the EY report on a shale industry supply chain. This report estimated 64,000 jobs would be created by a shale industry, he said. It recommended standardised skill requirements to address shortages.
Mr Cronin said the industry had done this by creating the National Shale Gas College in Blackpool.
The prize for me, Mr Cronin, said was:
- providing a source of energy
- providing a feedstock for industry
- protecting jobs
- provide new jobs and new opportunities for the supply chain
Onshore Energy Services Group
Lee Petts, chief executive of the OESG, addresses the seminar. He says he has visited North Yorkshire for many years without realising the area was a centre for onshore oil and gas. He said the industry could be developed without affecting the environment and that drilling for oil and gas were not unusual.
Mr Petts said it was unfair to say small businesses were only interested in profit. They generated jobs and paid their taxes, he said.
He said he was supporting UK shale gas because it would substitute for liquified natural gas from places like Qatat. The process of liquifying gas was responsible for substantial greenhouse gas emissions, he said. Replacing LNG with shale gas would be the equivalent of taking 400,000 cars a year of UK roads in emissions, he said.
He also questioned the human rights record of Qatar. It makes more sense to produce our own gas and support British families with well-paid jobs, he said.
“I would rather the gas we use in the winter was produced here in theUK than in the country that does not support workers’ rights”, he said.
Buying gas from Qatar does not raise taxes and generates few jobs. That can’t be right, he said. We would be better off using our own, he said. That would generate money for health and welfare.
He urged the audience to stand up for onshore oil and gas and what he said could be an economic renaissance in the region.
Glynn Williams, seminar chair and Executive Chairman at Ardyne Technologies Limited, opens the event, along with Simon Bull, Scarborough Business Ambassador