Can shale save Europe?

Regardless of how Russia’s foray into Ukraine finally works out, these last few weeks have offered a stark reminder of Europe’s desperate need to diversify its energy options.

Although Russia has stopped short of halting gas deliveries to Ukraine or the rest of Europe, the threat remains real and worthy of concern. Russia currently supplies about a quarter of the continent’s natural gas demand, with a third of that flowing through Ukrainian transmission lines.

With so much at stake, Europe’s leaders are looking just about everywhere for viable alternatives. Sure, there’s the promise of U.S. gas easing European dependence on an increasingly iffy relationship with Russia, but as The New York Times noted on the 7th of April, in “the short term, the United States can offer little hope for Europeans eager to diversify their gas sources as Russia occupies Crimea and may threaten other parts of eastern Ukraine.”

So, what’s left? Traditional domestic production remains scarce and efforts to beef up energy trade with North African suppliers have been limited by a steady stream of unrest and uncertainty. So where else can Europe look for new energy resources? An increasing number are saying shale.

More than just an opportunity to ease dependence on Russian reserves, Europe’s shale potential clears a path for the region to move away from energy dependence of any kind, especially if member states follow through on plans to beef up interconnectors over the next few years. On paper, it looks great, with upwards of 470 trillion cubic feet of recoverable shale gas from Ukraine to the United Kingdom, with substantial reserves in Poland and France. If reached, the reserves could easily cover Europe’s annual demand of 18 tcf or at least help import heavy member states look move away from Moscow.

However, despite this fresh enthusiasm from shale proponents, there is a long road between hope and real, tangible results. The most visible challenges for shale efforts across Europe have come from critics of the necessary practice of hydraulic fracturing, or “fracking’ – the process required to reach and extract shale reserves.  Long a target of environmentalists, the practice has been linked to allegations of chemical pollution, the tainting of wells and, in some cases, even seismic events. Despite the enormous potential that shale projects present in countries like France, the allegations have earned the practice outright or partial bans from regional and national governments.

Complicating the opposition issue further has been the European Union’s decision to push shale approval down to the local level, allowing national and even regional governments to make rulings on the viability of shale projects. In rare cases, like Spain, national governments have moved to overturn regional decisions on fracking, but this is hardly the case elsewhere in Europe where bans remain in place.

Another hurdle for shale proponents in Europe is the substantial costs associated with the earliest stages of fracking. In a region still struggling to find its financial footing, the prices of the personnel, technology and rigs necessary to launch shale efforts could prove to be prohibitively high. This situation is made worse by a lack of local success stories to present to potential investors.

 Early hopes that Poland, home to an estimated 148 tcf of technically recoverable shale gas, could provide that example have faded amid dismal results and regulatory headaches. According to the BBC, firms including Exxon Mobil XOM +0.4%, Talisman and Marathon have all pulled the plug on Polish shale efforts, while others wait for new reforms to kick in.

None of this is to say that shale has no future in Europe. Countries like Romania have already moved to reverse earlier bans, while Spain has worked to create a national policy that would trump local opposition. However, even with 470 tcf in play, shale will provide only a component of Europe’s larger diversification plan and even then, only in the long term. For now, alternatives like boosting Liquified Natural Gas imports, modest contributions from North Africa, increasing transport infrastructure between member states and renewable expansion will have to all play a larger part.

 

http://www.forbes.com/sites/christophercoats/2014/04/23/can-shale-save-europe/?ss=energy