Natural Gas

Issues and Opportunities

Why Natural Gas?

• Power

• clean technology favors natural gas for power

gas turbine plants are more efficient than coal plants

• Very high conversion loss in typical thermal power plant

• cogeneration – at NYU, 90% efficiency

microturbines and fuel cells

• environmental and public health concernsIn U.S., for instance, tightening standards for power plants:

• including greenhouse gas regulations

• EPA is proposing that new fossil‐fuel‐fired power plants meet an output‐based standard of 1,000 pounds of CO2 per megawatt‐hour (lb CO2/MWhgross).

• New natural gas combined cycle (NGCC) power plant units should be able to meet the proposed standard without add‐on controls. In fact, based on available data, EPA believes that nearly all (95%) of the NGCC units built recently (since 2005) would meet the standard.

• Of course, regulations to reduce greenhouse gases, including carbon dioxide, are coming into greater force all over the world:

• European Union’s cap-and-trade regime

• Australia’s cap-and-trade program

• California (9th largest economy in the world) is instituting economy-wide cap-and-trade program

• Northeast U.S. states have the Regional Greenhouse Gas Initiative (RGGI) for CO2 from power plants

• China is piloting cap-and-trade programs; China also committed at the Copenhagen climate conference in 2009 to achieving a 40-45% reduction in CO2 emissions per unit of GDP by 2020 compared with the 2005 level (carbon intensity)

natural gas prices are low, will rise, but in a stable manner

“Natural gas continues to be the fuel of choice in many regions of the world in the electric power and industrial sectors, in part because of its lower carbon intensity compared with coal and oil, which makes it an attractive fuel source in countries where governments are implementing policies to reduce greenhouse gas emissions, and also because of its significant price discount relative to oil in many world regions. In addition, it is an attractive alternative fuel for new power generation plants because of low capital costs and favorable thermal efficiencies.” – EIA, International Energy Outlook 2011

lower costs for power

cleaner fuel

natural gas vehicles

good for fleets

inefficent ICE

natural gas for fuel cells highly efficient

Where’s the gas?

China and North America

shale gas resources

•China – 50 to 100 bn BOE•Europe – 92 bn BOE•Latin America - 50 to 100 bn BOE•U.S. - 100 bn BOE•Canada – 27 bn BOE

How Much Will We Need?

Where Will it Be Needed?

shale gas extraction

See also fracking video

concerns

There are risks both for individual sites and cumulatively:

• Groundwater contamination• Surface water contamination• Water resources• Release to air• Risk to biodiversity• Noise impacts• Visual impact • Seismicity• Traffic

general risk causes

In general, the main causes of risks and impacts from high-volume hydraulic fracturingidentified in the course of this study are as follows:

• The use of more significant volumes of water and chemicals compared toconventional gas extraction• The lower yield of unconventional gas wells compared to conventional gas wellsmeans that the impacts of HVHF processes can be greater than the impacts ofconventional gas exploration and production processes per unit of gas extracted.• The challenge of ensuring the integrity of wells and other equipment throughout thedevelopment, operational and post-abandonment lifetime of the plant (well pad) so asto avoid the risk of surface and/or groundwater contamination• The challenge of ensuring that spillages of chemicals and waste waters with potentialenvironmental consequences are avoided during the development and operationallifetime of the plant (well pad)• The challenge of ensuring a correct identification and selection of geological sites,based on a risk assessment of specific geological features and of potentialuncertainties associated with the long-term presence of hydraulic fracturing fluid inthe underground

• The potential toxicity of chemical additives and the challenge to develop greener alternatives• The unavoidable requirement for transportation of equipment, materials and wastes to and from the site, resulting in traffic impacts that can be mitigated but not entirely avoided.• The potential for development over a wider area than is typical of conventional gas fields• The unavoidable requirement for use of plant and equipment during well construction and hydraulic fracturing, leading to emissions to air and noise impacts.

highest profile concern:

Poor well design or construction can lead to subsurface groundwater contamination arising from aquifer penetration by the well, the flow of fluids into, or from rock formations, or the migration of combustible natural gas to water supplies.

(See recent EU paper: Support to the identification of potential risks for the environment and human health arising from hydrocarbons operations involving hydraulic fracturing in Europe)

“Golden Rules”

The International Energy Agency issued its report, Golden Rules for A Golden Age of Gas, in May of 2012.

“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. “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.”

Measure, disclose and engage• Integrate engagement with local communities, residents and other stakeholdersinto each phase of a development starting prior to exploration; provide sufficientopportunity for comment on plans, operations and performance; listen toconcerns and respond appropriately and promptly.• Establish baselines for key environmental indicators, such as groundwater quality,prior to commencing activity, with continued monitoring during operations.• Measure and disclose operational data on water use, on the volumes andcharacteristics of waste water and on methane and other air emissions, alongsidefull, mandatory disclosure of fracturing fluid additives and volumes.• Minimise disruption during operations, taking a broad view of social andenvironmental responsibilities, and ensure that economic benefits are also felt bylocal communities.

Watch where you drill• Choose well sites so as to minimise impacts on the local community, heritage,existing land use, individual livelihoods and ecology.• Properly survey the geology of the area to make smart decisions about where todrill and where to hydraulically fracture: assess the risk that deep faults or othergeological features could generate earthquakes or permit fluids to pass betweengeological strata.• Monitor to ensure that hydraulic fractures do not extend beyond the gasproducingformations.

Isolate wells and prevent leaks• Put in place robust rules on well design, construction, cementing and integritytesting as part of a general performance standard that gas bearing formationsmust be completely isolated from other strata penetrated by the well, in particularfreshwater aquifers.• Consider appropriate minimum-depth limitations on hydraulic fracturing tounderpin public confidence that this operation takes place only well away fromthe water table.• Take action to prevent and contain surface spills and leaks from wells, and toensure that any waste fluids and solids are disposed of properly.

Treat water responsibly• Reduce freshwater use by improving operational efficiency; reuse or recycle,wherever practicable, to reduce the burden on local water resources.• Store and dispose of produced and waste water safely.• Minimise use of chemical additives and promote the development and use ofmore environmentally benign alternatives.

Eliminate venting, minimise flaring and other emissions• Target zero venting and minimal flaring of natural gas during well completion andseek to reduce fugitive and vented greenhouse-gas emissions during the entireproductive life of a well.• Minimise air pollution from vehicles, drilling rig engines, pump engines andcompressors.

Be ready to think big• Seek opportunities for realising the economies of scale and co-ordinateddevelopment of local infrastructure that can reduce environmental impacts.• Take into account the cumulative and regional effects of multiple drilling,production and delivery activities on the environment, notably on water use anddisposal, land use, air quality, traffic and noise.

Ensure a consistently high level of environmental performance• Ensure that anticipated levels of unconventional gas output are matched bycommensurate resources and political backing for robust regulatory regimes atthe appropriate levels, sufficient permitting and compliance staff, and reliablepublic information.• Find an appropriate balance in policy-making between prescriptive regulation andperformance-based regulation in order to guarantee high operational standardswhile also promoting innovation and technological improvement.• Ensure that emergency response plans are robust and match the scale of risk.• Pursue continuous improvement of regulations and operating practices.• Recognise the case for independent evaluation and verification of environmentalperformance.

谢谢。

Bill Hewitt, September 24, 2012For the Elion Resource Group

For more, see To Frack or Not to Frack? and Natural Gas (Revisited)

Also,