Shale gas: Europe would not reach energy self-sufficiency

Energy , Natural Gas Sep 13, 2012 No Comments

Gazprom - EuropeOn September 7th 2012, the European Commission published three new studies on unconventional fossil fuels, in particular shale gas. The studies look at the potential effects of these fuels on energy markets Unconventional Gas: Potential Energy Market Impacts in the European Union, the potential climate impact of shale gas production Climate impact of potential shale gas production in the EU, and the potential risks shale gas developments and associated hydraulic fracturing (“fracking”) may present to human health and the environment Support to the identification of potential risks for the environment and human health arising from hydrocarbons operations involving hydraulic fracturing in Europe.

It had been hoped that the controversial fracking technique could allow Europe to match the US’s success in extracting natural gas from shale rocks. Now the European Commission says that, at best, Europe’s shale gas will only compensate for its slowing production of conventional gas. Europe will still have to import 60 per cent of its needs.

Potential reserves are estimated at 16,000 European billion cubic meters of shale gas against 20,000 billion in the United States. However, the exploitation of unconventional gas in the United States is not comparable to Europe as U.S. pipeline networks are much more developed and the energy market is fully liberalized. Europe is trying to unify its energy market but faces opposition from producer countries such as Russia.

On the health side, the study identifies areas of high-risk due to the cumulative effect of multiple shale wells:

  • High risk of groundwater contamination
  • High risk of surface water contamination
  • High risk to water resources generally
  • High risk to biodiversity
  • High risk of noise impacts
  • High risk of increased traffic
  • High risk of land-taking

Most of the high risks associated with shale gas involve the method of extraction – using toxic chemicals to fracture the rock deep underground – and the lack of guarantees against chemical spills, well wall cracking, contamination of groundwater and contamination of soil etc…

These reports are published while tension is building between Europe on one side and Gazprom and the Russian government on the other side because the European Commission’s Directorate General for Competition is investigating the Russian company on allegations the company violated antitrust laws. As Microsoft knows, DG Competition does not give up, and it does not tend to lose. In fact, DG Competition has not lost an abuse-of-dominance case before the European Court of Justice since the EU’s antitrust rules came into force in 1958.

Beyond the investigation, relations between natural gas suppliers and consumers in Europe have come to a crunch point over pricing as buyers seek to wriggle free of long established but costly contracts and benefit from newly available sellers elsewhere. The clash is becoming more political as sparks fly between the European Union and its leading gas supplier Russia. Discoveries of natural gas reserves in East Africa, Australia, the Mediterranean Sea, as well as the shale gas boom in North America are also expected to help push natural gas above coal as the second biggest fuel source by 2030 and later could even challenge oil. Europe will, in the long term, decrease the region’s dependence on supplies from Russia and the Middle East, thus reducing their dominance in energy markets,” Frost & Sullivan Consulting Analyst Michael Mbogoro said in a report published on Wednesday. “It is likely to also give rise to new geopolitical alliances at the expense of old,” he added.

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Pascal Blanc

Pascal has implemented numerous software solutions in the areas of procurement, sourcing, spend management, supplier evaluation and performance. His clients include Fortune 500 companies in Europe, Asia and North America. He is a co-founder of Source & Procure.

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