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BSM084-ODL Project Fundamentals
Individual Report
UK Shale Gas
High Level Project Plan
1413749
MSc Project Management
December 2014
Word Count: 3691
BSM084-ODL Project Fundamentals: Individual Report Murat Islam (1413749)
IGas Energy Plc - UK Shale Gas High Level Project Plan Page | ii
Table of Contents
List of Figures ......................................................................................................................... iii
List of Tables ........................................................................................................................... iii
Executive Summary ................................................................................................................ iv
1.0 Introduction ..................................................................................................................... 1
1.1 Background ............................................................................................................... 1
1.2 Rationale .................................................................................................................... 2
2.0 High Level Business Case ................................................................................................. 5
2.1 Proposed solution ....................................................................................................... 5
2.2 West Bowland basin SWOT analysis ........................................................................... 6
3.0 Project Scope .................................................................................................................... 7
3.1 Assumptions .............................................................................................................. 9
3.2 Considerations ......................................................................................................... 10
4.0 Project Lifecycle .............................................................................................................. 11
4.1 Project Phases .......................................................................................................... 14
5.0 Key Stakeholders and Risk Factors ................................................................................. 15
5.1 Key stakeholders ...................................................................................................... 15
5.2 Key risk factors ........................................................................................................ 17
6.0 Implementation Considerations ...................................................................................... 20
7.0 Conclusion ..................................................................................................................... 21
7.1 Recommendations .................................................................................................... 21
8.0 Bibliography ................................................................................................................... 23
Appendix A West Bowland Basin Shale Gas Development Costs ........................................ 28
Appendix B Midland Valley Shale Gas Development Costs ................................................. 29
Appendix C Sussex Weald Basin Shale Gas Development Costs ......................................... 30
Appendix D Investment Return Comparison of each Region ............................................... 31
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List of Figures
Figure 1-1: Map of Onshore Oil and Gas Fields in the UK ....................................................... 1
Figure 1-2: Map of IGas Energy Plc Operating Licences in the UK ........................................... 2
Figure 1-3: UK Gas Price Forecasts ......................................................................................... 3
Figure 1-4: Exploratory Shale Gas Drilling Site at Barton Moss............................................... 4
Figure 1-5: Typical Shale Gas Site in Hydraulic Fracturing and Production ............................ 4
Figure 2-1: West Bowland Basin SWOT Analysis ..................................................................... 6
Figure 3-1: West Bowland Basin PEDL 189 Location and Operators ....................................... 7
Figure 3-2: Assumed Shale Gas Production Rates Over Project Lifetime .................................. 9
Figure 3-3: Bowland Shale Vertical Well Schematic based on Cuadrilla Resources ................ 10
Figure 4-1: Project Schedule and Gantt Chart ....................................................................... 11
Figure 4-2: Roadmap of DECC Consent to Shale Gas Hydraulic Fracturing in England ........ 12
Figure 4-3: Bowland Shale Gas Project Work Breakdown Structure ...................................... 13
Figure 4-4: Phases of West Bowland Basin Shale Gas Project ................................................ 14
Figure 5-1: Key Stakeholder Power and Interest Relationship ................................................ 15
List of Tables
Table 2-A: Financial Comparison of Investigated Project Locations .......................................... 5
Table 2-B: Site Selection Criteria Matrix .................................................................................. 6
Table 3-A: Project Objectives and Deliverables ........................................................................ 8
Table 5-A: Internal Stakeholder Strategy Plan ....................................................................... 15
Table 5-B: External Stakeholder Strategy Plan ...................................................................... 16
Table 5-C: Probability Impact Grid for Risk Assessment ........................................................ 17
Table 5-D: Identified Risk Probabilities and Ratings .............................................................. 17
Table 5-E: Risk Triggers and Mitigation ................................................................................. 18
Table 5-F: Risk Impact, Strategy and Response ..................................................................... 19
BSM084-ODL Project Fundamentals: Individual Report Murat Islam (1413749)
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Executive Summary
IGas Energy Plc started the UK onshore oil and gas drilling operations in 2003, and since
then, with the acquisition of Dart Energy Ltd in October 2014, became one of the leading
onshore oil and gas operators in the UK (IGas Energy Plc, 2014). Today, IGas and Dart
Energy holds a total of approximately 3.6 million acres of area subject to licensing
(Competition & Markets Authority, 2014). IGas has estimated the total net onshore
licence area of the two companies to be over 1 million acres in the UK, containing over
154tcf recoverable shale gas most of which is in the North West region (IGas Energy Plc,
2014). Current technology enables companies to harvest only a small amount of the
available shale gas resources within the fractured shale formations. With the rapid
developments in the drilling and gas extraction technology, it is likely that production
rates of existing wells can be improved during project lifetime, and the wells once
depleted and sealed could be re-drilled in the future.
Although IGas Energy Plc and Dart Energy Ltd has enough funds for gas exploration and
extraction, they would benefit from financial and marketing investment from major oil
and gas companies. Total AS has recently invested around $50m in shale gas
production in the East Midlands area at two PEDL licence locations (Chazan, 2014),
while Ineos Capital Ltd is planning to invest around £640m in the UK shale gas
exploration (BBC News Business, 2014). These companies should be the starting point
for investment negotiations. British Petroleum (BP) is also willing to benefit from the
shale gas market, however, due to oil spills which happened in the recent past, they
expect high opposition from the public and anti-fracking organisations (Macalister,
2014).
IGas Energy Plc is striving to be the most successful shale gas exploration and
production company in the UK and willing to start horizontal drilling operations
immediately. The purpose of this document is to provide a high level project plan to
recover shale gas from the most viable and strategic location in the UK and to provide an
insight for a more detailed project initiation document.
BSM084-ODL Project Fundamentals: Individual Report Murat Islam (1413749)
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1.0 Introduction
The purpose of this document is to provide a high level project plan for IGas Energy Plc
to enter into the UK shale gas market with a profitable strategy and to establish a set of
success criteria for this project. This plan evaluates the initiation of the project and
advises the optimum drilling location, technology and contractual arrangement options.
Figure 1-1 shows the three regions chosen for analysis; West Bowland (West Lancashire
/ Cheshire) Basin (in North West England), Sussex Weald Basin (in South England) and
Midlands Valley (in Scotland) (The UK Onshore Data Initiative, 2013).
Figure 1-1: Map of Onshore Oil and Gas Fields in the UK
1.1 Background
In 2013, natural gas consumption of the UK was around 2.7tcf (U.S. Energy
Information Administration, 2013). West Bowland Basin in the UK contains 1300tcf
shale gas resources on its own (Ficenec, 2014) and waiting to be exploited, while a
fraction of this amount could equate to 40 years energy requirement of the UK
(Jackson, 2013).
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Amongst major oil operators, French oil company Total made the first investment
for shale gas exploitation in the UK (Total S.A., 2014) and caused a strong
commercial interest in the UK Shale Gas Market (Lynam, 2014). IGas is very
experienced in oil and gas industry and currently operating in the onshore regions
shown in Figure 1-2 (IGas Energy Plc, 2014). After acquiring Dart Energy , IGas
Energy Plc became one of the leading shale gas exploration and production
businesses in the UK (Macalister, 2014), with licences to explore for oil and gas in a
number of locations (FirstEnergy, 2014).
Figure 1-2: Map of IGas Energy Plc Operating Licences in the UK
1.2 Rationale
Gas production in the UK continues to decline rapidly (U.S. Energy Information
Administration, 2014). Based on DECC project's, expected natural gas dependency
of the UK will be 76% by 2030 (U.S. Energy Information Administration, 2014).
Based on DECC, National Grid and Pöyry reports, UK Gas price is possibly be
quadrupled by 2030 as per Figure 1-3, if shale gas is not extracted (Webster, 2013).
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Figure 1-3: UK Gas Price Forecasts
Russia made a geo-political decision to supply gas to China for 30-years, which is
believed to increase gas prices in European countries (Luhn & Macalister, 2014).
Therefore, UK Government policies (GOV.UK, 2014) are likely to be softened in the
near future benefiting shale gas exploiting companies to improve economical
growth.
Acquisition of Dart Energy benefited towards overcoming logistical, technological
and contractual difficulties and increased the marketing power of IGas. Thanks to
onshore conventional oil and gas exploitation expertise, large-scale marketing, good
distribution practices and high production capacity of IGas, an early start in shale
gas production is likely to create a competitive advantage (Suarez, 2005).
Shale gas fracking is generally regarded as risky for environmental hazards and
cause excessive pollution (Natural Resources Defense Council, 2014), however it is
becoming more clear to everyone that as long as good practices are followed and
regulated, there is no more danger involved than conventional gas extraction
methods (The Heartland Institute, 2014).
Hydraulic fracturing liquid requires small amounts of chemicals and a lot of water
and sand to be stored and pumped. Estimated water consumption per well is
around 29 million litres for hydraulic shale fracturing (Probert, 2012). Shale gas
production well sites don’t require buildings, but once the extraction hole is drilled
(see Figure 1-4) (Macalister, 2014) and filled with cement, steel tubing is fed and
wells are built, many storage and operation trucks are required for transportation,
pumping/storing fracturing liquid, and storing gas as well as accommodation for
the employees. (See Figure 1-5) (The Pennsylvania Independent Oil and Gas
Association, 2014).
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Figure 1-4: Exploratory Shale Gas Drilling Site at Barton Moss
Figure 1-5: Typical Shale Gas Site in Hydraulic Fracturing and Production
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2.0 High Level Business Case
2.1 Proposed solution
Three locations have been selected for investigation including West Bowland Basin,
Midland Valley and Sussex Weald Basin shown in Table 2-A. More detailed
financial budget calculations adopted from a shale gas production economics model
spreadsheet (Penner, 2013) for each location can be found in the appendices. Shale
gas production figures and costs are also assumed based on various resources
(Probert, 2012) (Penner, 2013) (Webster, 2013) (U.S. Energy Information
Administration, 2013) (Frack Off, 2014) (Mearns, 2014) (U.S. Energy Information
Administration, 2014).
Based on the financial analysis results and expectations, a set of selection criteria
is presented in Table 2-B. The technology proposed for gas extraction is horizontal
drilling and hydraulic fracturing due to its superior gas yield or production rates
per well against vertical drilling methods, even though horizontal drilled wells are
more expensive (U.S. Energy Information Administration, 2011).
Table 2-A: Financial Comparison of Investigated Project Locations
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Table 2-B: Site Selection Criteria Matrix
2.2 West Bowland basin SWOT analysis
Figure 2-1: West Bowland Basin SWOT Analysis
(BSM084-ODL Group 15, 2014) (McLellan, 2014) and (Mearns, 2014)
STRENGTHS
+ IGas & Dart Energy have a strong position with greater resources and licences than competitors
+ IGas have already found gas in this area with existing test wells
+ Guaranteed investment from GDF Suez and possibly from Total and Ineos
+ Infrastructure is available
+ Site is very close to two big cities Manchester and Liverpool which can provide skilled workforce
+ ~1300tcf Shale Gas potential
WEAKNESSES
- Recoverable shale gas currently estimated at10% of total available
- Current licence terms are shorter than project lifetime
- There is opposition from the locals and anti-fracking organisations
- Vast agricultural areas are limiting available production areas.
OPPORTUNITIES
◙ First year success could bring further investments;
◙ Vast amount of nearby licence areas to expand
◙ There are geological similarities to other resourceful locations
◙ Fast technological advancements bring higher production rates in short term
◙ GDF can provide water & environment management experience
THREATS
▼ Frack-off demonstrations could delay production
▼ Government might change policies to limit production or stop drilling further wells
▼ First year failure would push investors away and increase competitors' power
West Bowland Basin
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3.0 Project Scope
The project is aimed at shale gas production from PEDL189 in West Bowland Basin
shown in Figure 3-1 below (Frack Off, 2014) which is located near Chester.
Figure 3-1: West Bowland Basin PEDL 189 Location and Operators
Scope includes preparation of project management plan, acquiring required
consents/160acre land/resources, drilling of 18 number of production wells in the
licence area and recovery of 97bcf shale gas in 30 year period.
Detailed project objectives and corresponding deliverables are listed in Table 3-A. Various
companies were investigated for achieving the deliverables (Department of Energy and
Climate Change, 2008) (INEOS Capital Limited, 2014) (Peel Land and Property, 2014)
(AdvanSci Limited, 2014).
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No. Objectives Deliverables
1 Initiate Project for PEDL189 (Start in January 2015) PID
2 A plan for Stakeholder Management, Community Development and Local Community Engagement
Relationship Management Plan
3 Establish risks and appropriate responses Risk Management
Plan
4 Acquired land, Production and conditioning facilities, Liquefaction and storage facilities and Pipelines
Purchasing Plan
5 Work Breakdown Structure (WBS), Gantt Chart, Financial Plan, Change Control Plan and Project Team Structure
Project Lifecycle Plan
6 Negotiations with INEOS for investments for further site development and drilling of new wells
INEOS report
7 Acquire Minerals Planning Consent (Due: February 2015)
MPC report
8 Environmental Risk Assessment (ERA) (Due: March 2015)
ERA report
9 Environmental Impact Assessment (EIA) (Due: March 2015)
EIA report
10 Acquire DECC consent to Drill (Due: April 2015) DECC Consent
11 Benefits Sharing Agreement (BSA) with the UK government and landowners (Due: June 2015)
Contractual Agreement Report
12 Memorandum of understanding (MOU) with an oil and gas major
MOU with Total
13 Minimum Gas recovery over 1 year (Initial Term End Date: 30 June 2016)
28bcf of shale gas
14 Minimum Gas recovery over 5 years (Second Term End Date: 30 June 2019)
50bcf of shale gas
15 PEDL189 Licence Extension (Prior to Licence Term End Date: 30 June 2039)
Extend PEDL189 Licence Term
16 Minimum Gas recovery over 30 years (Due: June 2045)
97bcf of shale gas
17 Project Completion and Lessons Learned (Due: August 2045)
Project Close Out Document
Table 3-A: Project Objectives and Deliverables
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3.1 Assumptions
Initial investment for the project is assumed to be funded 100% by IGas. GDF Suez
holds 25% of the PEDL licence rights due to current share of PEDL 189 Licence
ending on 30 June 2039 (Department of Energy and Climate Change, 2008).
Therefore it is assumed that GDF Suez would bring in extra investment and
especially water and waste management knowledge to the project (GDF Suez Energy
UK, 2014) which would pay for their share.
At the start of the project, gas price is assumed to be £171.36/1000.m³ gas or
48.53p/therm energy with an annual escalation of 1%, while operating costs are
assumed to be £48.52/1000.m³ gas or 13.74p/therm energy with an annual
escalation of 1.5% based on cost of living increase in the UK, (U.S. Energy
Information Administration, 2014). At the beginning of the production, presumably
a minimum daily recovery rate of 3.6 million m³ of dry gas will be achieved
considering an 80% decrease by the end of the year (see Figure 3-2). 25% royalty,
10% discount factor and 3% production taxes has been assumed to be fixed in the
lifetime of the project.
0
300
600
900
1200
1500
1800
2100
2400
2700
3000
3300
3600
3900
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0yr 5yr 10yr 15yr 20yr 25yr 30yrProduction Rate Decline Daily Production Rate (1000.m³/day)
Figure 3-2: Assumed Shale Gas Production Rates Over Project Lifetime
Due to industrial expertise in the North West of England, it is believed that IGas will
have minimal difficulty in finding skilled workforce and infrastructure to support
the project needs.
BSM084-ODL Project Fundamentals: Individual Report Murat Islam (1413749)
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3.2 Considerations
Main pressure on IGas is the public opposition to hydraulic fracturing with
horizontal drilling that is alleged to be the cause of high seismic activity on ground
level and environment pollution (Frack Off, 2014). IGas should consider the impact
of the project on nearby community areas and the fresh water table, and take
responsible actions during investments. 75%/25% licence share means that IGas
has to negotiate with GDF Suez for drilling location, finance and licence extension.
For this project to be successful financially it is crucial that in the first year the
daily gas production rate average does not drop below 2.16 million m³ of gas per
day at any time. If average production rate drops below this 1st year target, then it
is likely that the Return Period will increase and Net Present Value of the project
will drop. Once the project is successfully initiated, new investment negotiations
with investors (Ineos, Total, etc.) can be conducted with a higher chance of success.
Existing vertical well structures in the Bowland area suggest that horizontal drilling
is also possible using current technology with much higher production rates. IGas
could learn from both the good practices and mistakes of others to realise best
practice (Probert, 2012).
Figure 3-3: Bowland Shale Vertical Well Schematic based on Cuadrilla Resources
(Probert, 2012)
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4.0 Project Lifecycle
This project will start with the investigation of PEDL 189 licence area in West Bowland Basin. Key stakeholders will be clearly
identified and their relationship will be monitored and maintained. Required consents will be acquired before site setup and drilling
operations start for gas recovery. Gas recovery rates and sales will be monitored to meet and exceed planned targets. The site will be
abandoned once the project targets are met and licence period is finished. Lessons learned and a project closeout document will be
generated for project completion and knowledge population.
Figure 4-1: Project Schedule and Gantt Chart
(Microsoft Office Project 2007)
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Figure 4-2: Roadmap of DECC Consent to Shale Gas Hydraulic Fracturing in England
(Department of Energy and Climate Change, 2013)
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Figure 4-3: Bowland Shale Gas Project Work Breakdown Structure
BOWLAND SHALE GAS RECOVERY
PROJECT MANAGEMENT
Stakeholder Management
Team Building
Risk Management
Change Control Management
Project Lifecycle
Project Budget
Investment Plan
Recruitment Plan
DECC CONSENT
PEDL Licence
Environmental Risk Assessment
Environmental Impact
Assessment
British Geological
Survey
Health and Safety
Executive
Coal Authority
CONTRACTS
Dart Energy
GDF Suez
Landowner
Investors
Local Authority
Waste Management
Resource Management
Commisioning
PRODUCTION SITE
Land
Land Acquisition
Infrastructure
Excavation
Transport
Road Usage
Trucks
Cranes
Accommodation
Drainage
Living Areas
Living Supplies
DRILLING TECHNOLOGY
Pipeline
Hyraulic Fracture Pumps
Storage Tanks
Water Treatment
Drilling System
Perforator System
Well Head Structure
Miscellaneous Equipment
RESOURCES
Employees
Water
Sand
Chemicals
Cement
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4.1 Project Phases
Based on the Gantt chart provided in Figure 4-1, this project can be divided into 6 phases as shown in Figure 4-4.
Figure 4-4: Phases of West Bowland Basin Shale Gas Project
PH
ASE
•Create and Build Project Team
•Complete Project Initiation Document
PH
ASE
•Acquire DECC Consent
•Acquire Public Support
•Acquire Resources
•Acquire Further Investment
•Complete and Sign Legal Contracts
PH
ASE
•Setup Production Site
•Drill Horizontal Well, Hydraulic Fracture Shale and Setup Well Head
•Equipment Diagnostics and Maintenance
•Product Development
•Decide Site Worthiness and Future Investments
•Recover 28bcf of Shale Gas
PH
ASE
•Site and Equipment Maintenance
•Increased Product Development and Innovation
•Seek New Ventures
•Recover 22bcf of Shale Gas
PH
ASE
•Site and Equipment Maintenance
•Extension of PEDL189 Licence
•Future Plans
•Recover 47bcf of Shale Gas
PH
ASE
•Seal Well Hole and Abandon Site
•Project Success Analysis
•Lessons Learned
•Project Closeout
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5.0 Key Stakeholders and Risk Factors
5.1 Key stakeholders
There are 10 external and 5 internal key stakeholders identified and categorised in
Figure 5-1 based on their power and interest in the success of the project. Table
5-A and Table 5-B detail key stakeholders' concerns and suggests strategic actions
for IGas to negotiate on their expectations and achieve project success.
Figure 5-1: Key Stakeholder Power and Interest Relationship
INTERNAL STAKEHOLDER
CONCERN STRATEGY
IGas Board of Directors
Monetary profits, company reputation and market share
Inform via project status and finance reports.
Project Team
Maintaining good communication between stakeholders and overall success of the project
Provide with adequate communication tools and resources.
IGas Senior Management
Project requirements, outputs and successful execution along with sustainable operations
Inform via operation status and finance reports.
IGas Employees
Adequate personal development and benefits in a safe and enjoyable working environment
Implement strict Quality, Health, Safety and Environment (QHSE) standards
Provide with required training, adequate compensation and friendly attitude
Dart Energy Utilisation of available PEDL licences and market share
Include in planning and execution stages of the project. Inform via key project status and finance reports.
Table 5-A: Internal Stakeholder Strategy Plan
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EXTERNAL STAKEHOLDER
CONCERN STRATEGY
UK Government Sustainable development of the UK and welfare of its citizens
Obtain required permissions and licences and promote the country
GDF Suez Monetary profits from PEDL licence share
Company reputation
Provide financial reports and adequate share from the profits during licence term
Investors Long term financial benefits
Company reputation
Provide financial reports and adequate share from the profits
Local and International Contractors and Suppliers
Long term supply and service contracts with timely payments, minimal scope change and recognition in the international market
Make 40% payment upon purchase order, 50% payment on timely delivery and 10% payment on complete documentation
Publicize high performing suppliers
Landowners Sustainability of the land and long term monetary benefits
Provide adequate compensation and ensure land is safely operated and abandoned on time
Media/Press Increased viewing ratings via audience relevant news and stories
Limit access to production site
Provide media with success stories and create confidence in safe drilling and shale gas extraction techniques
Local Community Sustainable and safe environment
Increased road traffic
Job availability
Provide open days to public to explain benefits of shale gas production and enable them to apply for jobs
Utilise minimal number of trucks and transfer goods during light traffic hours where possible
Prioritise local workforce for jobs
Anti-Fracking Organisations
Seismic activity and pollution due to fracking
Monitor and limit seismic activity to acceptable levels and ensure environmental safety.
Provide seismic activity and pollution reports at request
Environmental Organizations
Sustainable environment and safe work practices
Adhere to safe work practices, industry standards and legislation
Key Competitors Resource usage in PEDL licence areas
Monitor competitor PEDL Licence areas, suppliers, technology and shale gas production rates for better planning and exploitation of opportunities
Table 5-B: External Stakeholder Strategy Plan
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5.2 Key risk factors
In order to identify significance of risk factors, a probability impact grid is presented
in Table 5-C.
1 2 3 4 5
Insignificant Minor Moderate Major Catastrophic
5Almost
Certain11 16 20 23 25
4 Likely 7 12 17 21 24
3 Possible 4 8 13 18 22
2 Unlikely 2 5 9 14 19
1 Rare 1 3 6 10 15
PROBABILITY IMPACT GRID
Likelihood
Consequence Severity
Table 5-C: Probability Impact Grid for Risk Assessment
Based on the above impact grid, risks are listed and rated in Table 5-D and risk
triggers and mitigations are proposed in Table 5-E.
1 Gas Price Reduces or Doesn't Escalate 1 5 5
2 Operating Costs Over-Escalate 3 4 12
3 Companies Stop Their Investment 2 4 8
4Opposition Organisations Delay
Production4 5 20
5Existing Drilling Technology doesn't
Work for this Location2 5 10
6 No Available Skilled Personnel 2 4 8
7Government Brings Policies to Limit or
Stop Fracking3 5 15
8 Environmental Hazard Occurs 3 5 15
9Environmental Disaster Destroy the
Site1 5 5
IDENTIFIED RISK PROBABILITIES AND RATINGS
NO RISK LIKELIHOOD SEVERITY RATING
Table 5-D: Identified Risk Probabilities and Ratings
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1Gas Price Reduces or
Doesn't Escalate
Oil Price Reduction and Increased Gas
Export.
Monitor Gas Prices and Invest
Accordingly.1 5 5
2Operating Costs Over-
Escalate
Increased Living Expenses.
Increased Waste.
Reduced Production.
Manage Resources and Waste.
Apply Lean Production Techniques.2 3 6
3Companies Stop Their
InvestmentPoor Investor Relationship Management.
Stakeholder Manage Plan.
Keep Investors up-to-date with
Information.
1 3 3
4Opposition Organisations
Delay Production
Environmental Hazard/Pollution.
Increased Road Traffic.
Recruit Local Workforce
Follow Good Drilling Practices
Invest in Local Community/Government
3 4 12
5
Existing Drilling
Technology doesn't Work
for this Location
Staff are not Trained.
Inadequate Equipment are Used.
Train Inexperienced Staff.
Acquire High Performance Equipment.
Promote Innovation.
1 5 5
6No Available Skilled
Personnel
Limited Skilled Personnel in the UK.
Poor HR activity/Job Packages.
Allow for International Recruitment and
Provide Benefit Packages1 4 4
7Government Brings Policies
to Limit or Stop Fracking
Government Don't benefit from Fracking
and Receive Public Opposition.
Environmental Hazard/Pollution/Traffic.
Increase Royalty to Government.
Invest in the UK.
Manage Environmental Risk
2 5 10
8Environmental Hazard
Occurs
Gas Leak/Water Course Pollution/Air
Pollution/Increased Seismic Activity
Take Preventative Actions for Each
Hazard.
Train Staff Adequately.
1 5 5
9Environmental Disaster
Destroy the Site
Flooding/Earthquake/Lightening/Land
Slide
Ensure Site Safety and Safe Operation.
Acquire Adequate Protection Equipment1 5 5
NO RISK MITIGATIONTRIGGERNEW
LIKELIHOOD
NEW RISK PROBABILITIES AND RATINGS BASED ON RISK TRIGGERS AND MITIGATION
NEW
SEVERITY
NEW
RATING
Table 5-E: Risk Triggers and Mitigation
Considering the mitigated risks, new ratings are also presented in Table 5-E above. Overall impact these risks are rated based on
Table 5-C, and a strategy and a response is allocated to manage each risk in Table 5-F.
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1Gas Price Reduces or Doesn't
Escalate15 Control Risk
Stop Investment and make Redundancies if
Necessary.
2 Operating Costs Over-Escalate 9 Reduce Risk
Review Employee and Production Efficiency.
Employ Cheaper Staff and Acquire More
Efficient Equipment.
3Companies Stop Their
Investment6 Control Risk
Reiterate Financial Planning and use media to
Attract More Investors.
4Opposition Organisations Delay
Production18 Reduce Risk
Apply Better Practices and Motivate Staff.
Use Media to Answer to Questions Raised.
5Existing Drilling Technology
doesn't Work for this Location15 Reduce Risk
Monitor Latest Technology and Import Adequate
Technology and Best Practices.
6 No Available Skilled Personnel 10 Control RiskTrain Existing Staff and Hire Skilled Staff
Locally and Internationally.
7Government Brings Policies to
Limit or Stop Fracking19 Reduce Risk
Use Media to Explain Safe Working Practices
and Community Benefits.
Stop Investment and make Redundancies.
8 Environmental Hazard Occurs 15 Reduce RiskStop Production until Ensuring Environmental
Safety.
9Environmental Disaster
Destroy the Site15 Reduce Risk
Recover and Protect the Site and Ensure the
Safety of Employees very Swiftly. Plan for
Rebuilding. Assess the Future of the Project.
NO RISK
RISK IMPACT, STRATEGY and RESPONSE
IMPACT STRATEGY RESPONSE
Table 5-F: Risk Impact, Strategy and Response
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6.0 Implementation Considerations
Once the project initiation document is completed by the project team (including
relationship management, project lifecycle and purchasing plans), all likely investors
(Ineos, Total, etc.) should be contacted for investment negotiations to enable further wells
to be drilled.
All activities are required to be allocated to individuals or teams for implementation with
clearly defined success criteria and to be accomplished at a given time with an
approximate duration. In need of more employees for tasks, a recruitment or staffing
plan should be adhered to. Main staff shortages are expected from experienced and
qualified truck drivers who fit in with drilling teams due to new EU regulations (Massey,
2014), therefore a long term recruitment agreement with a high performing recruitment
agency or advertising at transport unions should be considered. Local candidates should
have priority over international candidates or candidates who require relocation to gain
public and local authority support. All required and follow up staff training should be
included in a personnel development and training plan.
Scope, schedule and cost changes should be monitored and limited by the application of
a change control plan (identify, assess, approve, implement and follow-up (Hart, 2011))
to prevent hidden variances (Fermi Research Alliance, LLC, 2014). Required resources
and components to complete each defined task should be incorporated in a procurement
plan with expected delivery dates and times. Local suppliers should have priority over
suppliers in other cities to gain public and local authority support. If any supply cannot
be acquired within the UK at a reasonable quality/time, the most quality/cost efficient
international supplier should be considered. All procurement activities should have at
least two supplier options. Once the tasks become more clear and well defined the
procurement plan should be revised and tasks should be firmly set by the operations
manager.
Exact drilling point on West Bowland Basin should be decided upon DECC consent
(roadmap provided in Figure 4-2) and site survey evaluation. Landowners and all other
key stakeholders should be contacted in person and required contract terms and
conditions should also be agreed and signed.
The oil and gas industry is a very fast changing environment as the technology develops
rapidly (The National Petroleum Council, 2007), therefore IGas should monitor the latest
technology and market, and invest in Research and Development (R&D) programmes to
advance its technological capacity and productivity while attracting skilled workers and
engineers.
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7.0 Conclusion
In this report, three most viable shale gas extraction locations in the UK have been
assessed based on the selection criteria defined in Table 2-B. PEDL189 in West Bowland
Basin in the North West UK has been found to be the most appropriate location for this
project, especially due to high amount of recoverable resources and infrastructure
availability as well as low risk associated with project implementation.
The project is planned to deliver 97bcf of shale gas by August 2045. Project scope has
been defined around the assumptions made for PEDL189 licence share with GDF Suez,
escalation of gas price and operation costs as well as fixed 25% royalty scheme, 10%
discount factor and 3% production taxes (see section 3.0). It can be seen from the
development cost analysis in Appendix A and investment return analysis in Appendix D
that first year average production rate is crucial to the overall success of this project.
Based on the available PEDL licence areas shown in Figure 1-2 and expected first year
financial success, further investment opportunities for expansion in West Bowland Basin
are very likely.
7.1 Recommendations
Based on the conclusions drawn above, the below recommendations are proposed
for successful implementation of the project and sustainable shale gas extraction in
the UK.
1) Learn from US shale gas fracking experiences and apply better water
management and hydraulic fracking practices (Probert, 2012).
2) Undertake long term recruitment agreements with reputable recruitment
agencies for hiring skilled workers, technical staff and with transport unions for
hiring truck drivers.
3) Incorporate "Teamthink" activities within departments for improved decision
making (Manz & Neck, 1997), product development and innovation.
4) Investigate nearby PEDL licence areas for further drilling opportunities.
5) Make close contact with main investment companies, i.e. Total AS and Ineos. It
is expected that few years of successful extraction of shale gas in the UK will
encourage BP to go into shale gas market, therefore BP should be included in
future investment negotiations, and other investors should also be sought after.
6) Fund research for increasing economically recoverable shale gas from existing
and once-depleted wells.
Following recommendations are adopted from NPC Global Oil & Gas Study (The
National Petroleum Council, 2007);
7) Attract, train, and retain students in degree programs for shale gas extraction
related subjects such as petroleum engineering, geology and geophysics with
scholarship programs and research support at the university level.
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8) Improve the position of UK universities to the leading edge of research in
technology related to hydrocarbon extraction, by providing funding for
fundamental research. In particular, basic research in areas of enhanced
recovery, the development of unconventional and marginal resources, and
minimizing environmental impact would be well aligned with the domestic
resource base.
9) Review the current immigration policy and attract more experienced technical
professionals from overseas.
10) Apply for national tax credits for new technologies applied in the UK which
would increase domestic oil and gas production or enhance environmental
protection.
11) Request for adjusted royalty structure from the government in order to
encourage technology investment, such as lower royalty payments for higher
rates of recovery.
12) Request for more favourable tax or revenue policy in the UK than other regions
of the world in order to develop and implement more technologies for the UK.
13) Co-operate with smaller businesses for technology development and deployment
for shared risk benefits.
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Note: This bibliography is automatically created by Microsoft Office Word 2007 built-in
Bibliography with "Harvard" style and more detailed reference information can be found in
the Word document source manager. The word count presented is calculated starting from
"Page | iv" till "Page | 22" inclusively, excluding headers and footers.
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Appendix A West Bowland Basin Shale Gas Development Costs
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Appendix B Midland Valley Shale Gas Development Costs
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Appendix C Sussex Weald Basin Shale Gas Development Costs
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Appendix D Investment Return Comparison of each Region
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