BSM084 - Group 15 - 1413749 - Individual Report - IGas Shale - 2015_01_05 (FINAL)

BSM084-ODL Project Fundamentals

Individual Report

UK Shale Gas

High Level Project Plan

1413749

MSc Project Management

December 2014

Word Count: 3691

http://campusmoodle.rgu.ac.uk/user/profile.php?id=253235

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


IGas Energy Plc - UK Shale Gas High Level Project Plan Page | iii

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


IGas Energy Plc - UK Shale Gas High Level Project Plan Page | iv

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.


IGas Energy Plc - UK Shale Gas High Level Project Plan Page | 1

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).



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).



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).



Figure 1-4: Exploratory Shale Gas Drilling Site at Barton Moss

Figure 1-5: Typical Shale Gas Site in Hydraulic Fracturing and Production



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



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



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).



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



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.



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)



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)



Figure 4-2: Roadmap of DECC Consent to Shale Gas Hydraulic Fracturing in England

(Department of Energy and Climate Change, 2013)



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



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


PH

ASE

•Site and Equipment Maintenance

•Extension of PEDL189 Licence

•Future Plans


PH

ASE

•Seal Well Hole and Abandon Site

•Project Success Analysis

•Lessons Learned

•Project Closeout



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



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



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



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.



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



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.



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.



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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Appendix A West Bowland Basin Shale Gas Development Costs



Appendix B Midland Valley Shale Gas Development Costs



Appendix C Sussex Weald Basin Shale Gas Development Costs



Appendix D Investment Return Comparison of each Region

Documents

BSM084 - Group 15 - 1413749 - Individual Report - IGas Shale - 2015_01_05 (FINAL)