1. Regulation of shale gas exploration in County Fermanagh Mike Young Geological Survey of Northern Ireland 17 th November 2011, Fermanagh DC, Enniskillen

2. Outline Oil and gas potential in Northern Ireland Shale-gas: potential benefits and problems Petroleum legislation and licensing Shale-gas exploration in Fermanagh Regulation of exploration Standards and best practice

4. ‘Conventional’ exploration model Elements Organic-rich source rock Permeable reservoir rock Impermeable caprock Efficient trap Processes Source maturation Trap formation Hydrocarbon migration

5. ‘Unconventional’ exploration model

6. Benefits of oil/gas development Improved security of energy supply Local investment Income to UK and Northern Ireland economies: 1. UK tax revenue from oil/gas production: Corporation tax 30% Supplementary tax 32% 2. NI royalties 7.5%

7. Shale-gas concerns Contamination of water supply Excessive use of water Disposal of used water Air contamination Seismic tremors Noise Visual amenity Road traffic Radioactivity and radon

8. NI Petroleum legislation Petroleum (Production) Act (Northern Ireland) 1964 Petroleum Production Regulations (Northern Ireland) 1987 Hydrocarbons Licensing Directive Regulations (Northern Ireland) 2010 Petroleum Production (Amendment) Regulations (Northern Ireland) 2010

9. PPA1964 – enabling primary legislation Vests petroleum in DETI Powers to grant licences to search and bore for and get petroleum Ancillary rights to land access (not used to date) Rights to compensation Powers to make regulations (fees, licence areas, model clauses etc)

10. Exploration licensing Petroleum exploration: DETI licence is in two stages The licence contains conditions and limitations Licence gives licensee exclusive rights to an area Part 1 allows only preliminary investigations Part 2 is subject to planning and other consents No permission has yet been requested or issued for drilling or hydro-fracturing in Co Fermanagh

11. Exploration in Co Fermanagh Previous exploration Tamboran licence application Tamboran outline schedule

12. Previous exploration in the Northwest Irish Carboniferous Basin 1960s 5 wells (to 2100 metres) 1980s seismic survey, Dowra 1 hydrofraccing 4 wells (to 2000m) 2001-2 6 wells fraccing with N foam Tight gas sandstone play Source Carboniferous shale Reservoir Carboniferous sandstone and shale Caprock Carboniferous shale Traps 1.Anticlines 2.Flower structures 3.Basin-centred gas

13. PL2/10 Tamboran Resources Pty Ltd - 1 Application made: 28 th Aug 2010 Financial viability & capacity verified by DECC: Sept 2010 Technical capacity & exploration strategy reviewed by DETI & DECC Applicant interviews held at DETI Nov 2010 (DETI/DECC/BGS) Non-statutory consultation: Nov-Dec 2010 –E-mail to Fermanagh DC: 18 th Nov 2010 –Advertisements in Fermanagh Herald & Impartial Reporter Environmental (Habitats Directive Article 6) screening carried out by DETI: Jan 2011, approved by NIEA Feb 2011 Licence executed: 1 st April 2011

14. PL2/10 Tamboran Resources Pty Ltd. - 2 Initial Term5 yearsExploration (including well) 1 st Renewal term5 yearsAppraisal (further wells) 2 nd Renewal term20 yearsDevelopment/production Years 1 – 3 (Part I) Desktop studies Re-process & re-interpret existing geophysical data Sample & analyse existing core material Drill shallow cored boreholes and analyse Resource assessment Environmental review DRILL OR DROP DECISION Drill or drop work programme – no firm commitment to drill If company opt to drill they must nominate an operator to be approved by DETI. DETI will carry out due diligence checks on technical and financial capacity and ensure that insurance cover is sufficient to meet all liabilities from operations

15. PL2/10 Tamboran Resources Pty Ltd. - 3 Years 4 – 5 (Part II) Finalise drill location, well planning, preparation & permitting Environmental Impact Statement for Well No 1 Drill well including coring, fracturing & testing Analyse well results & carry out second review of economic potentia Acquire further infill seismic data, if required Identify additional drilling targets Finalise drill locations, well planning, preparation & permitting Environmental Impact Statement for Well No 2 Drill second well to test shale gas target, including fracturing, multiple horizontal legs, flow testing & seismic monitoring Review economic model Preparation and submission of plans for 1 st Renewal Term or Relinquish Licence Work programme is provisional – can change according to results or requirements (subject to DETI’s approval and/or instruction)

16. Tamboran operation Well pads up to 200x250 m for 16 wells Well pad area reduces by half after drilling ends Well pads 2 km apart, perhaps increasing to 4 km 100 well pads to be developed over 10-15 years Ultimate height of structures: 4 metres Product: low pressure; 99% methane with little water vapour No processing on-site, except de-hydration Vapour recovery unit to recover emissions from water tanks Water supply – four wells per pad

17. Regulation Regulatory bodies and roles Regulation of licence activities Regulation of drilling operations Best practice

18. NI Shale-gas Regulators Forum GSNI / DETI DoE Planning Services – Air Quality, Strategic Projects NIEA - Environmental Protection Division; Water Management Unit; Drinking Water Inspectorate NIEA - Industrial Pollution and Radiochemical Inspectorate NI Water - Water Quality DARD, Fisheries and Environment Division HSENI

19. What can the Licensee do without consent? Desk studies – analysis of existing data, data re- processing, re-interpretation Laboratory analyses of existing rock samples Walk-over surveys – geological mapping, outcrop sampling Regulation of licence activities -1

20. Additional consents required for: Environmental studies & seismic monitoring (DETI/NIEA) Fieldwork in ASSIs (DETI/NIEA) Shallow drilling (DETI/NIEA) Geophysical & geochemical surveys (DETI/NIEA) Siting and drilling of deep exploration boreholes (incl. hydraulic fracturing) (DETI/NIEA/HSENI/Planning) Test and produce hydrocarbons (DETI/NIEA/HSENI) Regulation of licence activities - 2

21. Regulation of drilling operations Planning permission, with Environmental Impact Assessment Licensing of water abstraction, storage and disposal Compliance with legislation: Health & Safety Environmental Health Pollution Prevention and Control Groundwater protection Local Planning

22. Preparation for regulation NI Shale-gas regulators forum now collating legislation and regulatory procedures Liaison with regulatory counterparts in GB, notably DECC Incorporation of best practice: GSNI and regulators to review and collate results of current UK, European and US studies on fracking

23. Best practice and current research - 1 1) New industry standards American Petroleum Institute (API) - A series of Guidelines/Best Practice documents specifically for unconventional well construction and management HF1 – Hydraulic Fracturing Operations – Well Construction & Integrity (Oct 2009) HF2 – Water Management Associated with Hydraulic Fracturing (June 2010) HF3 – Practices for Mitigating Surface Impacts associated with Hydraulic Fracturing (Feb 2011) Std 65 Pt 2 – Isolating Potential Flow Zones during Well Construction (Dec 2010) RP 51R – Environmental Protection for Onshore Oil and Gas Production Operations and Leases (July 2009)

24. 2) Recent and ongoing regulatory reviews ECC Select Committee – March 2011 New York State SGEIS – new revised draft Sept 2011 DECC Earthquake Report – Nov 2011 US Environmental Protection Agency – interim 2012 EPA Ireland – end 2012? Best practice and current research -2

25. Wytch Farm, Poole Harbour, Dorset Largest onshore oil/gas field in Europe Sited in AONB with nature reserves, Ramsar sites, Jurassic Coast World Heritage Site, etc 80 wells producing since 1979 Horizontal drilling laterally for 10 km Natural gas piped to local network in 8” pipeline Queen’s Award for Environmental Achievement, 1995

26. Regulation of shale gas exploration in County Fermanagh Mike Young Geological Survey of Northern Ireland 17 th November 2011, Fermanagh DC, Enniskillen

28. Supplementary slides

29. Unconventional petroleum resources Conventional reservoirs have porosities of 10-25% and permeabilities of 1-1000mD All gas is free gas in pore space between grains. In gas shales porosity is present as micro-porosity and permeabilities are 0.001 – 0.01mD Gas is present as free gas in micro-pores and as adsorbed gas attached to clay mineral grains In gas shales commercial flows of gas can be produced by drilling horizontally along the shale beds and then injecting a water-sand mix at high pressure into the shale. This hydraulic fracturing (fraccing) creates micro-fractures in the rock and allows the gas to flow into the wellbore and up to the surface. Shale gas produces ~30% of US gas and approximately 15,000 shale gas wells will be drilled in the USA in 2011.

30. Northeast Permo-Triassic Basins Source: Carboniferous coal/shale Reservoirs: 1.Carboniferous shales 2.Carboniferous sandstones 3.Early Permian sandstones 4.Triassic SSG sandstones Caprocks: 1.Carboniferous shales 2.Late Permian salt/mudstone 3.Triassic MMG salt/mudstone Conventional Traps: 1.Tilted fault blocks 2.Anticlines 3.Fan deposits

31. NI Petroleum legislation Hydrocarbons Licensing Directive Regulations (Northern Ireland) 2010 implements EU Directive on conditions for granting and using authorizations for the prospection, exploration and production of hydrocarbons –MS retain right to determine areas available but no discrimination –Publication of areas available, application deadlines in OJ –Open licensing (NI) –Areas not to exceed the area justified from technical and economic viewpoints; duration not to exceed that needed to carry out activities authorised, flexibility to prolong this; exclusive rights not to exceed time needed –Criteria for licences to include technical and financial capability, exploration and production methodology, (price), other relevant non-discriminatory criteria – to be published in OJ –Impose conditions on activities, as justified by national security, public health, environmental protection, safety, need to secure tax revenues –Rules governing state involvement, abolish reserved rights –Annual publication of licence areas, licensees and estimated reserves

32. NI Petroleum legislation Petroleum Production Regulations (Northern Ireland) 1987 Petroleum Production (Amendment) Regulations (Northern Ireland) 2010 Model Clauses – general not specific – Work Programmes – Commencement, abandonment and plugging of wells; control of development wells – Storage tanks, pipes and pipelines – Avoidance of harmful methods of working (includes prevention of escape of petroleum into waters or water-bearing strata); notification of incidents; availability of funds to discharge any liability for damage – Safety, health & welfare of employees – Training – Records, samples, returns, confidentiality – Department’s rights of access & inspection, power to execute works, right of entry – Compensation for damage, provision of insurance (to cover Licensee and Department) – Powers of revocation, provisions for arbitration

33. DETI responsibilities and practices Administer licensing regime according to PPA legislation –Regulations are wide ranging but bodies other than DETI may have primary responsibility for some aspects –DETI has primary responsibility for licensing system, ensuring proper conduct of exploration, appraisal and development, economic and technical issues Environmental responsibilities under NI implementation of EU Birds and Habitats Directives – Natura 2000 sites

34. DETI’s responsibilities Exploration, appraisal and development programmes –Technical Standards –Seismic risk –Compliance and enforcement Financial & technical capabilities of licensees and operators –Insurance, bonds –Qualifications Application for Consent to Drill –Well design, construction, cement & casing, testing, completion & abandonment Co-ordination of consents/permits/licences?

35. Industry Standards American Petroleum Institute (API) - series of Guidelines/Best Practice documents specifically for unconventional well construction and management HF1 – Hydraulic Fracturing Operations – Well Construction & Integrity (Oct 2009) HF2 – Water Management Associated with Hydraulic Fracturing (June 2010) HF3 – Practices for Mitigating Surface Impacts associated with Hydraulic Fracturing (Feb 2011) Std 65 Pt 2 – Isolating Potential Flow Zones during Well Construction (Dec 2010) RP 51R – Environmental Protection for Onshore Oil and Gas Production Operations and Leases (July 2009)

36. NI Energy Infrastructure

37. Exploration risks/ negative factors Southwest play area Low permeability ‘tight’ reservoir Identification of traps Timing of migration and trap formation Northeast play area Poor imaging of sub-basalt structure Source rock – distribution and maturity Timing of migration and trap formation Post-migration leakage