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Europe's shale caution may see it waste its potential

The EU must speed up development of shale-gas or it risks wasting a valuable resource

Europe must speed up development of a shale-gas regulatory framework or it risks wasting potential resources, Philip Lowe, the director-general of energy at the European Commission said. 

Lowe told Petroleum Economist that shale-gas development could drive down Europe's natural gas prices, but there needs to be greater market liberalisation and public acceptance of the fuel to make it happen. "If shale gas was available inside the European Union or its neighbours, like Ukraine, it would change the game considerably, as delivered pipeline gas in Europe still drives the price," Lowe told Petroleum Economist.

"Europe's beginning to realise that it's important to get the regulatory framework right after a cautious - maybe overly cautious - start. At the moment, the coal price is driving electricity prices. We need some clear game changers from a cost point of view in order for gas to gain a clear market share."

Shale potential

The US Energy Information Administration (EIA) reckons there could be around 620 trillion cubic feet (cf) of technically recoverable shale gas across just 11 countries in Europe.

Lowe said developing shale gas in Europe could improve energy security, cut emissions in the transport sector and push European gas prices away from oil-indexed model, potentially making them cheaper.

But polarised opinion within the EU, coupled with environmental concerns, has stalled progress on developing a regulatory framework. "Within the commission you've got various governments who are not really willing to start discussing shale, like France and Bulgaria. But even in those countries there is still debate about whether this is throwing up an opportunity," Lowe said. "There's particular sensitivity in Germany about the environmental impact. It's a cultural issue there, as well as being about what (constitutes) a real risk. But ultimately the Germans base their energy policy on the same grounds as everyone else: how much it costs."

The EC is carrying out an environmental impact assessment of shale gas production and has initiated a public consultation process which will run until 23 March.

France, which could have the second-highest shale-gas reserves in Europe, has banned hydraulic fracturing (fracking), a technique essential to extracting gas from shale measures.

Developing shale gas in Europe could improve energy security, cut emissions and push European gas prices away from oil-indexed model

Germany has been opposed to shale-gas development and, in the wake of the 2011 Fukushima Dai'ichi meltdown in Japan, has been backing away from nuclear power, which supplies about a fifth of the country's electricity. The federal government wants to close Germany's 17 nuclear power stations by 2022 (eight have already been shuttered), switching its power generation sector to renewable energy.  At the end of February this year,  the federal government approved a draft bill to allow fracking despite polarised political opinion.

Countries such as Poland and Ukraine have encouraged shale-gas exploration as they seek to reduce their reliance on Russian gas. However, a number of companies, including US supermajor ExxonMobil, have pulled out of exploration agreements, citing a lack of clear regulatory and investment framework

The US is considering exporting shale as liquefied natural gas. But even if some of that makes its way to European markets it will may not be cheap, once the costs of exporting and liquefaction are taken into account."Europe will be the only region on earth which doesn't take it (the shale opportunity)," said Alan Riley, professor of law at London City University, said, speaking at a conference in London. "Everybody else will be paying less than us for energy. You can't simply ignore incentives to develop (shale gas) globally. Europe can't sit there like an island ignoring what's going on."


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