INTERVIEW:The man behind a fracking proposal in teh northwest says there are immense opportunities for Ireland if the project proceeds
BUNDORAN MIGHT be best known for its surfing these days, but the Donegal resort town has given its name to a rock formation that is creating waves of its own – the Bundoran shale.
If the word “shale” has not already given the game away, it’s the formation that Australian company Tamboran says holds up to 4.4 trillion cubic feet of natural gas – equivalent to 12 years of Irish daily consumption and enough to support 3,000 jobs for four or five decades. The rock pokes through the surface at Bundoran from where it stretches back inland.
Tamboran chief executive Richard Moorman compares it to a bowl with Bundoran on the rim. But it’s the centre of the bowl, deep under north Leitrim and south Fermanagh, that interests him and his company.
Moorman says that the rock shares the same “DNA” as shales that produce natural gas in North America. All Tamboran had to do was establish whether or not the Bundoran shale could be cracked to release the gas. Tests, carried out by an independent group, Core Laboratories, produced results that Moorman describes as compelling. The rock was crackable.
“We already knew it was thick, we already knew it contained lots of gas, we already knew it was deep enough,” he says. “That was obvious, but we didn’t know if we could crack it.”
It’s the business of cracking it that is the problem. The gas can only be extracted by hydraulic fracturing, or fracking as it is colloquially known, a technique that involves drilling vertically to reach the rock, and then horizontally through the formation, before pumping millions of gallons of water at the rock face to crack it.
Fracking has had a near revolutionary impact in the United States. Gas prices have fallen from about $14 a unit in 2008 to close to $2. Its impact there prompted US President Barack Obama to voice his support for the shale gas industry in last month’s state of the union address.
But while its first citizen supports it, many others in the US do not. It has been blamed for contaminating water supplies, air quality and a host of other environmental ills. Such is the fear surrounding the technique that there is already a considerable movement against it here, particularly in the place targeted by Tamboran.
Leitrim County Council and a number of other local authorities have passed motions opposing it, and large numbers of the public have made it clear that they are against fracking, in their region in any case. Politicians from the area share their views, but the Government has so far held off on coming down on either side.
The Minister responsible, Pat Rabbitte, has asked the Environmental Protection Agency to commission a report on the technology to weigh up the pros and cons of something that he says is new to him. That will allow him to decide on what is the best way forward. At this stage, he has made it clear he is neutral on the subject.
However, on both sides of the Border, it appears many people are anything but neutral. Moorman is not surprised by this. “When you bring a new project in, the people in the area get concerned,” he says. “Why shouldn’t they? It’s in their neighbourhood. You can sit there and talk about the good of the country all day, but they’re the ones who have it next to them.”
To counter this, Tamboran has to do two things. The first is to enforce high standards on itself. The company’s website says that such things as air and water quality and seismic conditions should be benchmarked and monitored, and says that it, and its industry as a whole, should adhere to standards with which some companies may not necessarily be happy.
“Do we have a choice to operate at the highest standards?” he asks. “I don’t think so. Because our company is new, it’s going to be coming in with a new type of work to new countries and new communities. I can’t come in saying ‘it’s business as usual, folks’ because there is no business as usual.”
His colleague, Lisa Rollins, who manages Tamboran’s communications, says that, given the skills of those working for the business, it would be irresponsible to do anything other than stick to the highest standards. Moorman agrees: “I’d be telling those guys to do less than they know how to do, so it’s not really practical,” he says.
There is a practical argument for this approach. Moorman says that it is easier to apply the same standards to your operations across the board. Adjusting them to suit the minimum in each jurisdiction actually creates logistical headaches and is potentially more expensive in the long term.
Having committed itself to high standards, the company then has to demonstrate that it can keep its promises.
“If we’re going to be doing a project for decades, I’m going to have to live with those promises for decades,” he observes. “We’re in a digital world now. People have my email address. They’re not shy people, anybody wants to complain, they know how to, it doesn’t even take seconds.
“So, our job is to deliver on the promises. We’ve said that we’ll hire 10 or more people this summer and start a training programme this fall. If I can do that, well, there’s one thing we did that we said we’re going to do. And then we’ll do some more things that we said we’re going to do, and that’s the only way that we can build trust out there.”
He argues that the State also has to build confidence, by ensuring that it has the right regulations and the willingness and muscle to enforce them. This is particularly important in an Irish context. Moorman points out that it is very clear to anyone coming into this country that people have little faith in its regulators or their ability to ensure that everybody plays by the rules.
One of the most constant refrains he hears from the public is: “I don’t trust the regulators in this country.” They point out that everything from bank to building regulators have fallen down on the job, and ask if they can be trusted with an industry as complex as hydraulic fracturing.
“We can’t apologise for anybody’s mistakes in the past, but we sure better learn from them,” he emphasises. “And I think learning from them is where the regulators need to step up and show that they have control.”
Before last year, not too many people had heard of Tamboran. That’s because it is a young company, started in 2009. Moorman came on board last summer.
Early on, the Australian firm hired David Falvey, a former director of the British Geological Survey. “He came on board and said: ‘You know what? There’s rocks everywhere.’ So he went out and started collecting mineral right applications all over the place,” Moorman says.
“In the last three years, essentially the company amassed a 27 million acre position. Exxon Mobil has only slightly more acres than that in North America, so it’s not a small position from that point of view.”
Thirteen million of those acres are in Australia, another 13 are in Botswana and the remaining one is in Ireland. Out of the Irish prospect, Tamboran is focused on an area of about 100,000 acres. It has actually decided to surrender licence options in Sligo, as the area is not suitable for drilling.
At this stage of its development, the company is looking at raising the cash it needs to press ahead with its developments. It will spend about €50 million here over the next two years or so. Chairman Patrick Elliott is wooing potential backers in Australia, where the company believes its assets could bring in a multinational partner. Moorman is talking to investment funds in America, Canada and Europe.
There are a number of scenarios open to the company. At this stage, the likeliest one is a private placement within three to six months, followed relatively shortly by a flotation. The logic of this is that the placement will help put a value on its assets and the market is likely to reward this when it comes to a flotation.
One of the trickier issues is the amount it should raise and how much exactly of the company or its assets should be handed over in exchange for the funding. It may get better value in return for a comparatively small sum. As Moorman explains, the greater the number it seeks, the proportionately more of the company it will have to hand over.
As this process rolls on, Tamboran has further work to do in Ireland. In the Republic, its licensing option requires it to submit a report on the work it has done to date and an environmental impact study to the Department of Communications, Energy and Natural Resources by the end of November.
It can then apply for a permit for exploratory drilling in this jurisdiction.
In Fermanagh, it has also reached the point where it must complete an environmental impact study. Alongside this, it has to drill shallow boreholes and carry out further analysis of the rock it finds. From there, it has to apply to the Northern Irish authorities for a licence to drill, or it can opt out.
Either way, the company is unlikely to begin fracking for anything here until 2015 at the earliest, when it is likely to start operations in Fermanagh. Back across the Border, fracking, if it ever gets under way, is unlikely to begin before 2016.
If everything does go according to plan and Tamboran begins producing gas in the northwest, the opportunities for Ireland are immense, according to Moorman. Shell’s Corrib project, due to come on stream in 2015 and last for about 10 years, will, on that basis, be running down as Tamboran’s volumes start to really ramp up. Between the two, there are 60 years’ worth of natural gas production.
Along with 3,000 jobs associated with a successful project, the prospect of a long-term supply of the fuel could bring in other industries that need large amounts of it for their operations. All this assumes that the development path takes less than the 10 years that was needed to bring the Corrib field on line.
Moorman argues that this challenge faces not just Ireland, but Europe as a whole, which is facing the prospect of being left behind by the emerging powers in the east.
“If Europe struggles with getting a new energy source on line, Europe’s influence and Europe’s financial health will only fall further behind, so I think Europe has a challenge here,” he says.
“Ireland can really lead the way here. A way has to be found to do this stuff safely, responsibly and make sure people know that. And that’s the kind of leadership I really think people need at this time. The leadership to step up and say, ‘we are going to do this, we are going to do this safely; listen up, companies, and listen up, people’.”
FRIDAY INTERVIEW
Name: Richard Moorman
Post: Chief executive, Tamboran Resources
Why is he in the news?The company believes that there is enough natural gas under counties Fermanagh and Leitrim to support 3,000 jobs over 40 years. It intends getting the gas out using hydraulic fracturing, a controversial technique, that has raised hackles in the US and is doing so here.
Career: From Saskatchewan, in Canada, he is an engineer, and has worked in unconventional oil and gas exploration for over two decades. He has held senior managerial positions in a range of companies across North America including Southwestern Energy, Leor Energy and advisers, Energy Equity Research.
Something that won't surprise: He has an MBA and an MSc.
Something that will surprise: He and his wife like ballroom dancing.
