Shale Gas: The EU’s Energy Wunderwaffe?
August 27th, 2010 by Roderick Kefferpütz, Centre for European Policy StudiesThe American natural gas sector has undergone a ‘quiet revolution’ in recent years spearheaded by new innovative drilling techniques. These have given greater access to unconventional gas supplies, particularly so-called shale gas. With these new supplies the American gas market has soared; shale gas is now responsible for about 20 per cent of total US gas production while back in 2000 it was still in single-digits.
The ripple effects of this are already reverberating abroad. Gas markets have turned upside down and are now characterised by a significant glut with correspondingly low prices as oversupply in the US has caused LNG tankers to re-route to markets in Europe and Asia, where they are upsetting existing market structures. Keen to capitalise on the potential suggested by the American shale gas success story, Europe is hoping to follow the US on this shale trail with major energy companies engaging in a veritable landgrab for Europe’s finest shale acreage.
On the surface, shale gas seems destined to play an important role in the EU’s energy mix. Natural gas is the most environmentally-friendly in comparison to the other fossil fuels and would work well in tandem with the EU’s renewable energy agenda as the flexibility of gas-fired power plants can better accommodate any fluctuations in electricity demand and supply, which might arise due to the intermittency of renewables. In the wake of two gas crises and increasing sensitivity surrounding energy security many also regard shale gas as a silver bullet against Russia, solving the European Union’s energy security puzzle.
At first glance, the European Union also appears structurally well-prepared to emulate the American success story as it is home to an integrated market with an established pipeline infrastructure and a steadily rising demand with attractive prices. Initial estimates also hint at sizable reserves, particularly in Poland, which is offering attractive fiscal terms for their development and which has recently joined the US in its Shale Gas Resource Initiative alongside China. All this is creating a buzz surrounding shale gas on the continent.
Nevertheless, it seems that shale gas is unlikely to become a game-changer in the EU any time soon. There are a number of obstacles impeding the success experienced in the US. This is not only because the actual numbers with regards to shale deposits in Europe remain uncertain but particularly because of above-ground difficulties. Compared to the United States the EU faces equipment shortages, higher costs and it lacks a drilling workforce experienced in unconventional supplies. Europe is also more densely-populated, which could lead to local opposition to drilling particularly when the environmental impact of shale gas on water supplies remains questionable and since there won’t be any rags-to-riches stories in Europe as in many EU countries mineral rights are owned by the state as opposed to local residents, which in the US can make an impressive sum by selling their rights. The fact that Europe’s shale potential is pursued by major energy companies who have lengthy decision-making processes and a generally risk-averse mindset might also create a slower dynamic than the one created in the US, which was driven by an avant garde of ingenious American wildcat drillers. Other hurdles would also need to be overcome such as the sourcing of water, since shale gas drilling is very water-intensive.
Consequently, while shale gas will have an effect on the European gas market, as a result of future domestic exploitation efforts and global developments of unconventional supplies which could further increase liquidity in the LNG market, it is unlikely to revolutionise the European energy landscape to the extent that it has in the US.
Roderick Kefferpütz is an Associate Research Fellow at the Centre for European Policy Studies
November 29th, 2010 at 5:43 pm
So basically, retrieving the ” shale gas” will cost a lot of money, a lot of water which can´t be re-used as it´s full of chemicals after the process, this waste-water (produced water) requires storage or cleaning which is costly and dangerous, it will cause devastation to our natural landscape, and the environmental influence particularly to our drink-water reserves is unknown.
Wow, sounds like a great resource.
My question is, will the EU monitor and regulate this ” innovative drilling technique¨ where the rock is basically bombarded with high pressure and a mix of chemicals so that it bursts open as to release the gas? Also, will the EU demand disclosure of the actual chemicals used in this process as the chemicals are currently viewed as corporate intellectual property and thus have not yet been disclosed? Let´s not have our hunger for gas get in the way of long term prospects and make sure we, as EU, know all the facts and risks before allowing this crude way of gas-mining to be implemented on our land.