Cuadrilla Resources: The Waiting is the Hardest Part

The gas is there, but getting at it could take just a little more patience.

In a nutshell, that’s been the experience of Cuadrilla Resources, the company which located huge shale gas resource potential – 200 TCF - in Blackpool and South Lancashire in the UK last September.

In the wake of minor seismic activity, Cuadrilla stopped its hydraulic fracturing activities at its Preese Hall I site. Following an independent study initiated by Cuadrilla and submitted to the UK’s Department of Energy and Climate Change (DECC), Cuadrilla admitted that its hydraulic fracturing activities had been the cause of the tremor. Since then, it’s been somewhat of a waiting game for shale gas in the UK.

Eric Vaughan, COO of Cuadrilla, said his company was now awaiting the authority’s review.

He said, “DECC should complete their review in March/April of 2012. We’re hoping to hear from them in the near term on whether they approve to go ahead with the frack operations.”

According to Mr. Vaughan, Cuadrilla has had a variety of meetings with DECC covering different aspects of the operation between the licensing, operation sides as well as the seismicity studies.

“I assume we’re either going to have to have more studies or be able to go ahead, perhaps with different restrictions – we really don’t know.”

He continued, “In the worst case scenario, it will be something where we will have to go back and do more science and look at more aspects of the study.”

In his presentation in Barcelona, Spain at the Unconventional Gas Forum, he reported that Cuadrilla was currently doing a 3D seismic survey in the center of its license and that data acquisition was to start at the beginning of the month. Vaughan said that the company had plans to hydraulically fracture two existing wells that had not yet been fracked.

Cuadrilla, he said, was actively dealing with public concerns to be able to move ahead.

According to him, there was a perceived lack of regulation in the UK regarding shale gas E&P:  “A lot of the public think we’re not regulated at all.”

He emphasized that the UK had a very well structured environment for the regulation of oil and gas activities. A lot of paperwork and meetings, he said, were required with regulators, who sometimes made unannounced visits.

Groundwater protection, he said, was a key concern. “In the UK sites are lined with a thick, impermeable membrane. They’re checked for methane before, during and after any activities.”

Mr. Vaughan noted, “It’s actually well design that causes potential problems, not the fracturing operations.”

Additionally, all chemicals used in fracking, he said, needed to be pre approved by the Environment Agency. “We also promote disclosure of the chemicals that we use to the public - it’s on our website.”

In terms of water usage, he said Cuadrilla was getting ready to reduce some of its usage, through use of mains water, instead of trucking it in, meaning less disruption to the local environment.

Because Cuadrilla used a chemical tracer to monitor its flowback fluids, this inhibited recycling more flowback water.

Vaughan showed delegates a photograph of a hydrocarbons field in Wyoming that had been pockmarked with wells, explaining that it was how naysayers had attempted to portray shale gas development in the UK – a false portrayal.

“Well spacing with multi well pads reduces that footprint,” he said. “The pads are miles apart.”

He showed a pastoral view of the Cuadrilla Preese Hall-1 Well in Lancashire to demonstrate that population density was not an issue. There were no houses in sight and the well site was surrounded by greenery.

He described locals in the Blackpool areas as being very enthusiastic about what the shale basin could do for the region.

“The closer you get to operations, probably the more positive people are. Most of the people that protest or complain are actually from further away. That’s where the dedicated protesters are from in contrast to someone who actually listens to the science, to what’s actually going on and how we’ll affect the local people,” he said.

Cuadrilla, said Mr. Vaughan, had been doing a lot of work engaging with the local community, spending time at the drill rig with residents and national politicians. It had hosted over 60 journalists, inviting them to come to the frack site.

“We have a media cabin permanently set up on the site to show what the operations are actually like, and we’ve had public information days. We also have a dedicated phone line and answer emails to address people’s questions,” he explained.

“We try to be extremely open with everyone, so everyone can see what we’re doing. We’ve had numerous public meetings in which people can come in and ask us questions individually and then go over what we’re actually trying to do, to show them things they don’t have to be concerned about compared to what they see on the Internet – we actually get down to what people are really doing and how we can control our operations and take care of the local environment.”

Vaughn contended that Cuadrilla’s efforts to engage the public on the company’s operations were working, that the public was more for than against shale gas prospecting. He argued his case if the exploration phase proved successful.

“If we can produce the gas, if it does become an economic resource, it changes the whole area on how you can provide gas to the UK from the UK, so instead of bringing more LNG imports and spending the money in other countries, the money obviously stays in the UK and makes a huge difference on the local area economically in terms of jobs and the various economic benefits of having increased activity in the area,” he said speaking of Blackpool – Lancashire.

“We are still in the exploration stage, so we don’t know if we can produce the gas that’s in the area; we know there’s gas there, we don’t know if we can produce it,” he explained.