Shell MD tells Engineers Ireland conference that Ireland is on the cusp of an 'energy renaissance’, but faces difficult choices about gas exploration and fracking. Mary Anne Carrigan reports
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Engineers must take greater responsibility for shaping a positive public discourse about the rewards to society from major energy-infrastructure developments, according to Michael Crothers, managing director of Shell E&P Ireland Ltd.

Speaking at the Engineers Ireland Annual Conference last week in Dublin, the Canadian native said there was “enormous potential” for Ireland’s energy industry. “But after two years on Corrib [Shell’s controversial gas-pipeline project], I’ve a deeper understanding of the significant political, community and environmental challenges that Ireland will have to surmount if its high energy potential is to be developed.”

Crothers said that the earth’s population passed the seven billion mark in 2011 and, simultaneously, more people around the world are demanding and enjoying improved living standards – which inevitably leads to a higher demand for energy.

“A number of different forecasts, including from the International Energy Agency and Shell’s own future projections, show world energy demand doubling by 2050. At the same time, we’re providing twice as much energy to meet surging world demand and we must halve the level of greenhouse gas emissions so as to mitigate the impacts of serious climate change. By anyone’s standards, that’s a pretty tall order.”

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ENERGY MIX

Although renewables are likely to make steady progress in displacing hydrocarbons, the Shell boss believes that society will need a diverse mixture of energy sources – including hydrocarbons – for decades to come to meet demand. New technology for energy conservation and carbon capture and storage must be deployed to reduce greenhouse gas emissions from conventional sources, until renewables are advanced enough to take on the lion’s share of demand. Shell believes that gas is the bridge to a renewables future, he said.

“Gas emits half the CO2 of coal or peat in power generation. It can be transported as liquefied natural gas, compressed for use in vehicles and converted to cleaner fuels using gas-to-liquids technology,” Crothers explained. “Shell is part of a wide coalition – including Greenpeace, believe it or not – that’s calling for a properly functioning EU Emissions Trading Scheme with a price for CO2 to incentivise the development of renewables and reduce hydrocarbon use.”

Ireland is heavily reliant on imported gas and oil

Ireland is more reliant on oil and gas than the rest of the world for its total energy mix, importing 95% of these hydrocarbons. Crothers said that Shell plans to tilt that balance when it comes on stream “at the end of next year or in early 2015”, stating that Corrib has the potential to provide up to 60% of Ireland’s gas needs, at peak production.

Two hundred miles off the south-west coast, Exxon and Providence are drilling the Dunquin prospect. If the predictions for this field are proved correct by this summer’s exploration drilling campaign, then the Dunquin Field could be the biggest oil and gas discovery in Irish waters – several times bigger than both Kinsale and Corrib combined.

“There are also potential onshore shale-gas resources in basins stretching from Fermanagh to Clare, which might be developed in a safe and environmentally acceptable manner in the future,” said Crothers. “Could this energy source have a similarly positive effect on the Irish energy system and economy as it has in the US, which may now be energy self-sufficient by 2020?”

Ireland’s oil and gas potential is as yet largely unproven, but the country has some of Europe’s most prodigious wind and wave energy potential in the Midlands, in counties all along the Western seaboard and offshore.

“Ireland’s west coast is said to have the best wave energy potential of almost any country in the world,” said Crothers. “Ireland could become an energy superpower, exporting renewable electricity and oil and gas. The UK is facing a major shortfall in its energy needs, as it reduces coal-fired generation and decommissions nuclear reactors. It’s also trying to cope with the long-term decline of North Sea gas.

ONCE-IN-A-LIFETIME OPPORTUNITY

“This is an opportunity for Ireland that comes along once in a generation. By 2030, there could potentially be five offshore oil and gas fields, which the recent PricewaterhouseCoopers report estimates could generate over €2 billion in tax revenue and sustain nearly 6,000 jobs. Using the latest environmentally sound hydraulic fracturing technology, 10% of Ireland’s gas needs can come from its own shale gas resources.

10% of Ireland’s gas needs could come from its own shale gas resources

“There could be three major offshore power installations, using technology developed and tested in Ireland. Onshore, some 3,000 new wind turbines across the west and midlands, largely manufactured in Ireland, can generate green power for export via a network of high voltage power lines. Will Ireland seize this opportunity?”

Crothers cited Newfoundland as an example of a community that managed to harness its energy potential to grow its economy. Newfoundland’s first commercial discovery of offshore oil was in 1979 in Hibernia. It took until 1997 for that field to come into production due to low oil prices, lack of a framework to share profits and construction delays. Since 1997, however, four more fields have come on line. Together, they have delivered over 1.4 billion barrels of oil. Despite 60 exploration wells and dry holes through the 1960s and 1970s, geologists were confident in the offshore potential.

Newfoundland took the approach of incentivising the industry to drill and develop the first field, and then steadily increasing its take of the profits through royalties for subsequent fields once the industry was established. The Canadian government funded about half the original capital cost of Hibernia – about $6 billion.

“This model makes sense where the risks to entry are high,” Crothers explained. “The other essential component to unlocking investment has been the requirement for industry to submit both a local benefits plan and a development plan. In this way, local communities can see clearly the benefits coming to them and have been very supportive of development as a result.

“However, there has been a collective will between the government, communities and developers to work together for mutual benefit. Citizens have generally acted to maximise benefits for the province and not for themselves. The province has not allowed narrow special interests to interfere with its vision of development.”

As a result, he continued, over 5,000 direct jobs in the oil and gas sector in Newfoundland have been created, along with tens of thousands of jobs in the construction sector as the offshore platforms were built. The development halted generations of emigration as young people found well-paid employment instead of relying on dwindling fisheries and depressed forestry.

However, Ireland does not have the financial resources to fund exploration as Norway does now or as Newfoundland did in the 1990s. Does it have the tools needed to develop its energy sector?

REGULATION AND PLANNING OBSTACLES

“I think what’s holding Ireland back from becoming the next Newfoundland is the complexity of the regulatory and planning system,” Crothers stated. “It’s difficult for developers and investors to navigate the minefield of Ireland’s planning system. Even when permissions have been secured, given the adversarial legal system, uncertainty remains about whether such permits can be relied upon for implementation.

Ireland’s planning and regulatory systems are a ‘minefield’

“Ireland could improve its planning and regulatory processes to make them more transparent, flexible and collaborative – so that the valid interests of regulators, communities and developers are better reconciled. There are many examples of delayed or derailed energy investment due to a lack of public support and our initial approach at Corrib ten years ago is an example of that.

“Notwithstanding the self-inflicted mistakes made in those early years, a medium-sized gas development should not take 15 years to deliver from final investment decision to first gas. Neither is it competitive to require nine years to build a high-voltage regional electricity transmission line or more than a decade to secure permission to build a power from waste incineration plant. These sorts of experiences deter investment.”

Crothers said that Norway, Newfoundland and the UK have shown that it was possible to simplify development processes and build a vibrant energy sector, without compromising on either environmental standards or community harmony. “Having an efficient and transparent regulatory regime is a competitive advantage for all sectors of the economy. I’m concerned whether the pace of reform is sufficient, as other jurisdictions are acting quickly and may be out-hustling Ireland for investment.”

He acknowledged that good work has already been done in the energy space with the introduction of the Strategic Infrastructure Act, the Petroleum Safety Act and the Government’s recent policy statement on infrastructure. However, the Shell boss said that the energy sector needed what he called a ‘one team’ approach.

“We need this because energy development is controversial, contentious and challenging and therefore politically risky. We need to recognise the very serious challenge around public perceptions and acceptance of key infrastructure as being one of the greatest policy implementation challenges facing Ireland.

“How can we create a coalition across Irish business, academia, agencies and communities that demonstrates that a sound balance can be struck between the economic, social and environmental aspects of development? How can we give politicians the reassurance and will to act in the national interest by bringing cohesive and united alliances together? I believe strongly that leadership like this needs to come from groups like Engineers Ireland.”

CALL TO LEADERSHIP

Crothers described the ceremony, called the Ritual for the Calling of an Engineer, which is held for all graduate engineers in Canada. It originated in 1922, when a civil engineer called Prof Herbert Haultain from the University of Toronto proposed that an organisation was needed to bind all members of the engineering profession in Canada more closely together and that there should be a statement of ethics to which young engineering graduates should subscribe.

Engineers in Canada wear an iron ring on the little finger of the working hand, symbolising the pride they have in their profession, while its plainness simultaneously serves as a reminder of their humility. The ring serves as a reminder to everyone of the engineer’s obligation to live by a high standard of professional conduct.

“Society can trust engineers to speak objectively,” Crothers explained. “We can explain technology properly, along with its impacts and trade-offs. We can help the public make sound decisions to balance the economic with the environmental and the social because we’re ideally suited to foster public debate and bring rational, objective discourse to society. Engineers can be non-partisan and factual to explain the risks and means to control risk of various courses of action.

“As a profession, we’re too passive. Instead of taking an active and decisive role in the debate, we often wait for companies, communities and regulators to fight it out and then get on with the work, depending on what has been decided. It’s not our general nature to seek the limelight. It takes a new set of skills to engage with stakeholders – empathy, patience and humility to allow us to take complex topics and make them understandable.”

Organisations like Engineers Ireland should take a more proactive role in informing and advising the public and government, according to Crothers. He said that Engineers Ireland should:

  • Join the debate at all levels and actively engage with TDs, Oireachtas Committees, Government, the media and communities;
  • Advocate for an overhaul of the Ireland’s adversarial and complex development processes, with mechanisms to ensure concerns are heard and addressed but without allowing self-serving individual interests to derail national strategic vision;
  • Encourage engineers to run for public office; and
  • Foster education about the vital role of engineering through programmes such as STEPS.

“The global energy challenge is monumental. Ireland has great potential as a country and has to face up to some difficult choices. But I believe that the engineering profession can play a central role in harnessing Ireland abundant energy resources – for the good of all citizens,” Crothers concluded.

http://www.engineersjournal.ie/wp-content/uploads/2013/06/MC-7-1024x683.jpeghttp://www.engineersjournal.ie/wp-content/uploads/2013/06/MC-7-300x300.jpegDavid O'RiordanElecenergy,infrastructure,planning,Shell,STEPS
Engineers must take greater responsibility for shaping a positive public discourse about the rewards to society from major energy-infrastructure developments, according to Michael Crothers, managing director of Shell E&P Ireland Ltd. Speaking at the Engineers Ireland Annual Conference last week in Dublin, the Canadian native said there was 'enormous potential'...