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Unfounded Fears

pic of John Donnelly, JPT EditorOil and gas industry leaders seem to be in universal agreement that the industry is getting a raw deal from public and political fears about hydraulic fracturing. Now there seems to be a growing consensus that the industry must be more proactive in explaining shale production procedures and must really make an effort to address some of the questions surrounding risk.

In recent speeches and panel presentations at conferences and public events, industry leaders and energy ministers are lauding the potential of natural gas, based in part on the phenomenal success of the US shale experience. Major company forecasts see hydrocarbons meeting global demand through 2030 and beyond, with natural gas gaining in consumption at the expense of oil and coal. The industry is still absorbing the outlook for gas production in the US, which is now considering gas exports given the production success and the low cost of gas in the country.

“We probably do not have 100 years’, we probably have 200 years’ supply,” said G. Steven Farris, chief executive officer of Apache, in a speech at the annual IHS CERA Week energy conference in Houston. “What is really happening with respect to hydraulic fracturing and horizontal drilling is that we have opened up areas of rock that have never been able to produce and that has tremendous impact on the reserves of natural gas.”

But there are potential roadblocks to a new global gas revolution fueled by growth in unconventionals. One is how replicable the US shale experience is in countries that do not have the same system of property rights. A second is the price disconnect between oil and gas, particularly in the US, although that issue might be solved as liquefied natural gas trade grows, making gas less a regional product and more open to the international market. The third is rapidly causing more concern in the industry: how to persuade a skeptical public that the tools, technologies, and practices the industry uses in producing shale are safe or least worth the risk.

At the fifth International Petroleum Technology Conference (IPTC), held in February in Bangkok, Thailand, energy ministers and representatives of national oil companies, international oil companies, and the service sector spoke about the danger of losing the public relations war on hydraulic fracturing and shale production.

During an IPTC panel session, Martin Stäuble, vice president of gas at Shell China E&P, said that the industry must work closely with communities where unconventional projects are taking place, and that it needs to be transparent with the public on how operations will be conducted and what will be involved.

Another panelist, Jean-Marie Guillermou, senior vice president of Asia Pacific E&P at Total, said that, “Our industry needs to demonstrate that we can properly manage these projects and that they are beneficial for the stakeholders.” Panelist Hinda Gharbi, president of Schlumberger Asia, called for more use of “green” fluids in fracturing projects and a smaller environmental footprint.

Many educational efforts are under way. 2012 SPE President Ganesh Thakur examined some of these issues in his President’s column in JPT last month. And in this JPT issue, George E. King of Apache does a masterful job of examining the charges against hydraulic fracturing, the facts and hyperbole, and the real risks involved.

Guillermou, speaking at IPTC, summed up the issue this way. “We have to explain, explain, explain. The main issue today is how to win the confidence of public opinion.”