Politics thwarting Europe's unconventional oil
The continent has indigenous reserves to exploit. But it also has a lot of opposition to overcome
Global shale oil production could reach 14 million barrels of oil per day (b/d) by 2035, according to PricewaterhouseCoopers, making up around 12% of total global oil supply. And it would be a boon for Europe's hard-pressed economies. Germany and the UK could see GDP gains of between 2-5% on the back of a surge in shale oil production, the consultancy believes.
But this is because global oil prices would fall - helping the balance sheets of importing nations - not because European countries will jump aboard the tight oil bandwagon. Europe's share of global output is likely to remain negligible, as limited data and opposition to hydraulic fracturing (fracking) stalls development.
It's not that the continent doesn't have resources to develop. A recent study from IHS, a consultancy, said 4% of the world's recoverable shale oil lies in Europe. In the UK alone, there could 131 billion barrels of oil in-place in the Anglo-Dutch basin, which together with the Bowland basin in northwest England forms part of the Whitehurst Group. As the UK's conventional gas and oil production falls, this could provide an important new source of supply.
But data is sparse and opposition fierce. And with an average unconventional oil recovery rate of around 3.5%, the country's recoverable endowment is just 4.5m barrels.
Factors above the ground, not beneath it, are the real obstacles, though. Stephen Trammel, head of IHS's unconventional energy unit, says the rocks in the UK look promising. The rest, less so. "There are numerous above-ground issues that can prevent this taking off," he says. The scale of the business in North America is 'huge'. "It's going to take time to get that scale available internationally."
High oil prices will also be necessary. Trammel said Brent would need to trade around $120 a barrel to make development commercially viable.
Then there are the anti-frackers. The UK-based explorer Cuadrilla Resources carried out exploratoration drilling for conventional oil in Balcombe, southeast England, in the summer of 2013. It was met with vehement environmental opposition - even though the firm had no plans for fracking on the drilling permit - which resulted in a six-week protest camp being set up outside the site.
The big French shrug
At least the practice hasn't been banned outright in the UK, as it has in France. There, shale oil reserves are thought to be equally large. But a resounding 'non' to fracking from the French government has killed any short-term development of a sector.
The EIA says two main formations in the Paris basin - the Lias Shale and the Permian-Carboniferous Shale - hold 118bn barrels of shale oil, with around 4.7bn barrels being recoverable. The basin is also thought to hold 690 trillion cubic feet (cf) of shale gas, with around 129 trillion cf considered technically recoverable.
France banned fracking in 2011 following environmental protests. The government revoked exploration licences it had awarded to several companies, including Schuepbach Energy and Total. In October 2013, French courts upheld the ban. For his part, President Francois Hollande says he won't allow fracking during his term.
Some firms are still drilling - they just don't use the most effective methods at their disposal. US firm ZaZa Energy and Canada's Vermillion Energy have held onto their exploration licences by promising not to frack. But the exemption seems to be shortlived. US firm Hess's bid to take over seven permits in the Paris basin, which were granted to Toreador Resources in 2010, was rejected in November 2013. France's energy minister Philippe Martin said the company had "not abandoned its original project" to explore for shale oil and rejected its application, saying fracking would be required.
Vermillion says there are 6bn barrels of shale oil in-place, of which 60m-120m barrels are recoverable, across its concession areas in the Paris basin. Without fracking, however, getting accurate data is tricky. In any case, French red tape and government meddling means only a fraction of all exploration work leads to an operations phase. "For this reason, exploration costs are even higher in light of the absence of guaranteed results," Vermillion said recently.
Then there's European oil shale - not to be confused with shale oil. Oil shale is a sedimentary rock that contains kerogen. This can be heated, separated from the rock, processed and turned into liquid shale oil. The shale oil can be treated and refined into oil products, such as diesel. Oil shale can also be burned to produce electricity and heat. Environmentalists don't like it because production is more carbon-intensive than other forms of oil production.
Opec estimates the world has between 2.8 trillion-3.3 trillion barrels of recoverable oil shale. More than 70% of these resources are thought to be in the US, with Brazil, Jordan, Russia and Morocco also having large deposits.
Estonia, with recoverable oil shale reserves of 16.3bn barrels, is Europe's kerogen king. In 2012, shale oil accounted for 70% of the country's primary energy needs and about 90% of its electricity.
State-owned Eesti Energia dominates the country's oil shale sector and produces around 12,000 b/d. The company wants to increase this to 22,000 b/d by 2016. The company, which operates internationally under the name Enefit, is also developing oil shale projects in Jordan and the US state of Utah. Through a staggered ramp up, starting in 2020, Enefit hopes to produce 38,000 b/d in Jordan and 50,000 b/d in Utah.
Eesti has been operating for 30 years but Estonia has been using oil shale to produce energy for over a century. While this had brought the country an enviable level of energy security, the International Energy Agency says the process is environmentally unsustainable.
Almost 80% of the country's total greenhouse gas emissions come from Eesti Energia's two Narva power plants, the agency says. Since joining the EU in 2004 Estonia has overhauled and liberalised its electricity market and is trying to diversify its energy sources by cutting its reliance on oil shale for electricity production and to increase output of shale oil.