Golden Rules for a Golden Age of Gas

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The world is on the cusp of a golden age of natural gas. The North American experience, where technological advances led to a surge in the production of unconventional gas in recent years, is holding out the prospect of similar industries emerging in other parts of the world with natural gas resources. The upshot, needless to say, could be substantial--wider energy diversity, greater supply security, and a reduction in energy costs.

However, for it to materialise, a number of hurdles need to be overcome--not least the social and environmental concerns associated with the extraction process. The production of unconventional gas generally imposes a larger environmental and societal footprint than conventional gas development. Often, more wells are needed and more invasive techniques involved.

As a result, concerns over the public's reaction are causing governments to hesitate--or even oppose--the extraction of unconventional gas. Which is unfortunate, considering the technology for a responsible extraction already exists. What is required is a commitment from governments and the industry to apply the highest environment and social standards in the extraction and production process, in order to earn and maintain public confidence.

To shed light on this issue, the International Energy Agency (IEA) released a special World Energy Outlook report on 29 May 2012, titled "Golden Rules for a Golden Age of Gas". The report presents a set of principles--or "Golden Rules"--that can allow policymakers, regulators, operators and others to effectively address these environmental and social concerns.

The Golden Rules are:

Measure, disclose and engage:Engage local communities, establish and monitor baselines for key environmental indicators, disclose operational data, and minimize disruption to communities and the environment.

Watch where you drill:Choose well sites with minimal impact to the environment and community, conduct a proper geological survey and risk assessment, and monitor all hydraulic fractures closely.

Isolate wells and prevent leaks:Implement robust rules on well design and construction, consider appropriate minimum-depth limitations on hydraulic fracturing, and actively prevent spills and leaks from wells.

Treat water responsibly:Reduce freshwater use, safely store and dispose produced and waste water, and minimize the use of chemical additives.

Eliminate venting, minimise flaring and other emissions:Target zero venting and minimal flaring, and minimise air pollution from all equipment used.

Be ready to think big:Explore economies of scale, co-ordinate development of local infrastructure, and consider the effects of multiple drilling, production and delivery activities.

Ensure a consistently high level of environmental performance:Ensure that the gas output is matched by political backing for robust regulatory regimes, achieve a balance between prescriptive regulation and performance-based regulation, implement robust emergency response plans, and recognise the case for independent evaluation and verification of environmental performance.

As a whole, the Golden Rules underline the critical importance of transparency and engagement in addressing public concerns. "The technology and the know-how already exist for unconventional gas to be produced in an environmentally acceptable way," said IEA Executive Director Maria van der Hoeven.

She added: "But if the social and environmental impacts are not addressed properly, there is a very real possibility that public opposition to drilling for shale gas and other types of unconventional gas will halt the unconventional gas revolution in its tracks. The industry must win public confidence by demonstrating exemplary performance; governments must ensure that appropriate policies and regulatory regimes are in place."

According to the IEA's estimation, the Golden Rules could increase the cost of development for a typical shale-gas well by approximately 7 percent. However, for a larger project with multiple wells, the additional cost may be offset by lower operating costs.

The "Golden Rules for a Golden Age of Gas" report comes roughly a year after the IEA's publication of a similar report, titled "Are We Entering a Golden Age of Gas". That preceding report analysed the factors affecting the future role of natural gas, and reflected the uncertainty surrounding the potential for growth in unconventional gas supply. The current report is a more detailed examination of a key pre-condition for a golden age of gas, zooming in on the environmental impact of unconventional gas supply, the mitigating measures, and the likely consequences.

This is a summary of the "Golden Rules for a Golden Age of Gas" report, originally published by the International Energy Agency(IEA). The full report is available here.

BY : the International Energy Agency