Saturday 28 February 2015

Spain's slim energy options grow dimmer

It may have seemed like a good idea at the time. Open the waters around the Canary Islands to one of Spain’s largest energy firms and they’d promise billions in exploration and production efforts for a country in dire need of domestic energy production. For a country still mired in a prolonged economic crisis and dangerously dependent on energy imports, it may have made sense, even in the face of strong opposition from local communities. Despite the controversy –  it would be a risk for the environment and for political support – for Prime Minister Mariano Rajoy, the risks would be worth the rewards. Furthermore, if not this, then what?

But according to the company, the project ultimately collapsed not because of the massive protests, collapsing oil crisis worldwide or a lack of central authority – Rajoy made sure that was available. It was because, as many European energy production efforts, it simply did not live up to the hype.
In January, the energy giant announced that their early efforts have failed to produce anything worth pursuing in the waters of the islands, choosing instead to focus attention on projects in Angola. The move, coming just three months after it officially began, according to The New York Times, left Spain and especially Rajoy, grasping for energy options. After all, the country looks abroad for virtually all of its oil and gas needs.
To be sure, Spain remains a center of renewable energy potential, including both solar and wind. However, those options remain a modest, but growing, part of its energy mix, making it necessary to pursue more conventional measures in the meantime. The country’s renewable potential has been further complicated in recent years by a schizophrenic state approach to supporting the sector, leaving it unsteady and uncertain, especially in the eyes of foreign investors, many of whom have been put off by the government’s handling of subsidy agreements.
So, with the country’s offshore efforts off the table and renewables too modest to consider for the moment, where does that leave Spain’s energy needs? For now, at least, one of the country’s few options lies with another project that has faced staunch local opposition and controversy – shale. According to the U.S. Energy Information Administration, that could be as much as 227 billion cubic meters of recoverable shale gas.  According to a Bloomberg report, the Basque Country approvals cover two wells, Fulmar-1 and Pelicano-1, which are located in waters about 15 and 20 km from the coastline and 170 and 385 meters beneath the surface. The report estimates that each project could cost up to $40 million to drill.Despite such potential, Cantabria’s regional government have expressed strong concern about the environmental impact of the extraction process, including the effect it could have on local water sources.
Once again, Rajoy and Madrid moved to override local opposition by granting permission for the efforts from the capital. However, if broader European trends concerning shale potential are any indication, Rajoy’s shale dreams could soon go the way of Repsol’s offshore efforts. Recently, Europe’s most viable shale project in Poland suffered a substantial setback with the announcement that Chevron had joined ExxonMobil, Total and Marathon in pulling out of the once-hyped shale project. This was, after all, the case that was supposed to prove that the shale revolution seen in the U.S. could be replicated in Europe. However, poor early performance, scattered policies and sustained economic pressure proved too much to take.
While the failure of one country’s efforts certainly does not guarantee the failure of another, Spain’s political and economic environment presents its own set of challenging circumstances for new and needed investment in a project as unproven and uncertain as shale. 

http://www.forbes.com/sites/christophercoats/2015/02/27/morocco-continues-energy-diversification-push-with-lng-roadshow/

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