SHale gas Exploration andExploration and Exploitation induced RisksRisks

Ri k M t i thRisk Management in the Development of Shale Oil and Gas

Prof Ruth Allen - Director RSKW

Development of Shale Oil and Gas

Second Annual MeetingSecond Annual MeetingBlackpool - June 5-7, 2017

This project has received funding from the European Union’s Horizon 2020 research and innovation programme under grant agreement No 640896.

Risk Management – Shale Oil and Gasg

Talk Content1 What is risk?

2 Examples of perceived and non perceived risk2 Examples of perceived and non-perceived risk

3 Risks in shale oil and gas exploration

4 Risk quantification

5 So what? - Risk management thoughts

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What is risk?

http://world.350.org/nepal/the-greatest-oil-spill-disaster-the-bp-oil-spill-samidha-shakya/

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What is Risk? – ISO 31000:2009

effect of uncertainty of objectives (deviation from theeffect of uncertainty of objectives (deviation from the expected financial, environmental, social, health and safety etc. goals)

coordinated activities to direct and control an organisation gwith regard to risk

a situation involving exposure to danger

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Perceived Risks –Queen Victoria’s Train JourneyQueen Victoria s Train Journey

….it goes so fast you won’t be able to breathe….

• Great Western Railway (I.K. Brunel) linked Bristol with London Paddington in June of 1841.Paddington in June of 1841.

• Bypassed Windsor - noise and smoke • Headmaster at Eton - "must be to the greatest degree injurious"

to both health and discipline at the school.p

The Queen wrote….. "In half-an-hour, free from dust and crowd and heat, and I am quite charmed with it."

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a d a qu te c a ed t t

Unknown Risks –Things not thought risky that wereThings not thought risky that were

Clunk-Click – seat belt campaign 1971campaign 1971

Drink Drive Campaign 1964|6

Drink-Drive Campaign 1964- Risk management in the development of shale oil and gas -

R. Allen, RSKW - Blackpool 7 th June

Unmanaged Risk?

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Real or Perceived Risks?

FACTS AND INFORMATION

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Risks or Myths and Legends?

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Risk Management in Shale Oil and Gas

“The SHEER project analyses best p j ypractices for assessing and mitigating the environmental risks related to the

l ti d l it ti f h lexploration and exploitation of shale gas. This includes development of a probabilistic procedure for assessing shortprobabilistic procedure for assessing short and long-term risks associated with groundwater contamination, air pollution g , pand induced seismicity.”

http://www.sheerproject.eu/

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New Processes…. New Risks

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Risk management process

The ISO 31000:2009 Risk management process (ISO, 2009)

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Risk Management in Shale Oil and Gas - Water

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Risk Management in Shale Oil and Gas - Water

Factual Review• History of development, licensing

G• Resources and Reserves• Role of innovation and technology• Water management infrastructure• Supply and demand in last 5 years

General Analytical Approach

• Overview of regulatory framework

Pestle AnalysisPolitical economic socialPolitical, economic, social, technological, legal, environmental

SWOT AssessmentInternal and external

Scenario DevelopmentHigh, medium, low

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Risk Impact/Probability Chart

Highg

High HighLow High

act

g gg

Impa

Hi h LL L High LowLow Low

Probability0%

Low

100%

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Risk Management in Shale Oil and Gas

• Critical importance. • These are your top

• High importance - very unlikely to happen.

High

y ppriorities, and risks that you must pay close attention to.

• Do what you can to reduce the impact if they do occur.

• Have contingency

act

High HighLow Highplans in place in case they do.

Impa

High LowLow Low

Probability0%

Low

100%• Low level importance y

• Moderate importance – if these things happen, you can cope with them and move on.

• Try to reduce the likelihood that

Low level importance• Risks that you can often ignore.

|- Risk management in the development of shale oil and gas -16R. Allen, RSKW - Blackpool 7 th June

they'll occur.

Risk Management in Shale Oil and Gas

• Critical importance. • These are your top

• High importance - very unlikely to happen.

High

y ppriorities, and risks that you must pay close attention to.

• Do what you can to reduce the impact if they do occur.

• Have contingency

act

High HighLow Highplans in place in case they do.

Impa

High LowLow Low

Probability0%

Low

100%• Low level importance y

• Moderate importance – if these things happen, you can cope with them and move on.

• Try to reduce the likelihood that

Low level importance• Risks that you can often ignore.

|- Risk management in the development of shale oil and gas -17R. Allen, RSKW - Blackpool 7 th June

they'll occur.

Risk Management in Shale Oil and Gas

• Critical importance. • These are your top

• High importance - very unlikely to happen.

High

y ppriorities, and risks that you must pay close attention to.

• Do what you can to reduce the impact if they do occur.

• Have contingency

act

High HighLow Highplans in place in case they do.

Impa

High LowLow Low

Probability0%

Low

100%• Low level importance y

• Moderate importance – if these things happen, you can cope with them and move on.

• Try to reduce the likelihood that

Low level importance• Risks that you can often ignore.

|- Risk management in the development of shale oil and gas -18R. Allen, RSKW - Blackpool 7 th June

they'll occur.

Risk Management in Shale Oil and Gas

• Critical importance. • These are your top

• High importance - very unlikely to happen.

High

y ppriorities, and risks that you must pay close attention to.

• Do what you can to reduce the impact if they do occur.

• Have contingency

act

High HighLow Highplans in place in case they do.

Impa

High LowLow Low

Probability0%

Low

100%• Low level importance y

• Moderate importance – if these things happen, you can cope with them and move on.

• Try to reduce the likelihood that

Low level importance• Risks that you can often ignore.

|- Risk management in the development of shale oil and gas -19R. Allen, RSKW - Blackpool 7 th June

they'll occur.

Risk Management in Shale Oil and Gas

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Risk Management in Other Sectors

• Water Meter replacement programme p g

• High proportion of reactive spend• Managing asset failure:

ReactiveReactiveProactive – asset typePredictive – asset criticality, target assets highesttarget assets highest likelihood of failing first

• Asset cohort groupsC iti lit d l ti l• Criticality model – operational, financial, reputational

• Reduced reactive cost, mitigated F B impact of customer/operational/

reputational issues.• £££ Saving

Four Box Model

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g

Risk Management in Other Sectors• Station Asset Management• Optimised investment and customer

feedback scores (£££ saving)( g)• Risk scoring based on such factors as:

• Safety • EnvironmentalEnvironmental • Operation• Cost of Repair • Replacement Value• Replacement Value • Probability of Failure • Criticality

R f ti• Range of actions:Run to fail…to…Immediate actionFour Box

M d l • Reduced reactive cost, mitigated impact of customer/operational/ reputational issues, optimal investment timing

Model

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Assess all inter-related risks

(Roux & Seaton, 2013)

|23

(Roux & Seaton, 2013)

- Risk management in the development of shale oil and gas -R. Allen, RSKW - Blackpool 7 th June

So What?• SHEER research programme• Consider perceived and real risks

M th d l d f t d i f ti lid t d• Myth and legend – facts and information - validated• Address the REAL issues • Messages need to be simple, reinforceable and validated by data• There is not a ‘one size fits all’ communication• There is not a one size fits all communication• Be thorough – this is serious

• Lot of world class experts here today

• Use themUse them• Ask questions and share

information• Enjoy it!j y

….and finally….

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Risk and Forecasting – Keep it Simple

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ReferencesC idi T W t R C idi N M ti J 2012 E i t l I t d i M ll h l d illi i tConsidine, T., Watson, R., Considine, N., Martin, J., 2012. Environmental Impacts during Marcellus shale gas drilling: causes, impacts and remedies. Shale Resources and Society Institute

Environment Agency, 2013. Regulating for people, the environment and growth https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/312703/LIT_9902.pdf (accessed May 2017)

ISO, 2009. ISO 31000:2009, Risk management – Principles and guidelines. International Organization for Standardization, Geneva, Switzerland

Roux, L. and Seaton, J., 2012. Strategic Risks associated with developing a European Shale Gas Industry. Executive summary strategic risk shale gas Europe Research Centre for Energy Management (RCEM)strategic risk shale gas Europe. Research Centre for Energy Management (RCEM) http://www.rcem.eu/media/90017/executive_summary_strategic_risk_shale_gas_europe.pdf (accessed December 2016)

US EPA, 2016. Hydraulic fracturing for oil and gas: impacts from the hydraulic fracturing water cycle on drinking water resources in the United States. United States Environmental Protection Agency Report EPA/600/R-16-236F; https://www.epa.gov/hfstudy (accessed February 2017)February 2017).

US CSB, 2016. Drilling Rig Explosion and Fire at the Macondo Well. United States Chemical Safety and Hazard Investigation Board, Report No. 2010-10-I-OS (April, 2016).

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Risk in the shale oil & gas development cycle

E.g.Groundwater risks arise inGroundwater risks arise inevery part of the oil and gascycle :• initial abstraction for use• initial abstraction for use

downhole• disposal• long-term protection of anlong term protection of an

aquifer from degradationin well integrity over time.

(US EPA 2016)

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(US EPA 2016)