Shale gas – Europe – The current situation

Energy , Europe , Shale gas Mar 25, 2013 No Comments

Shale gas - EuropeThe energy revolution experienced by the United States for the past ten years will not come to Europe anytime soon. Members of the European Union are indeed very divided on the issue of the exploitation of non-conventional energy resources.

In November 2012, after 3 studies published earlier by the European Commission which concluded that Europe would not reach energy self-sufficiency, the European Parliament invited to comment on the development of shale gas, was unable to pass a binding resolution. In the end, the two resolutions adopted in Strasbourg just called for the Member States to exercise caution in this area because of environmental constraints.

A binding resolution encouraging to explore or exploit shale reserves would probably not have had a majority of votes because of many European MPs opposition, as risks associated with shale gas extraction are not perceived in the same way throughout Europe.

It’s in Poland that the development of shale gas is the most advanced. The country relies on its large reserves to get rid of the Russian gas, its large neighbor and historic rival. The country’s reserves, albeit significantly revised lower in spring 2012, are now estimated at 1,920 billion cubic meters, a quantity which corresponds to a century of its current consumption.

More than 110 exploration licenses have been granted throughout the country. Drilling will precisely confirm the gas potential of Poland. Meanwhile, the government is already planning the construction of gas infrastructures such as LNG terminals on the Baltic Sea or reverse flow pipeline connecting the countries of Central Europe.

Ukraine, a key country in the European Union gas supply network and third holder of reserves shale gas in this part of the world, seems to follow the path of Poland. Ukrainian authorities signed several contracts in 2012 for exploration of the giant Yuzivska field, located in the east of the country.

The UK is also preparing to explore reserves, despite protests from locals. Drilling near Blackpool by Cuadrilla had been suspended in 2011, following the discovery of increased seismic activity.

But the British government finally lifted in December last year moratorium on hydraulic fracturing, after slightly strengthening regulations on safety and the environment. Proved reserves are, however, lower in Britain, around 255 billion cubic meters, according to the U.S. Department of Energy.

It is important to note that for shale gas, the quantity actually exploitable is generally much lower than indicated during the initial reserve estimates. Due to the complexity of the geology, gas reservoir are indeed sometimes unreachable. It is only at the start of production that companies know exactly the production potential.

Germany, after several weeks of debate, reached on February 26th an agreement opening the door to early exploration while imposing harsh conditions. Companies must meet very precise specifications, and will not be allowed to operate near water reserves.

Other European countries, however, are more skeptical about the development of shale gas, first of which France, which holds quantities of gas comparable to that of Poland. Current hydraulic fracturing techniques are prohibited since July 2011 for environmental reasons. President François Hollande has confirmed that the country would not change the law.

France does not, however, close the door to the exploitation of shale gas in the event of discovery of a cleaner techniques. So oil companies, who see a growing hostility from people toward hydraulic fracturing, are trying to develop new techniques. Many of them, such as pneumatic fracturing (with compressed air), or the use of propane, are currently under study.

Similarly, Bulgaria has imposed a moratorium on hydraulic fracturing on January 2012. Consequently, licenses previously granted to Chevron were repealed.

So, on the shale gas question, Europe is still divided between countries moving ahead fast and others where nothing is happening.

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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