SHALE GAS EXPLAINED. What is shale gas?

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1 SHALE GAS EXPLAINED What is shale gas? Shale gas is natural gas trapped in shale, a fine grained rock made up of clay, quartz and calcite minerals. To liberate the gas, wells, are drilled down vertically and then horizontally through the shale. The rock is then hydraulically fracture stimulated creating a network of small cracks that enable gas to flow from the rock. What is hydraulic fracture stimulation? Hydraulic fracture stimulation is when fluid is pumped into a well at high pressure to fracture the rock, creating a network of interconnected cracks that open spaces for the movement of gas to the well bore. Hydraulic fracture stimulation is used when the rock or sand has poorly connected pore spaces which limits the flow of gas to the well. More than 700 oil and gas wells in the Cooper Basin have been fracture stimulated since exploration commenced in the basin fifty years ago. In more detail, following completion of either horizontal or vertical drilling into the rock, the steel casing surrounding the well bore is perforated at regular intervals. Fluid is then pumped down the well under high pressure, passing through the perforations into the target zone to create or enlarge fractures in the rock. The fluid is predominantly water mixed with proppants, typically sand or ceramic beads, used to prop the newly created fractures open and prevent them from closing up after pressure is released. The trapped oil or gas can then flow through the induced fracture system to the production well. What chemicals are used in fracture stimulation? Additives are used during the stimulation for a variety of purposes, such as:

2 reducing friction between the water and the pipe or casing in the well; stopping the growth of bacteria in the well and reservoir; preventing corrosion of the casing; and carrying the proppant. The chemical compounds used include surfactants (found in soap and toothpaste); guar gum (in ice cream); sodium hypochlorite and hydrochloric acid (in swimming pools), acetic acid (basis of vinegar), cellulose (structural component of primary cell wall of green plants) and biocides (to inhibit bacteria forming and corroding the steel and cement well casing). Although these additives are often also found in commonly used household products, it doesn t mean that they are all harmless, but with appropriate control their use can be managed. Chemical additives in the fracture stimulation fluid are highly diluted so they only represent less than 1% of the volume of the fluid, as shown in the chart below. Can fracture stimulation fluid come into contact with groundwater? Aquifers may be passed through when a well is drilled. These aquifers are isolated behind layers of cemented steel casing which line the well. The casing and cement provide a mechanical barrier between the inside of the well and geological formations. This ensures the fracture stimulation fluid is not pumped into the aquifers. The cement fills the space between the casing and the rock that has been drilled. It prevents migration of fluid along the well path behind the casing and ensures that fluids pumped into the well at depth will not migrate up to the aquifers.

3 In the Cooper Basin, the gas saturated zone, which is the target of drilling, is usually many hundreds of metres below the deepest aquifers. Monitoring of the height growth of typical shale gas fracture stimulation treatments in the US indicates that fractures do not grow more than metres from the treatment zone. Further, geological barriers tend to limit height growth of fracture stimulation treatments. In the Cooper Basin geomechanical studies suggest that the Triassic zone, which occurs between the Jurassic aquifers and the target zones, is a stress barrier and will prevent upward growth of induced fractures during stimulation treatments. Water production from an oil or gas well can in fact slow or stop oil and gas production, so producers are additionally vigilant in ensuring that aquifers are not penetrated. Where necessary, micro-seismic monitoring techniques are used to measure the extent of fractures. A number of trusted oil and gas industry experts have reported that fluid leaks are far more likely to result from poor well construction than from fracture stimulation activities. well construction is the dominant source of non-transport pollution problems in well development, including most that are erroneously blamed on hydraulic fracturing - George E. King, Apache Corporation, 23 Jan 2012 The integrity of a gas well is dependent on good design and construction. Beach has been drilling oil and gas wells throughout its 50 year history and has invested hundreds of man hours testing and researching the design of our shale gas wells in an effort to ensure that they are well constructed and of the highest integrity. Can the chemicals stored on the site affect groundwater? Safe handling of all water and fluids on site, including chemicals used for hydraulic fracturing, is of the highest priority. There are strict regulations governing containment, transport and spill handling. To protect the environment, chemical containers are located on site within secondary containment barriers, which have the capability of capturing a spill in the unlikely event that one would occur. Should a spill occur, it would be immediately cleaned up, reported and documented in accordance with regulatory requirements. What happens to the fracturing fluid after it is used? Much of the fracture stimulation fluid remains underground. However, a portion of the fluid used to stimulate the well, returns to surface. This fluid is contained in fully lined ponds and evaporated. The pond liners are removed and disposed of once this process is complete. If appropriate and feasible, the recovered water may be used to fracture stimulate other wells in the same area. How are unconventional gas exploration and development activities regulated in South Australia? In South Australia, all operations associated with upstream petroleum operations, including coal seam, shale and tight gas exploration, development, production and transport in pipelines, are regulated under South Australia s Petroleum and Geothermal Energy Act 2000 (P&GE Act) and the accompanying Petroleum and Geothermal Energy Regulations The P&GE Act and its

4 Regulations can be readily accessed through the South Australian legislation website Key objectives of the P&GE Act and its Regulations are to ensure that all risks to the health and safety of the community and the environment are either completely avoided, or managed and reduced to a level that is low, or as low as reasonably practicable, to meet community expectations for net outcomes. The grant of petroleum exploration, petroleum retention, petroleum production and petroleum pipeline licences, pursuant to the P&GE Act, does not provide an automatic entitlement to conduct regulated activities under the P&GE Act. Before regulated activities under the P&GE Act can be carried out there must be an approved Statement of Environmental Objectives (SEO) in place, prepared on the basis of an Environmental Impact Report (EIR). In addition, an activity notification must be provided for all activities detailing the planned operations, risk management processes, operator capabilities and the applicable SEO. The EIR identifies all potential risks relating to the activity and the appropriate risk mitigation and monitoring strategies. The SEO identifies the environmental objectives to be achieved to address the risks identified in the EIR and the criteria to be used to assess achievement of the objectives. All SEOs and associated EIRs are public documents found on the South Australian Government s Department for Manufacturing, Innovation, Trade, Resources and Energy website. Beach s SEO and EIR were open for public comments until 28 May In its SEO Beach outlined 12 key environmental objectives as follows: 1. Avoid aquifer contamination. 2. Minimise impacts of groundwater use. 3. Avoid contamination of surface water and shallow groundwater. 4. Minimise disturbance and avoid contamination to soil. 5. Minimise disturbance to native vegetation and native fauna. 6. Avoid the introduction or spread of pest plants and animals and implement control measures as necessary. 7. Avoid disturbance to sites of cultural and heritage significance. 8. Minimise air pollution and greenhouse gas emissions. 9. Minimise risks to the safety of the public, employees and other third parties. 10. Avoid or minimise disturbance to stakeholders and / or associated infrastructure. 11. Optimise (in order of most to least preferable) waste avoidance, reduction, reuse, recycling, treatment and disposal. 12. Remediate and rehabilitate operational areas. Beach has also determined assessment criteria for these 12 objectives in its SEO. Click here to view a table of Beach s SEO, including assessment criteria for fracture stimulation of deep shale gas and tight gas targets in the Cooper Basin, South Australia. Click here to view the South Australian Government s Invitation for Public Comment

5 Click here to view Beach s Environmental Impact Report What information is provided to stakeholders and land owners? Through the stakeholder consultation requirements of South Australia s Petroleum and Geothermal Energy Act 2000 (P&GE Act), stakeholders including landholders are required to be informed of the potential risks associated with proposed activities, and management strategies to be deployed to minimise such risks. This is undertaken in two stages of an activity approval, firstly during the development of the EIR and SEO and secondly, when Notice of Entry is provided. In addition, licensees are required to submit annual reports detailing activities undertaken within each licence area during the respective licence year, as well as the activities proposed for the ensuing licence year. An important part of this reporting is to ensure that each licensee regularly reviews, assesses and reports on their performance and compliance with the P&GE Act and the relevant environmental objectives.