It has been drawn to my attention that Mr Nick Grealy, self-styled ShaleGasExpert on Twitter, consultant and shale missionary, has called me a fake expert in a blog dated 17 December 2014. I have left it to my good friend Andy Skuce to respond to this smear, which he does in the first of several posts he is writing about the UK shale business. Andy has over 30 years in the hydrocarbon industry, and was formerly a Vice President of Encana Corporation. Turning his skills to climate change from a geologist’s perspective, he was recently a co-author of the famous ‘97% consensus’ paper, proving that there is a robust scientific consensus on anthropogenic global warming.
What is of greater interest than smear, the act of a desperado, is that Grealy has created a company, London Local Energy Limited (LLE) to apply for three onshore hydrocarbon prospecting licences in the UK. I have written to Ms Toni Harvey, head of onshore licensing at the Department of Energy and Climate Change (DECC), to clarify his and LLE’s credentials. Here is a copy of the letter, to which I have added extra comments (blue), links (red) and diagrams (click to enlarge).
It has been widely reported in the press that London Local Energy Limited (LLE) has applied for three 14th onshore round blocks on offer within the M25; TQ18, TQ28 in NW London, and TQ26 in Merton and Sutton (Fig. 1). I am writing to provide you with some background information for your determination of this application.
As you know, I am critical of the government’s encouragement of unconventional exploration in the onshore UK, on grounds of complex geology and likelihood of groundwater contamination. I am also critical of the current regulatory system, although I have always maintained that the DECC system for awarding licences is robust and sound. You and I met across the licence award interview table in 2008, when I was representing a company applying for onshore southern England blocks. On that occasion you may remember that I remarked that I was probably the only person who had ever sat on both sides of the DECC licence application interview table – not at the same time, of course – the other occasion being when I sat beside your predecessors John Brooks and Jim Aitken to interview BP, about twenty-five years earlier. I never worked for the Department of Energy, as it then was, but for the British Geological Survey. John Brooks asked me to help interview BP, which was applying for blocks in the Rockall frontier region, an area in which I had internationally recognised expertise.
The DECC licence award criteria, as I remember them, take into account whether the applicant (or the partnership as a whole) can demonstrate (inter alia):
(1) The necessary experience and skills to operate the licence,
(2) A viable work programme in place, with identified prospects, and
(3) Sufficient funding in a UK account to carry out the proposed work.
Regarding LLE’s current application, I should like to point out that the company was incorporated on 13 October 2014, that is, some two weeks before the closing date for the 14th round applications. LLE’s director is Mr Nick Grealy, a journalist and shale gas commentator with no professional experience in hydrocarbon exploration, nor indeed in any other branch of earth science or engineering. LLE’s listed address is 20/22 Wenlock Road, London N1 7GU. This is actually the address of London Presence – “one of the leading virtual office providers in London, UK providing mail forwarding, phone answering, mail forwarding address and fax …” (see Fig. 2). The LLE website comprises a single public page with the message “We’re busy, come back soon”. This hardly inspires confidence that we have a serious industry player in LLE , does it?
Mr Grealy may, of course, have assembled both a legally binding partnership and the necessary funding (all within two weeks of his company being incorporated!), so that another, more experienced, company will be designated as operator, and not LLE. If that is the case, I shall be interested to learn how the partnership, if indeed there is one, has managed to devise a viable work programme, given that:
(1) There is only one well in the three blocks totalling 300 sq km in area – Willesden-1, drilled by D’Arcy Exploration (renamed BP in 1954) in 1947 (Fig. 3), approximately in the centre of the TQ18/28 pair of blocks, and
(2) There are no seismic data, apart from a total of 4.7 km of old 2D at the southern margin of TQ24, comprising two tail-ends extending northwards from the better-explored area of Banstead and Chipstead to the south, into Belmont and south Wallington.
Figure 4 shows the blocks currently offered by DECC (buff) with the three blocks applied for by LLE in red. The UK Onshore Geophysical Library is the publicly available repository of all released seismic data. Anyone wishing to explore in the UK would normally buy and study the seismic and well data for the area of interest, before applying for a licence.
The D’Arcy well was drilled on the basis of oil and gas shows in an existing water well (an interesting example of natural contamination of the groundwater), and apparently found gas. The well proved some 500 m of Upper Devonian mudstones and limestones. Perhaps LLE thinks that this tight formation is the source of the gas; if so, and if LLE proposes to produce gas from this formation, then I shall be intrigued to learn how it plans to protect the 200 m or so of Chalk above from contamination – as you well know, the south-east’s principal aquifer.
So to map out the subsurface with 2D seismic in its seismically virgin blocks LLE should be offering (let’s say) an absolute minimum of 50 km of 2D per block, before locating drill sites. This comes to around £1.5M for seismic acquisition; not much for a realistic bid, but in fact quite a logistical and technical challenge to shoot and interpret within a time frame of, say, two years, leaving enough time over for the follow-on exploratory wells. My estimates are based upon an absolute minimum feasible survey comprising four parallel lines spaced roughly 2 km apart, linked by one line at right-angles, for each block, at a cost of £10K/km. Presumably LLE is committing to drill at least one vertical exploratory well per block, following the examples of Cuadrilla and Celtique in the Weald. So I presume that LLE’s consortium must be committing to the order of £10M of work; but, more important than the cash, that it also has the experience and skills to carry out the technical work.
The DECC award system is based largely on how much ‘work’ will be carried out; essentially, this is how much money the applicant is prepared to spend. If one gambles that a block has no competing applicants one might obtain the licence with a minimal bid: buying all the old seismic, reprocessing it to bring it up to modern standards, and committing to shoot (jargon for ‘acquire’, from the days when most seismic was done by firing dynamite in shot-holes to create the seismic energy), say, 20 km of new seismic. There also has to be some commitment to drill exploration wells, once suitable locations have been found on the basis of the underground knowledge gained from the seismic data.
There are no existing seismic data in the blocks, so LLE will have to acquire new seismic. Grealy’s blog shows a pretty colour map of the ‘residual gravity anomaly’ of the London area. This will have been compiled from the freely downloadable gravity readings of the British Geological Survey, processed to remove something or other (hence the word residual) and contoured; a couple of days work for an expert. This map might be handy as an adjunct to geological structure maps made from seismic data, but on its own it is useless. Perhaps Mr Grealy’s experts (“We have geologists, geophysicists and geochemists on our team.“), probably consulting on a daily or hourly rate (i.e. on a zero-hours contract), are fooling him into thinking he has a valuable dataset here – enough to plan a multi-million pound drilling campaign. But I don’t think DECC will be fooled.
These figures assume that there would be no unconventional drilling, but perhaps Mr Grealy, to judge by his press statements, intends to move straight to extended-reach fracked laterals from a single pad. The pad is to be sited in the Park Royal Industrial Estate some 2-3 km SW of the vintage Willesden-1 exploratory well. So it would appear that LLE does not seem to need a prior structural model before drilling – quite an innovation, in my view.
But perhaps the speedy creation of LLE, together with the ensuing licence application that you have to consider, is just a publicity stunt, and there is no serious exploration intent behind it at all. If this is this case, then Mr Grealy would appear to be making a mockery of the DECC licensing system.
Perhaps Mr Grealy is serious in managing to convince gullible investors to part with their money, because he will be able to pay himself a generous ‘compensation package’ while this venture lasts. A quick google of major US shale players like Chesapeake Energy or Range Resources will demonstrate that the CEOs are continuing to pay themselves handsomely even though their companies have always been in debt, and their share price is now going down the pan. Mr Grealy can play around with other people’s money if he wishes, but his LLE is evidently a cowboy outfit, and should never be permitted to drill. The risk of polluting the Chalk aquifer, the main underground drinking water resource of SE England (see Fig. 3 above), is too great.
Whatever the truth behind LLE, I look forward to the results of your assessment of this application, and will be intrigued to see whether or not LLE features in the 14th Round Awards List.
With best wishes for 2015,
Mr Grealy states, in his blog post entitled We’ll surprise you that “A key failure of UK shale gas has been the interminable delay in accessing geological data via exploration in an expeditious way.” So why not just bypass all that bureacratic red tape and annoyingly expensive geophysical data (he implies), slowly acquired and painstakingly processed and interpreted? – we can quickly start drilling and fracking by just putting our minds to it. This “counterintuitive” thinking (if it can be called thinking) does indeed surprise us.
Addendum 10 January 2015