Specification for research into the economic, societal and environmental impacts of onshore petroleum exploration and production in Northern Ireland

The research should analyse relevant contemporary qualitative and quantitative information and research across economic, social and environmental issues with focus on the interaction between these factors in determining the viability of onshore petroleum and, separately, UOG development.

The results of the research will be used by policy makers to formulate evidence-based policy options and provide Ministers with the information needed to make fully informed decisions about future petroleum development.

Background

Onshore petroleum exploration, on a relatively small scale, has taken place over a number of decades across Northern Ireland. Only sixteen exploration wells have been drilled and although several wells have recorded gas and oil shows none of these shows have led to field development. Table 1 summarises the petroleum exploration history in Northern Ireland.

Table 1: NI Petroleum Exploration History

*Spud date means the date of first actual penetration of the earth with a drilling bit.

Recent UK policy decisions around climate change and UK government commitments to a 2050 Net Zero Greenhouse Gas (GHG) Emissions target has raised the issue of whether or not it is economically, environmentally or socially appropriate to continue to license petroleum exploration and development onshore Northern Ireland.

The development of UOG – shale gas, associated liquids and Coal Bed Methane (CBM) – has been gathering pace in a number of countries around the world in recent years, most notably the USA and Canada, but more recently in Argentina (shale oil) and Australia (CBM). The exploitation of UOG resources has been associated with economic benefits in these countries and has led to the USA becoming the leading oil producer in the world. However, some of the processes used to recover UOG resources are controversial because of their potential environmental impacts.

In the UK, a number of sites have been identified which have geological characteristics that indicate potential sources of UOG. These sites include the Midland Valley of Scotland, the Bowland Shale area of northern England and the Hodder and Weald basins of southeast England.

Some UOG-related exploration activity has taken place in England, for example Cuadrilla Resources’ exploration activities in Lancashire. Such exploration has now been halted and a moratorium is in place on further exploration as it could not be demonstrated that the level of seismic activity induced by fracking would not adversely impact local communities.

In Northern Ireland, previous exploration has identified the potential for onshore petroleum, including UOG. As set out above, to date, none of the exploration activity in NI has resulted in discovery of economically viable deposits. Exploration companies continue to show interest in the region due to the geological factors which indicate potential reservoir basins for oil and gas.

Estimation of the potential for petroleum in Northern Ireland

Commercial quantities of conventional oil and gas reserves are as yet unproven in Northern Ireland, although hydrocarbons were discovered in the Ballinlea No.1 well, drilled in 2009 in the Rathlin sedimentary basin. P50 estimates of estimates of recoverable reserves were 812 million barrels of oil equivalent (mmboe) from nine leads and two prospects mapped across the onshore part of the Rathlin Basin using seismic and gravity data.

In the onshore part of the Larne Basin conventional hydrocarbon P50 resources were estimated to be greater than 450 mmbo (million barrels of oil) based on the size of the structures mapped from seismic reflection data. However, despite these estimates, recent drilling the Woodburn Forest No.1 well on one of the structures with P50 resource estimates of 25 mmbo resulted in a dry well. Despite the absence of commercial hydrocarbon discoveries, hydrocarbons shows have been recorded in several of the basins and the reservoir quality of the target reservoirs is good, but the hydrocarbon charge history is poorly understood.

The potential for UOG in Northern Ireland is greatest in the parts of Fermanagh that constitute the Lough Allen Basin. Estimates about the gas present (gas in place) in the Bundoran Shale Formation are based on the extent, thickness and depths of the shale, together with other properties (e.g. Total Organic Carbon, porosity). Other factors such as the tectonic structure and ability to access certain areas will determine the prospectivity of a given region.

In Co. Fermanagh the subsurface distribution and thickness of the Bundoran Shale Formation can be mapped with confidence, but some of the other parameters are less well understood. Drilling to obtain fresh rock core samples would enable these parameters to be more accurately quantified. The volume of gas recoverable from the formation is expected to be less than 15% of the gas in place although future technological advances could increase the amount of gas that might be recoverable.

Tamboran Resources Pty Ltd, who previously held a licence looking for shale gas, estimated the gas reserves in place in the Bundoran Shale in both Northern Ireland and the Republic of Ireland at between 10.7 and 21.3 tcf (trillion cubic feet), with recoverable gas volumes of 1.6 to 3.2 tcf. This is a large potential resource but, as outlined above, there are still significant uncertainties around these figures at this early stage of exploration.

Other areas of Northern Ireland where shale may be present at depth have some potential for UOG, but are at present much less prospective due to reduced knowledge of the nature, distribution and structure of shale deposits. In the Rathlin Basin UOG in place reserves were estimated to be 2.8 tcf. However, the deep geological structure is difficult to image using conventional seismic reflection techniques because of the thick near-surface layers of basalt which increase the diffraction and decrease the penetration of the seismic waves. Because of this limitation it is unlikely that the fault patterns could be mapped with sufficient resolution to allow companies to adequately identify and mitigate the risks of induced seismicity associated with drilling and hydraulically fracturing horizontal shale gas wells in this basin.

The research being commissioned is seeking to identify the economic, social and environmental impacts of onshore petroleum production across a range of scenarios. Within the research separate assessment should be made of UOG. As regards UOG, while a petroleum licence could be awarded to enable exploration for potential UOG under the Petroleum Production Act (NI) 1964, the NI Strategic Planning Policy Statement (SPPS) contains a presumption against the extraction of unconventional hydrocarbons ‘until there is sufficient and robust evidence on all the environmental impacts’.

In 2019, the Department consulted on two petroleum licence applications, one application proposed exploration UOG and the other for conventional oil and gas. The consultations generated a combined total of 5,703 responses (2,572 EHA and 3,131 for TRUK). The issues raised covered a wide variety of topics including climate change and the impact on net zero GHG targets, whether there is an economic case for the industry, environmental and health risks associated with emissions affecting air, water, waste, biodiversity and the impact on other sectors such as tourism, agriculture, fisheries and renewable energy. A summary of the responses will be made available to inform the research and the .researchers will be asked to address many of the complex issues involved in considering whether or not to award the petroleum licences.

Research in other jurisdictions

In 2014 the Scottish Government published a report on UOG in Scotland, the ‘Report on Unconventional Oil and Gas’, produced by the Independent Expert Scientific Panel. The Scottish research assessed the scientific evidence relating to UOG and included summaries of the geological and seismic evidence. It also considered the regulatory requirements for the development of the UOG sector in Scotland as well as the technical, environmental and societal challenges associated with the development of UOG. The Report concluded that there could be potential for positive economic impacts in terms of jobs created, taxes paid and gross value added from developing the UOG sector in Scotland. The report also identified that there are environmental or societal impacts such as concerns around water contamination, public health, seismicity, climate impacts and wider social impacts that will need to be carefully considered, and recommended that communities are consulted regarding those impacts.

To support the Scottish Government’s assessment of the benefits and challenges of UOG development, a number of research projects were commissioned by the Scottish Government including:

• understanding and monitoring induced seismic activity
• decommissioning, site restoration and aftercare
• obligations and treatment of financial liabilities
• understanding and mitigating community level impacts on transport
• economic impacts and scenario development
• climate change impacts.

Separately, a Public Health Impact Assessment (PHIA) of UOG development is also being evaluated.

This KPMG Report Economic Impact Assessment and scenario development of unconventional oil and gas in Scotland presents the findings of the economic impact assessment and scenarios development.

In 2015 the Welsh government published research into the potential impact of coal bed methane production with regard to economic, social and economic factors (Socio-economic impact of unconventional gas in Wales). Following this research a model was developed that used a wide range of indicators such as environmental designation, social and health data to model the suitability of certain areas for CBM production. The model runs were used to inform decision making as regards CBM production.

Between 2014 and 2016 the Irish Environmental protection Agency (EPA), the Department of Communications, Energy and Natural Resources (DCENR) and the Northern Ireland Environment Agency (NIEA) commissioned a 24 month research programme to look at the potential environmental and health impacts from UOG development (UGEE Joint Research Programme).

This research concluded that UOG development comprises multiple activities over a period of up to 25 years with the potential to impact on both human health and the environment at all stages. Although the final report concluded that many of these potential impacts could be effectively mitigated with the use of appropriate techniques and a robust regulatory regime, it identified three main areas where there was insufficient information to assess whether such mitigation measures would be effective and suggested some further areas of research to address these information gaps. However, the Irish Government subsequently introduced a ban on all onshore oil and gas exploration and production and this second phase of research did not proceed.

Scope of the contract

The Department for the Economy is seeking to commission a review of existing research into the economic, societal and environmental benefits and disbenefits of onshore petroleum development (including exploration, extraction and decommissioning) and its application to Northern Ireland across a range of pre-identified scenarios.

The research should use the Irish, Scottish and Welsh reports, and other relevant UK information, as a source of data in producing an assessment of the interactions between environmental, social and economic factors in identifying the benefits and disbenefits of petroleum exploration and development in NI. The research should also consider other relevant information from other jurisdictions.

Research aims and objectives

The general aims of the research are to:

• inform understanding, based on a current knowledge of the resource that might exist in Northern Ireland, of the potential economic, social and environmental benefits and disbenefits to Northern Ireland of onshore oil and gas development for conventional and unconventional gas development, in both the exgploration phase and commercial extraction stages
• inform identification of the key economic, social and environmental variables that may be impacted by conventional and unconventional gas development, and to determine suitable indicators against which the impacts can be assessed
• compare the economic, social and environmental variables to those of a continuing reliance on the importation of oil and gas
• compare the economic, social and environmental variables to those of increased reliance on renewable energy technologies
• inform Identification of any potential cross-border implications of conventional or unconventional oil and gas development
• inform policy development on conventional and unconventional oil and gas exploration and development.

The specific objectives are to:

• assess the economic, social and environmental impacts in the two key stages of development (planning/exploration/assessment stage and commercial extraction stage) in each of the development scenarios set out below
• evaluate the supply chain, business support and the jobs likely to be directly and indirectly created, from the exploration stage through to well decommissioning, and their associated skills, qualifications and wage levels. Consider whether there is a requirement, and then the potential for developing education and training provision in Northern Ireland to meet this skill requirement
• estimate the potential social and environmental benefits and disbenefits to communities hosting conventional and unconventional gas developments in each of the development scenarios
• estimate the potential environmental benefits and disbenefits of oil and gas exploration and extraction in general and specifically to areas designated because of their environmental importance or scenic value in each of the development scenarios
• determine impacts of conventional and unconventional oil and gas development on other economic sectors in Northern Ireland including (but not exclusive to) tourism, transport, agriculture, fisheries, energy intensive industry, refineries and other energy sources including renewables and other fossil fuels
• determine the impact of conventional and unconventional oil and gas development on assets and resources in Northern Ireland including electricity transmission and gas networks, associated infrastructure and water supply
• address a number of the issues identified in the 2019 consultation on two petroleum licence applications, with a view to informing a recommendation as to whether or not to grant the licences.

This research is intended to be an independent assessment of the potential economic, societal and environmental impacts of the development of oil and gas resources in Northern Ireland. Like the Scottish report this research should be based on a range of data sources including, publicly available information, including the Irish, Scottish and Welsh and other GB reports, an analysis of that information and where appropriate stakeholder engagement to inform and test conclusions.

The report should also take account of other relevant information, including the Global Material Resources Outlook to 2060, which considers future resource requirements locally and globally and the likely impact of environmental policies – particularly zero carbon commitments.

Assessment requirements

Review of policy

An assessment of the impact of the UK government’s declared climate emergency and 2050 net-zero commitments.

A review of current energy policy, including consideration of any indicated policy direction from the new NI Energy Strategy, which is in development and which has issued a call for evidence.

A review of other policies in relation to conventional and unconventional oil and gas both in Northern Ireland and the rest of the UK, such as current planning guidance, initiatives to promote exploration and extraction, economic development measures, community benefit initiatives, etc.

A review of the proposed objectives contained in the consultation on NI’s first Environment Strategy (Environment Strategy for NI public discussion document).

A review of relevant policies in the Republic of Ireland and possible transboundary issues.

Analysis of the resource position

A review of the latest available evidence on:

• the potential conventional oil and gas resource (globally, in the UK and in Northern Ireland), distinguishing between the types of resource
• the potential unconventional gas resource (globally, in the UK and in Northern Ireland)
• an assessment of the global demand and supply position in relation to oil and gas
• the key factors that determine the technically and economically recoverable resource, including their relevance to the conditions in NI
• the estimates of technically and economically recoverable reserves in Northern Ireland, if they are available.

Review of the economic impact evidence

A comprehensive review of existing studies examining national, regional and local impacts of conventional and unconventional oil and gas exploration and extraction, including:

• economic, sectoral and labour market impacts
• energy market impacts (eg infrastructure and assets, pricing, security)
• local community impacts.

The review should take account of peer-reviewed literature, in particular from the US, due to the greater experience of developing onshore conventional and unconventional oil and gas at scale in the US and hence the existence of a substantial evidence base, but allowing for the geological, economic and fiscal differences between the US and UK.

The review should draw on the analysis of economic impact undertaken in the Scottish and Welsh reports and consider the application to NI.

The review should consider the changing importance of global and local environmental protection – particularly net zero requirements, with a focus on how this could change the economics of petroleum development.

Review of the environmental impact evidence

A comprehensive review of the existing studies examining the national, regional and local impacts of conventional and unconventional oil and gas exploration and extraction, including:

• impacts on areas which are designated or protected because of environmental importance or scenic value
• impact on air and water quality
• local community health impacts

The review should consider peer reviewed literature, in particular from the US, due to the greater experience of developing onshore conventional and unconventional oil and gas at scale in the US and hence the existence of a substantial evidence base, but allowing for the geological, economic and fiscal differences between the US and UK.

The review should draw on the analysis of environmental impact undertaken in the Scottish, Welsh and Irish Reports and consider the application to NI.

Review of the social impact evidence

A comprehensive review of the existing studies examining the national, regional and local impacts of conventional and unconventional oil and gas exploration and extraction, including:

• social/community benefits and disbenefits to communities hosting conventional and unconventional gas developments
• impact on local community cohesion
• impact of potential protest sites and associated security presence

The review should draw on the analysis of social impact undertaken in the Scottish, Welsh and Irish Reports and consider the application to NI.

Impact scenarios

The research should draw on the review of experience elsewhere, the various impact assessment evidence and the stakeholder engagement exercise to inform the assessment of the economic, social and environmental impacts of the development of conventional and unconventional oil and gas in Northern Ireland.

The department has identified a number of development scenarios and the economic, social and environmental impacts should be assessed for each of these. The assessment should also consider all aspects of conventional and unconventional oil and gas and highlight consideration of shale gas, individually and in combination.

Development scenarios

As there is considerable uncertainty over the likely development path of conventional and unconventional oil and gas sector, like the Welsh assessment, the review should use a range of scenarios to test the potential economic, social and environmental impacts of various development paths within Northern Ireland.

The economic impact of the activity should consider the period from now up to at least 2035 and consideration should further extend to the decommissioning of any potential extraction activity.

The basis of the scenarios are summarised as follows:

• Climate Change – Move to a low carbon economy. Net Zero commitments creates barriers to oil and gas development and taxes on emissions will dis-incentivise investment in oil and gas developments. Environmental and health protections increase costs of development and local communities actively resist development. The likelihood of this scenario is judged to be moderate to moderately high.

• Status Quo – Business as Usual. Uncertainties and other barriers to widespread development remain. Global energy prices and the continued availability of imports continue to provide limited incentives to invest in oil and gas development in the UK. Existing environmental and health protection activities are considered adequate and there is limited objection from local communities. The likelihood of this scenario occurring is judged to be moderate.

• Increased Demand – Step Up in Exploration and Production in Northern Ireland. A number of the barriers and aspects of uncertainty affecting the industry are lessened or removed. Global energy prices and/or uncertainties over the continuing availability of imported oil and gas to meet UK demand provide a greater incentive to developing extraction in the UK. Existing environmental and health protection activities are considered adequate and there is limited objection from local communities. The likelihood of this scenario occurring is judged to be fairly low.

Research methodology

The research partner will be expected to work closely with local and national stakeholders, where appropriate, to gather the necessary evidence to meet the objectives outlined above. It is envisaged that the methodology will follow a process designed to deliver the outputs below. This should include desktop analysis in the main and targeted stakeholder engagement.

Research outputs

The research partner will be expected to prepare a detailed report which fully meets the aims and objectives. A short summary report covering key messages must also be provided.

The research partner will be expected to make a presentation of their findings to senior managers within Department for the Economy and others as is deemed appropriate, and travel costs and attendance at meetings must therefore be factored in.

Timescales and costs

The overall budget for this research is a maximum of £75,000. It is expected that an initial payment of 45 per cent will be made upon acceptance of an approved draft report, with 45 per cent upon submission of a final draft report and 10 per cent when DfE is content to sign off on a final report.

It should be noted that departmental budgets for 2020/21 have yet to be agreed and, should there be any delays in securing these budgets, the payment schedule and scope of the proposed work may have to be revised. This can be discussed further at the project initiation meeting.

A final report should be provided and presentation made to senior DfE officials within 4 to 6 months of signing of the contract.

Assessment Criteria, Service Levels and Key Performance Indicators (KPIs)

Prospective tenderers must provide evidence of how they meet the following essential criteria:

• Company’s proven experience in analysis of complex economic, environmental and social impacts and their interactions;
• Qualifications, experience, availability and contingency arrangements of those who will be assigned to carry out the proposed work;
• Methodology meets the requirements of the specification; and
• Ability to complete the assignment within 4-6 months from the signing of the contract and within the £75,000 budget.

The successful contractor will be required to have an initial project initiation meeting and at least fortnightly contact, with the DfE/GSNI Project Group to provide updates on progress and details of work undertaken.

The following outputs are:

• Output 1: Project Initiation meeting & Desk top research – list of information and data will be provided from DfE/GSNI but contractor will be expected to add value by fully researching other sources which the contractor identifies as relevant;
• Output 2: – Engagements – agree methodology for the contractor to seek information from stakeholders; a list of key stakeholders will be identified by DfE/GSNI;
• Output 3: Discussion with DfE/GSNI project group on key findings, additional analysis required and proposed structure of Report;
• Output 4: Draft produced for comment by DfE/GSNI; and
• Output 5: Final draft Report produced with DfE/GSNI comments incorporated

Contract management and review

DfE/GSNI will work with the contractor to agree:

1. a breakdown of the working timeline to deliver a final Report within a maximum of 4-6 months of the signing of the contract
2. outputs at each stage of the timeline
3. agree fortnightly contact and meeting schedule with project group
4. lists of key stakeholders and licence holders with whom the contractor should engage
5. list of available reports, data and statistics available from DfE/GSNI.

Responsibility for the day to day management of the assignment will rest with DfE/GSNI, who will work with the contractor to ensure that the timetable is met and the outputs required, as mentioned above, are delivered.

Payment will be made as follows:

• 45 per cent on receipt of an approved draft report
• 45 per cent on receipt of an approved final draft report
• 10 per cent retention until DfE/GSNI content with final report.

Sustainability

The issue of sustainability of our natural resources should be a key cross-cutting theme running through this work.

Contract period

The contract will commence by late 2020 (estimated) with the successful consultants completing their agreed final report within 4-6 months of the signing of the contract. The maximum value of the contract is £75,000 (excluding VAT). 10 per cent of the total project costs will be retained until DfE/GSNI is content with the Report and all queries have been addressed.