Imperial Oil and Gas – 19 May 2014

To The Commissioner,

RE: APPEA Submission to the Northern Territory Hydraulic Fracturing Inquiry

Imperial Oil & Gas Ltd is a petroleum exploration and production company exploring for hydrocarbons within the approved tenements of the Northern Territory. Imperial is a wholly owned subsidiary company of Empire Energy Group ltd (an 100% Australian owned company) currently operating an extensive number of producing oil and gas wells from its operations in the continental United States of America.

As a subsidiary of an operating and exploring petroleum company Imperial welcomes the submission1 by APPEA to the enquiry and provides this letter of support to that submission.

Imperial has confidence that the Inquiry will provide the clarity required to properly inform the public on both the benefits and perceived risks of hydraulic fracturing and onshore petroleum exploration and development in the Northern Territory. As reported in the APPEA submission “The science indicates that, with appropriate monitoring and robust and transparent regulation in place, shale and tight petroleum resources can be developed safely and effectively as an economically important additional energy source which could significantly reduce Australia’s greenhouse gas emissions. Other impacts in relation to health, cumulative impacts, seismicity, fugitive emissions, social impacts, groundwater contamination and best practice regulation for onshore natural gas have also been considered extensively by the existing literature.”

A recent announcement in the BBC Business News2 reported on the 7th of May 2014:

“Regulated fracking should be an "urgent national priority", an influential group of Lords has said.” Shale gas can bring "substantial benefits" to "the economy, to national energy security and to the environment", the Lords committee said.

The report went further to say that “the UK Economic Affairs Committee last week pledged to support the House of Lords as they call for fracking to become a ‘national priority’. The UK House of Lords went on to say that changes to the law are being urged to ensure responsible land holder and drilling cooperation.

Imperial supports the APPEA position “that the key technical issues at the centre of the Inquiry are being managed effectively by the petroleum industry in the way the exploration programs are planned and developed.”

A report3 (Dr Jeffrey – Draft Report) prepared for the office of the NSW Chief Scientist & Engineer by Rob Jeffrey, CSIRO Earth Science and Resource Engineering stares that “Hydraulic fraccing has been used internationally in the petroleum industry since 1947 to stimulate oil and gas wells, allowing production at higher rates and enabling more of the in place hydrocarbons to be recovered. Hydraulic fracturing for stimulation was first used in Australia in 1969 in the Cooper Basin”.

The process of hydraulic fracturing has been used in the Northern Territory’s oil and gas industry since the 1980s and in other Australian jurisdictions since the early 1950s. Since that time around 1800 wells in South Australia, Western Australia and the Northern Territory have been hydraulically fractured with no adverse effects on water aquifers. This includes the fracture of around 300 wells in the Amadeus Basin in the NT.

Further, It is relevant to note in the context of well integrity that as part of a program4 to assess well head safety, 2719 well sites across Queensland were inspected with the key findings that of the 2719 sites:

In summary, all of these points help to ensure that aquifers are protected from risks arising from well failure, such as radial leaks (movement of contaminated or saline water or methane through casing into rock formation) or annular leaks (vertical movement between casings, or between casing and rock formation). Best practice guidelines for well construction and integrity are set down by the API (Well Construction and Integrity Guidelines, 2009) and it is important to recognise that well failure is rare in a well-regulated environment.

The technology that is used to fracture wells accessing conventional oil and gas resources is the same as that used to fracture wells drilled into deeper shale oil and gas resources (regardless of whether the wells are vertical only or also extend horizontally). The types of risks encountered in fracturing conventional oil and gas wells and the management practices used to minimise those risks are the same as those encountered and managed while drilling shale and tight oil and gas deposits.

This same report goes on to state that hydraulic fracturing is not only currently used in CSG and shale hydrocarbon production but Hydraulic fracturing is used to stimulate water wells (Dr Rob Jeffrey (draft report)). And, “Hydraulic fracturing has been used since 1997 to weaken rock in coal and metal mining operations. This work is usually done before mining by preconditioning the rock so that it will fail uniformly when mining occurs.

It should be noted that much of the environmental campaign around the hydraulic fracturing process in based on information from the outcomes of the process used on coal seam gas at relatively shallow depths. The fear and misinformation campaigns put forward by the relevant environmental lobby groups do not provide information on the process as used in the shale oil and gas or conventional oil and gas industry.

The report on the life cycle of CSG projects and the impact of fracking generated by the NSW Chief Scientist5 in section F.1 Fracking For CSG and Shale Gas reports that “Hydraulic fracturing (fracking) to stimulate gas production has been used by the petroleum industry for many decades, including in Australia. There are some similarities in its application to coal and shale in that in both instances, the purpose is to increase the permeability of the rock, thereby increasing the flow of gas from the coal seam or the shale to the production well. In addition to increasing the fracture permeability, it also gives access to a greater volume of gas- bearing rock thereby increasing the total volume of gas that can be produced from a single well. However there are a number of important differences between coal seam gas and shale gas production that reflect their differing geology. A number of these features impact on the application of fracking to the two types of gas production.”

While the type of risk are similar between CSG and Shale; in the case of shale the risk is usually far lower due to the greater depths associated with shale deposits and hence greater vertical separation between fracture zones and water aquifers. These critical risk issues around hydraulic fracturing and development of shale and tight resources have been considered in detail by the Australian Council of Learned Academies (ACOLA).

According to the Chief Scientist report on CSG projects referenced earlier In the United States fracking is almost invariably undertaken for shale gas projects in horizontal wells to produce vertical fractures. In Australia it is unclear the extent to which vertical fracking from horizontal wells will be used for shale gas, because in many areas, the Australian stress field is predominantly compressive, meaning that fracking in vertical wells may be the preferred method for Australian shale gas.

Imperial Oil & Gas ltd agrees with the APPEA assertion that the Petroleum industry has the technical capability to develop all forms of oil and gas resources. And as stated by the APPEA submission, expansion of the industry into onshore areas with little previous exposure to oil and gas exploration will require the development of understanding and confidence among local communities and landholders. This confidence will require robust regulation, responsible operator practices and early and effective communication with stakeholders. While addressing the Inquiry terms of reference, we believe the submission provided by APPEA will also reference on how the industry is working across these three areas to build confidence.

We look forward to the findings of the inquiry in this matter.

  1. APPEA Submission to the Northern Territory Hydraulic Fracturing Inquiry. MAY 2014
  5. Life Cycle of Coal Seam Gas Projects: Technologies and Potential Impacts Report for the New South Wales office of the Chief Scientist and Engineer. Professor Peter J Cook CBE, FTSE June 2013