Unlocking Lancashire's Shale Gas

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Overview: Lancashire Shale Gas Potential

▪ Indigenous Shale Gas could provide up

to 50% of the UK’s natural gas

requirements

▪ Lancashire Shale is the only significant

Shale Gas opportunity that could be

producing into the domestic gas market

within the next 5 years

▪ If successful, it offers the opportunity for

hundreds of £millions of private

investment and could generate up to

tens of £millions of local contributions

▪ The local supply chain could deliver a

significant proportion of capital and

operational expenditure

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What is Shale Gas?

▪ Like conventional reservoirs, shale rock

contains natural gas that has been generated in

marine deposits, laid down hundreds of millions

of years ago

▪ Unlike natural gas from conventional reservoirs,

gas in shale rock has remained in the source

rock which has low permeability

▪ Fracturing is required to create the connectivity

between microscopic gas pockets, to allow the

gas to flow

▪ Fracturing is a well established technique used

globally over many decades to improve the

reservoir performance of many different types

of rocks

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The potential for gas in the Bowland Shale has been assessed by

independent experts

▪ The 2013 study by the British Geological

Survey assessed the resource potential of UK

shales

▪ Central Case in-place estimates

– Bowland Basin: 1,329 trillion cubic feet gas

▪ In context, current UK annual gas consumption

~2,500 billion cubic feet of gas

▪ So, even with a small percentage recovery of

in-place volumes, this could be a very

significant contributor to UK gas for decades

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DUKES2016 Chapter 4

Even in the most positive outlook for energy efficiency and

renewables, UK natural gas demand will endure

▪ Majority of natural gas used for

heating, cooking and industry

▪ Small proportion used for generating

electricity

▪ Over 50% of our natural gas

requirement is now imported

▪ Under the greenest scenario we’ll still

be consuming the majority of today’s

natural gas requirement in 2040

Sources: Dukes 2016 and National Grid Future Energy Scenarios 20166

Results from our current activities at Preston New Road are very

encouraging ▪ First two horizontal fractured shale gas wells in

the UK

▪ These wells will establish the commercial viability

of Lancashire shale gas development

▪ Completed drilling a vertical pilot well >2.7 km

through both the Upper and Lower Bowland

shales

▪ Recovered >100m of core samples

▪ The most comprehensive data set recovered

from any UK shale well

▪ Excellent rock quality for hydraulic fracturing and

a high natural gas content in several zones within

the shale

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Results from our current activities at Preston New Road are very

encouraging

THE TIMES 13th Jan 2018:

“The company’s tests suggest that each well could extract enough gas to meet

the needs of 5,000 homes for 30 years.”9

We are a Lancashire based company, and have articulated six

commitments to our home County

1. We will increase energy security for Lancashire

and Britain as we become operational

2. We will carry out our operations to the highest

safety and environmental standards and

communicate openly

3. We will work with local partners to promote

Lancashire as a hub for the UK shale gas

industry with new jobs and economic growth

4. We will prioritise Lancashire suppliers and publish

the amount we are spending

5. We will support local training opportunities for

young people including the National Onshore Oil

and Gas College based at Blackpool & The Fylde

College

6. We will share the benefits of shale gas by

sponsoring educational and sporting projects and

through a local community benefit scheme

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What will Shale Gas development look like?

▪ Vision of Shale Gas development specific to

Lancashire setting will be heavily informed by this

year’s activities

▪ US shale development is not a good analogue

– Different rocks

– Different geography

– Different drivers

▪ We will seek to minimise the surface footprint, by

having multiple directional wells from a single “pad”

location, similar in size to Preston New Road

▪ Multiple similar pads could be developed to optimise

resource extraction

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What could future Shale Gas Development mean for Lancashire?

Local contributions enabling local investment

Exploration Well * £100k per exploration lateral

Local Grid Entry *Potential saving of ~2% on gas price for local

grid entry

Production Revenue >1% gross production revenues

Business Rates 3% gross production revenues (indicative)

Shale Wealth Fund 10% of corporation tax (up to £10m per site)

* For exploration activity only

Photo © P L Chadwick (cc-by-sa/2.0)Photo © robert wade (cc-by-sa/2.0)

What could future Shale Gas Development mean for Lancashire?

Local Supply Chain Opportunities

▪ Getting Ready for UK Shale Gas (2014)*

– £33bn spend on potential supply chain

– 64,500 Jobs in upstream phase

▪ Potential for Lancashire business

– Single production pad = several hundred £m capex

and opex

– Significant proportion of spend will be in Lancashire

– Proportion will increase as industry and supply chain

becomes more established in the local area

– First mover advantage means we will be ideally

positioned for growth across the North

14* Report by UKOOG and EY

Lancashire Shale Gas has the potential to transform the County

▪ Lancashire's “Gross Value Added” per capita is only 77% of the UK average

▪ Lancashire strategic economic plan 2014: “Without strategic interventions Lancashire's

GVA gap with the rest of the country is predicted to increase”

▪ Shale Gas could be precisely the opportunity that:

– Puts Lancashire at the centre of the UK’s energy map

– Delivers significant private investment

– Develops local supply capabilities

– Directly contributes to funds for local disbursement

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