That seems to have been the general response to Cuadrilla’s parent company AJ Lucas’s attempts to winkle more cash from their beleaguered investors.

The results are now in and we can see that they managed to raise a gross total of Au$28.6 million from the sale of about 440 million shares.

This was made up of:

Au$ 24.7 million taken up by Kerogen
Au$ 1.5 million taken up by other institutional investors
Au$ 2.4 million from retail investors

The Kerogen investment resulted in no cash being provided as it was a debt for equity swap.

Total cash raised was therefore just over Au$3.9 million or just over £2 million. That’s enough to keep fracking operations going for about 3 weeks at Preston New Road.

They had hoped to raise a gross total of Au$ 46.3 million which would have left net cash proceeds of Au$ 21.6 million.

The share price today sits at Au£0.066 compared to the offer price of Au$0.065. A crumb of consolation for the few who decided to risk more money.

Where it will be in 2020 is anyone’s guess.

The idea of the offer is pretty straightforward – you are offered a number of shares for each share you currently own (19 for every 20 here) and you can either buy them or not. You can also ask for a higher allocation subject to eligible shareholders not taking up their full entitlement. There is a sting in the tail here though for existing shareholders who do not participate in the new equity round proportionate to their shareholding, as that shareholding percentage will now be diluted.

This “offer” is aimed at raising AUD$ 46,300,000 from the sale of shares at AUD$ 0.065 each. This constitutes a new tranche of 712,600,000 shares. This almost doubles the number of shares that currently exist. Last time they did this they only had to sell 97,500 shares to raise AUD$ 31,200,000 but that was when the shares were worth AUD$ 0.32c each.

The Institutional (non-retail) part of the offer is already partly subscribed. Kerogen Investments No.1 (UK) Limited who own 53% of the company have agreed to take up their entitlement in full this guaranteeing AUD$ 24.7 million from the exercise. However this will not directly increase available cash as “proceeds from Kerogen’s participation in the Offer of $24.7 million will be used to reduce Kerogen’s subordinated debt facility”. Just as last time then It seems therefore that Kerogen won’t actually be parting with any real cash but will simply be writing off debt in exchange for a larger share of the AJL business.

AJL expect a take up of just 1/3 to 2/3 giving a total gross proceeds of AUD$ 34.8 million. This would mean that just over half a million new shares would be sold meaning that there would be just over 70% more shares than there are currently. These new shares will have been purchased at 28% discount to today’s price of AUD$ 0.09c.

Gross proceeds from the Offer are estimated to be between $32.5m and $37.0m based on Kerogen’s take up of its entitlement and assuming c.36% and c.57% take up 2 of the remainder of the Offer respectively (including through the retail over allocation facility), with a midpoint of $34.8m ( Indicative Offer Size)

After the costs of the exercise (AUD$ 0.6 million) the net proceeds of the capital raising will thus be AUD$ 9.6 million

How will it be used?

Net cash proceeds after fees & expenses will be applied to:
₋
Meet AJL’s share of future commitments to UK investments including to meet costs associated with the ongoing flow test of the
second Preston New Road well (PNR 2) and the appraisal of other prospective sites
₋
Fund any investment required to grow the Australian drilling business
₋
Balance to fund general corporate costs and/or service debt

It is not clear whether Centrica’s £46,700,000 Contingent Carry payable after the flow testing of gas for six months will be met. Presumably Centrica expected a flow test from a fully fracked well when this condition was set. Centrica do have an option to escape from their investment and it would seem that if they do that £46.7 million will be forfeited. Ouch!

Under the agreement, Centrica also holds a put option to sell back its equity interest in the Bowland licence to Cuadrilla and AJL for a nominal consideration. In the event that Centrica exercises the put option, the contingent carry amount would be forfeited.

It was a strange claim given that we have heard from a variety of sources that there were over 100.

So what are we to make of the publication by AJ Lucas today of a document supporting their recent capital raising which clearly states that Cuadrilla did in fact receive “approximately 100 claims relating to property damage”.

That’s actual claims, not just “reports of damage”.

Perhaps we should leave you to draw your own conclusions, but we would point out that he and his company do have form here .

https://www.refracktion.com/index.php/perhaps-maths-isnt-mr-egans-strong-point/
https://www.refracktion.com/index.php/moving-the-posts-before-the-game-starts/
https://www.refracktion.com/index.php/what-the-ruck/

Here on Refracktion we are always happy to explore points of view. Local author Alan Tootill has been a commentator on fracking for many years and his in depth analysis has been immensely helpful to many of us over the years. Here he offers his thoughts on recent events.

Reaction to the new fracking moratorium is mixed. The distrust of politicians and in particular the Tories under Johnson is so deep that on the one hand, many believe this to be just an election ruse, and the moratorium will be overturned as soon as the Tories are back in power.

Others believe that the moratorium sounds the death knell for fracking, mainly on the principle that fracking without government support is uneconomic and not viable, and that investor confidence will collapse. This view has led Natalie Bennett, or Baroness Bennett as we should now call her, today (3rd Nov) to say “make no mistake, this is the end of fracking in England.” Also, of course, the government, having been reported in many papers as imposing a ban, would be regarded by the public with further distrust and disdain if it made a further U-turn.

Which view is right?

On paper, the moratorium looks vulnerable. At Preston New Road there was an effective moratorium already in place before the weekend. Fracking was stopped after the 26th August magnitude 2.9 earthquake, felt by many residents and reportedly damaging property as far away as St Annes. The OGA announced “Operations will remain suspended while the OGA gathers data from this and other recent seismic events and then considers carefully whether or not the hydraulic fracturing operations, mitigations and assumptions set out in the operator’s Hydraulic Fracture Plan continue to be appropriate to manage the risk of induced seismicity at the Preston New Road site.

The OGA has not yet published data relating to that “event” and their moratorium was (and is) still in place, when the 2nd November government announcement came. For Preston New Road nothing has changed. Since the fracking halt, Cuadrilla has resumed operations to flow test and flare gas at the PNR site, resulting in what many feel is the continuing risk to environment and health of noxious gases and substances. The new moratorium will not change anything.

Where, of course, the major difference comes, is that the moratorium is now extended to all England (not exactly all the UK, as the press reported). And the header to the government’s press release was “Government ends support for fracking in England on the basis of new scientific analysis, published today.” Also significant in the decision was the statement that no new changes to the planning system for fracking (eg making it come under NSIP government control) were now to be pursued.

For those who read the press headlines of a “ban” now in place, Andrea Leadsom’s later in the day 2nd November media appearances proved more pessimistic. She stressed the “decision based on science” argument, which led her to praise fracking as a prospective gas supply, and add the corollary that the moratorium would end when new scientific evidence was presented.

I have always argued that fracking is a political, not a technical issue. I would argue that the moratorium decision was based on political grounds, not on the science. Firstly, the Oil and Gas Authority report which was released at the same time as the government announcement, reads to my eyes as not supporting a view that with fracking “it is not possible with current technology to accurately predict the probability of tremors associated with fracking”. This it seems, being nowhere I can find in the report, is an interpretation designed to support the press release rather than a scientific and factual interpretation of the OGA report, which consists of a number of very technical papers and a rather ambiguous summary.

Significantly, the four technical reports were all produced on data from the 2018 Cuadrilla activity on PR1z well (and scientific papers) and took no account of the August 2019 “big” seismic event on the PNR2 well.

The OGA summary ends –

“PNR2 data should now be used to test and improve all four studies with work on maximum magnitude prediction given high priority. Further work on correlating seismic susceptibility to local geological characteristics could be undertaken. The current reports should be treated as interim.”

When before have we seen the government acting on merely an interim report to make a major policy change? I am led to the conclusion that the government’s moratorium is based on not the scientific evidence, but the public’s ever-decreasing support for fracking, the sustained pressure of opposition to fracking, the argument linking fracking with climate change, resulting for support for fracking being seen as a loss leader in a new General Election.

If the decision to impose a moratorium is not based on the science, one may conclude that a decision to remove the moratorium will not be made on scientific evidence, despite what Andrea Leadsom said. And we must bear in my mind that nowhere has the government addressed other fracking issues, such as environmental damage, risk to health, threat to climate change policy and many other threats fracking poses which have driven opposition.

Natalie Bennett is perfectly right in serenading those who have worked tirelessly at PNR, out in all weathers, putting themselves at risk of police persecution and arrest, and in claiming they have been the ones making a major impact on policy, and this new moratorium in particular. They do indeed deserve to take a well-deserved rest. And those of us who are just working from keyboards owe it to them to keep working to monitor the changing tide of politics and raise the alert when the signs turn to worse.

Others have pointed out this weekend that a fracking moratorium will not cover (because of the definition of fracking in the 2015 Infrastructure Act) other unconventional oil and gas extraction procedures. And not, of course, conventional oil and gas production. I would add to that list offshore Oil and Gas production, which under the Infrastructure Act has a legal duty to maximise economic production.

This is valid, and not only an issue for the Tories. Labour and LibDems have vowed to ban fracking. But have they included abolishing the Infrastructure Act definition of fracking to include other unconventional techniques (acid stimulation is the new scapegoat there)? I don’t think so. In fact the Labour Party’s 2017 manifesto, due to union pressure, actually included the policy to “safeguard the offshore oil and gas industry”.

This has to change, if we are to reduce dependence on Oil and Gas. Not just the Tories, but other parties, must review all their policies, rather than using fracking as an electoral greenwash. Fracking is a symptom of a wider disease, not a disease itself. The Green Party is the only one so far which has stepped up to the plate. Which is why a vote for the Green Party is the only one which will ever satisfy me.

As the dust starts to settle on the announcement of the government’s decision to implement a moratorium on new fracking development we take a look at what it means and how it came about.

First of all let’s be clear about one thing. Fracking in England has not been banned. Instead the government announced

On the basis of the disturbance caused to residents living near Cuadrilla’s Preston New Road site in Lancashire and this latest scientific analysis, the government has announced a moratorium on fracking until compelling new evidence is provided.

A moratorium means “a temporary prohibition of an activity“. Significantly the government has not placed any time limit on their moratorium, stating instead that they will not allow further fracking “until the science can make clear what the seismic activity is likely to be with a much greater degree of certainty”

Like me you can probably spot the wiggle room being created there.

It would also appear that the moratorium has been implemented only for “fracking” and not the associated activities of drilling and flaring, and other exploratory activities.

In this context it is interesting that under the government’s own definition of fracking (or “associated hydraulic fracturing” as it is called in the 2015 Infrastructure Act) …

…it could be argued that neither well at Preston New Road has actually been fracked as no stage used or was expected to use “more than 1,000 cubic metres of fluid at each stage, or expected stage” and the totals injected were less that 10,000 cubic metres in both cases (3602 M3 for PNR1 and 2485 m3 for PNR2).

Presumably if companies wished to try to get round this moratorium by stimulating with less than 10,000 m3 of fluid per well this route might still remain open to them, although it is hard to see how this would be economically viable or how they would get planning permission in the current climate.

In their Press Release the BEIS state that

The Traffic Light System was introduced in 2012 as an evidence-based method of regulating seismicity caused by shale gas exploration. It has operated at Preston New Road, allowing the OGA to swiftly put a halt to activity when required – including after several significant events this summer.

This is quite a strange claim as the Traffic Light System manifestly failed to stop the seismic activity at Preston New Road this summer. The 2.9Ml quake that put an end to the process occurred at 8:30 am on 26th August, a full three days after they last fracked. The BEIS are either spectacularly badly informed, stupendously self-satisfied or are misleading the public in an egregious way here.

What is even more strange is that the report from the Oil and Gas authority is based only on analysis of the seismic events provoked by the fracking of the first well. If that moved them to recommend a ban based on the unpredictability of the seismic activity last year, then analysis of the events this summer can only strengthen the scientific case being made agsint fracking.

Listening to Ms Leadsom, who, as usual, appears to be totally out her depth, it seems she hankers after the opportunity for science to bend itself to her agenda. The Independent reports that

She said it was clear the government “must impose this moratorium until the science changes”, but added shale gas is something the UK “will need for the next several decades”.
When pressed on why a permanent ban is not being implemented by No 10, she replied: “Because this is a huge opportunity for the United Kingdom”.

Readers will take some comfort here from the fact that as the great Ken Wilkinson ponderously pointed out at the Harrogate debate “The good thing about science is that it’s true, whether or not you believe in it“

We think Ms Leadsom will have to wait some time for the science to change, or for a magical report to appear stating that the industry has discovered a way to accurately predict earthquakes. Remember this is an industry which mislaid the Millstone Grit at PNR and which failed to locate the entire Bowland Shale at Tinker Lane. The chances of these companies accurately locating fault lines and predicting what fracking into them will do look vanishingly small.

So why did the government blink here? Well rather obviously there is an election looming and the incumbent Tory MPs like Mark Menzies might have been vulnerable even with their large majorities. This moratorium tries to neutralise fracking as an electoral issue, but in fact it falls between two stools. It is not a ban, so the Fylde MP’s ineffectual response to the issue will still loom large in people’s minds. It may however mean that Lee Rowley, who took a safe Labour seat due to his opposition to fracking, now loses it again as his stance will no longer draw so many votes. He is sitting on a slim (5%) majority which must be very vulnerable in such a previously staunch Labour constituency.

Anyway, regardless of the motivation, we now have temporary ban on new fracking activity which will stop the industry in its tracks. The reaction of the Australian stock market to the news when trading opened this evening will be the first real indicator of what this means to the investors. (AJ Lucas which trades on ASX is Cuadrilla’s parent company). Trading in Igas shares will also give an indication tomorrow.

So do we have cause to celebrate? Undoubtedly yes. I don’t believe for one second that even a Boris Johnson led Conservative government would dare reverse this moratorium without being able to claim to have scientific evidence that fracking can proceed without causing significant earthquakes.

Given the 100% failure rate that Cuadrilla have demonstrated here on the Fylde, that evidence will simply not be forthcoming. Anyway, it is not sufficient for them to be able to predict the quakes. They need to be able to mitigate (or avoid) them. They have show many times now that with current techniques this is impossible.

It is not impossible that at some indeterminate point in the future they will find a way to unlock shale gas that does not involve fracking and earthquakes, but as we move closer and closer to decarbonising our economy that window of opportunity for the industry is getting ever smaller.

In any case as Saturday’s Financial Times made clear

Energy prices for oil, gas, wind and solar have all fallen over the past five years. If the UK fracking industry had not been halted by concerns over earthquakes, the economics of trying to produce small amounts of gas in the face of strong local opposition would have forced it out of business eventually.

Today’s Observer was even more scathing

Ministers have been condemned for wasting millions of pounds of taxpayers’ money in a failed attempt to introduce fracking to the UK. The bid also cost the nation a decade of effort that should have been expended on other, more environmentally friendly energy projects, scientists and activists claimed yesterday.

The results of Wave 31 of the BEIS quarterly tracker, due out on Thursday, are unlikely to provide any succour to this beleaguered industry either.

The writing is on the wall now for this industry in the UK and I don’t believe that the government can find a way to wipe it out.

Whatever shape of government we end up with in December now needs to concentrate on viable and sustainable ways to create the energy we all need to live in 21st century society, and to develop techniques like Carbon Capture and Storage.

The papers today are running a story about Cuadrilla’s good will payments made to home owners who reported damage after the 2.9 Ml quake of Monday August 26th 2019.

This article in the Times is typical so we shall comment on a few of the points it raises.

A fracking company is offering “goodwill payments” to people who say their homes were damaged by an earthquake that it caused.
Cuadrilla Resources has not disclosed the number or size of the payments but several residents near Blackpool have reported receiving offers of up to £700.

What the article does not tell is is whether there are conditions attached to the offers. Nor does it say whether all those who claimed will be compensated.

Francis Egan, Cuadrilla’s CEO,is quoted as saying

the number of reports of damage were in the “low two figures” and there was no clear evidence that the earthquake had caused them.

So what does the “low two figures” mean? Presumably more than twenty but less than fifty. However, other reports we have seen suggest that at least one hundred people reported damage. Mr Egan seems to be being deliberately vague here. In September Drill or Drop reported that :

“the British Geological Survey’s leading seismologist, Dr Brian Baptie, revealed at a meeting London last night that the BGS had received “several hundred reports” of damage to property.”

We think Mr Egan should say exactly how many reports of damage were made or it might be assumed that he is deliberately and artificially downplaying the scale and significance of these events.

In any case his statement that “there was no clear evidence that the earthquake had caused them” merely serves to demonstrate and amplify the problem that home owners will face next time Cuadrilla or another operator provoke a damaging earthquake.

Mr Egan also went on to suggest that his company had received fraudulent claims. The Times quotes him as saying:

some “obviously egregious” damage claims had been sent to the company. “Lots of people have showed us cracks with weeds growing out of them, for example, or cracks that when you look on [the property website] Rightmove you can see the exact same cracks in photographs taken well before the tremor.”

This is of course an easy accusation to levy without providing any supporting evidence at all. However, when it is clear that those sent out to assess the damage included Public Relations and Social Media staff rather than building surveyors it really is “egregious” of them to start accusing locals of fraud without providing any evidence whatsoever to support their accusations. Of course we don’t doubt that they are speaking the truth, we just think they should provide some evidence.

For the avoidance of doubt we would absolutely condemn any attempt to defraud Cuadrilla, and hope that they have raised this matter with the police. We have emailed Mr Egan accordingly

Dear Francis
I was surprised to read in the press today that you are accusing locals of “obviously egregious” damage claims.

The claims you allude to would clearly be fraudulent. For the avoidance of doubt I would absolutely condemn any attempt to defraud Cuadrilla in this way, and assume that you have raised this matter with the police.

Would you be kind enough to share with me the time and date of these reports to the police and to whom they were reported or otherwise explain why this criminal activity was not duly reported.

Actually we are not holding our breath here as when, 6 years ago, Mr Egan claimed he had been subjected to death threats we emailed him twice asking which police force he had reported them to and when. He did not reply.

.. and she is already singing.

Today Cuadrilla announced that they are demobilising the fracking equipment at their site at Preston New Road as they will not be able to restart fracking before their existing planning permission runs out at the end of November 2019.

Before they can frack again they would need to have a hydraulic fracture plan with mitigation procedures for seismic activity agreed by the Oil and Gas Authority, and they would need to apply for and receive new planning permission from Lancashire County Council.

Given that there is no published or agreed seismic mitigation procedure to replace the failed traffic light system it is hard to see how the O&GA could agree a new HFP, and, given that fracking provoked a 2.9Ml quake which literally woke the Fylde up on the morning of 26th August 2019, Lancashire’s planners would seem to have good grounds for rejecting any future applications from Cuadrilla in this area.

Cuadrilla maintain that they are continuing operations at the site by initiating a flow test, but as they have only fracked 7 out of their planned 47 stages and only injected 8% of the proppant permitted, it seems highly unlikely that they would be able to produce any figures that will keep their investors happy. These investors were already showing a high degree of dissatisfaction even before today’s news

It seems that Cuadrilla have managed to maintain their 100% failure rate over the last 8 years, with sites at Singleton, Preese Hall, Annas Road and Becconsall all having shut down with no commercial flow of gas. While there has been a limited flow of gas at PNR it seems that they can’t extract even small quantities without provoking a level of seismic activity which is unacceptable both socially and politically.

Their performance at Preston New Road is all the more alarming because not only did they promise that they could guarantee not to cause earthquakes, they proceeded to do so multiple times on two different wells!

So where does that leave the UK fracking industry?

Clearly, fracking is now a political hot potato. As far as we know there is no fracking company with planning permission in place and raring to go.

Aurora near Halsall is the only fracking application pending but it seems unlikely that it will be decided this year because highways officers want more information. It could obviously go the same way as Roseacre where refusal on traffic grounds put paid to Cuadrilla’s ambitions for that site.

Third Energy has permission in Yorkshire but has said it is concentrating on conventional extraction and, as far as we know, has not passed the required financial resilience test.

We believe both Ineos and Igas have permissions in place for drilling but not fracking.

For an industry which claimed in 2013 that it was only 2-3 years away from commercial production progress has been glacially slow, and as climate change concerns have gathered pace it seems to have been overtaken by events.

It remains to be seen whether the government’s fast cooling attachment to fracking will be rekindled once the Brexit traincrash has been cleared up. Indeed it remains to be seen whether this government will even still be in place next week and, with every other party that has a realistic chance of power being against fracking, it is starting to look like end for an industry that few support and many feel has no place in the UK or anywhere else.

It is clear that events of this magnitude and frequency were not anticipated by Cuadrilla or the regulators. In Cuadrilla’s Environmental Statement it is made very clear that if the seismic Traffic Light System (TLS) were in operation they considered a theoretical “worst case scenario” to be a 1.5 Ml event

This Environmental Statement was a very important document in both the planning application that was rejected and the subsequent appeal which was granted.

The fact that the “worst case scenario”presented by Cuadrilla was exceeded by a quake 25 times stronger and with an energy release 125 times greater on 26th August clearly demonstrates that the “gold standard of regulation” described by our local MP, Mark Menzies, has failed totally to protect the citizens of the Fylde.

It is uncertain yet how many claims for property damage have been registered, but it is abundantly clear already that the scale and range of damage is far greater than that which was experienced after the Preese Hall quakes which occurred in 2011.

So now we have to wait for the outcome of the Oil and Gas Authorities investigation. It seems absolutely inconceivable that they could conclude that it is safe for Cuadrilla to continue to frack under their existing Hydraulic Fracture Plan as this is based on the obviously ineffective TLS. They would seem to have 3 choices here though. Firstly to forbid further fracking, secondly to permit it but with a reduced red limit and finally to ignore the empirical evidence and raise the TLS, allowing Cuadrilla to potentially unleash further stronger quakes on an increasingly restive local population.

Likewise it would seem inconceivable that Lancashire County Council could now grant Cuadrilla an extension past the end of November to complete drilling and fracking operations on well PNR2 at Preston New Road. Any councillor supporting such a move would surely find themselves looking for alternative ways to pass their time come the next local elections.

So Cuadrilla having managed the next to impossible task of mobilising a normally quietly acquiescent local population against themselves, are now burning though (by their own estimate) £96,000 a day and are starting to remove material from the site. That would be nearly £1 million since they last pumped at the site.

It can only now be a matter of time before either the commercial reality or government action puts an end to the failed experiment that is UK fracking.

If not then the sleeping giant of local public opinion will continue to grumble along with the earth under the well and it won’t be a good outcome for any local politicians who continue to support fracking in the face of incontrovertible evidence that our “gold standard regulation” is really just fools’ gold.

The research also showed that nearly half the population (46%) oppose any loosening of the TLS with less than half that number (22% ) supporting any change to the TLS.

A good analysis of the report can be found here on Drill or Drop.

This industry clearly has no social licence and any claim to the contrary is simply, and now demonstrably, a lie.

On the same morning we read in the Guardian that

Jeremy Corbyn has urged Boris Johnson to ban fracking for gas as research by Labour shows it will stop the UK meeting a net zero target for carbon emissions this century.

This industry’s days are numbered here in the UK.

And next time anyone asks you to justify the claim that the majority of people don’t want fracking here in the UK all you have to do is to point them towards this poll!

A scenario is literally “that which is pinned to the scenery”  and it looks to us as though the scenery here is pretty shoddy.

First of all let’s be clear about what the report doesn’t do. It does not attempt to revise the forecasts for gas in place in the Bowland Shale, so anyone hoping that there was going to be a marvellous story of a new age of energy independence was going to be disappointed.  Not that that stopped them making some  pretty fantastical claims as we shall shortly see.

The motivation for the content and timing of this report is immediately clear of course. It is intended to provoke the BEIS into allowing what the report describes as “an unhindered flow test” – or to put it differently they are hoping to have the seismic TLS limit raised and so are bigging up the prospects of the “prize” to be had for any politician foolish enough to swallow their bait.

You would imagine that such an important potential result for the industry would mean that this report was a carefully prepared, academically sound piece of innovative research with some unimpeachable conclusions. You would be wrong . The report itself is a misleading, internally inconsistent and lazily referenced mishmash of data from old reports and some modelling that they have undertaken to improve the rather flakey looking immediate prospects for the industry. Somehow UKOOG seem to have built a whole sequence of scenarios around one well (PNR-z1) that was only five per cent fracked and had to shut down because of the continual risk of earthquakes.

The scenarios themselves are quite revealing. Clearly the industry wants a good news message to convince the government that there is a massive prize available in the near future. From that perspective it is interesting that last year Edison Investment research provided a report for AJ Lucas which used a 30 year type curve sourced from Cuadrilla to calculate the production decline rate.

This new analysis uses a 20 year curve instead, apparently “analogous to typical US shale gas type curves”  for 3 Estimated Ultimate Recovery (EUR) scenarios.

While the end result would be the same, the shortening of the timescale in the curve pushes the production forecast forwards and allows them to claim bigger benefits more quickly. It’s a simple trick but an effective one when you want to front load your benefit case to politicians. Those of you who are keeping abreast of the arguments will obviously have noticed the downside for them here, which is that they just cut their employment forecast timescales by 10 years as well.

Coupled with this we see them increasing the average Estimated Ultimate Recovery  (EUR) from the IoD’s 3.2 billion cubic feet (bcf)  per well to a range from 3.0 bcf to 8.0 bcf. When looking at the new per well EUR forecasts it is interesting to read that “As a result of continuous improvements in completion techniques and the selective development of subsurface targets,improvements in per-well economically recoverable reserves are anticipated over time. This natural increase in well productivity is assumed to be included in the range of scenarios presented“.  In other words these new scenarios do depend on an awful lot of wishful thinking!

We would point out here for the purposes of comparison that a 2019 report for the Oil and Gas Journal , based on the highly productive Marcellus shale suggests that the EUR for a 2.5 km lateral would be have a much wider range of 1.65bcf – 8 bcf (much lower at bottom end than is suggested in this report) and highlights the highly variable range of unconventional plays. It would seem then that forecasting a possible average EUR of 8.0 bcf is very optimistic to say the least.

To achieve the extraction volumes they are talking about they propose massive 40 well pads (something which they avoided discussing in their last amusingly titled report – “Developing Shale gas and Maintaining the Beauty of the British Countryside“) and reference examples in the USA. However, the article they reference here actually talks about these 40 well pads requiring sites of 10 acres. That’s 4 hectares each. That is almost twice the size of PNR’s pad and 4 football pitches in size – It seems we are a long, long way from Francis Egan’s reassuring “just a rugby pitch” spiel now.

In fact Encana’s mega pad that they discuss is capable of holding 64 wells on one large, single pad sized in the order of eight football fields long by two football fields wide. That is 16 hectares. – six times a big as the PNR pad and 16 times as big as what Francis Egan was claiming to the press would be all that was needed a couple of years ago. In spite of this they still repeat the claim on page 17 that we’d have “each pad the size of two football pitches”. See what we mean about being internally inconsistent?

The development schedule looks “ambitious” compared to the government’s unreleased Implementation Unit Report on Shale Gas which foresaw only 155 wells drilled by 2025. Even if they started commercial development in 2020 (which seem rather unlikely) they claim to be able to have 40 pads and 342 wells in production by 2025. That’s more than twice the government estimate, and given the incredibly slow progress so far and the continuing planning challenges they face the possibility of that looks vanishingly small.

Perhaps the most questionable claim in the whole report though is that their modelling shows “Net gas imports being almost eliminated in the early 2030s, improving the balance of payments by around £8billion a year.”

However having modelled their assumptions it would appear that, using their central scenario,  while production might ramp up so that by 2034 they are producing almost enough to equal projected imports for a year or so in the mid thirties, by the mid forties the decline in production means they are only producing half of that peak rate and it continues to decline swiftly thereafter, becoming inconsequential around 2050.

To claim therefore that imports are almost eliminated by UK shale gas is frankly poppycock, and yet this PR message seems to have been swallowed wholesale by the press!

You can see exactly why they think it’s worth trying to dupe us can’t you?

If you are in any doubt about how they are trying to disguise the reality consider that they show this graph to demonstrate their point:

However, this is hugely misleading as they really ought to show the full picture which shows very clearly the temporary nature of their impact and the fact that it is only achieved for a short period even in the most optimistic scenario and not at all in the other two.

They claim that they might expect a recovery factor of the gas in place of between 15%-30% according to a “recent” MIT study

The “recent” study is from 2011. However, if they expect to extract up to 30% of the 200 tcf they have claimed is in their licence area then they would need 7,500 wells with an average EUR of 8bcf or 20,000 wells with an EUR of 3 bcf.  At 40 wells per pad that is between 187 and 500 well pads even if they could site 40 laterals on each pad. That would be a remarkable feat for a UK industry who have so far failed to frack a single well without encountering problems. Strangely the UKOOG scenario doesn’t look at those sorts of numbers at all.

The other major claim they make is the beneficial impact UK shale gas development might have on the level of global Green House Gas emissions. Their reliance here on the 2013 Mackay and Stone report to support a hypothesis that UK shale is less GHG intensive than imported LNG is perhaps unfortunate given that the relevance of, and the weight that should be accorded to, this report have come under question in a recent court judgement.

What they fail to admit here is that in the absence of any means of guaranteeing that the LNG concerned will not simply be burned elsewhere the savings are more likely not to exist and the effect to be negative. In other words UK shale gas is simply going to add to the world’s total emissions and not save anything.

Even the industry’s supporters have acknowledged that it can only be consistent with the UK’s climate change objectives if its emissions are mitigated by Carbon Capture and Storage (CCS). However, for all of the flammery about carbon emissions in the report  you will search in vain for any reference to CCS. It doesn’t exist there anymore than it exists as a commercial reality in the real world.

Finally almost  every one of their charts using any of their scenarios simply illustrates the fact that the industry will take too long to ramp up to be consistent with the UK’s legally binding climate change objectives and will then decline swiftly until by 2050 it is almost invisible again as can be seen here.

The capital intensity required to fund development and the steep initial declines in productivity are clearly demonstrated here and this explains why the industry is unlikely to ever be profitable unless the price of gas at least doubles. We can’t know whether that might happen or not but current indications suggest it is unlikely at least in the short to medium term

Will this report provide the fig leaf that the government might want to hide behind so their dignity and modesty are maintained as they change the TLS limit?  We think it is unlikely as this is a rather amateur PR job that really is not convincing anybody. Even Claire Perry should be able to see this for what it is.