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No revolution for European shale gas

No shale-gas play has yet been brought into full production anywhere in Europe

The absence of a region-wide consensus on development and divided public opinion are preventing a shale-gas revolution sweeping Europe, as it has in North America, says Ernst & Young (E&Y). A new report – Shale gas in Europe: revolution or evolution – suggests the impact of shale gas on European energy markets will be evolutionary rather than instantly transformative.

Over half of all estimated European shale-gas reserves – nearly 10% of the world total – are to be found in two countries, Poland and France, with the latter already having banned shale drilling. Exploration is pushing ahead in Poland, however, while a number of countries with smaller reserves are also considering exploration programmes, such as Germany, Austria, Lithuania, Bulgaria and the UK.

But the consultancy firm notes that no shale-gas play has yet been brought into full production anywhere in Europe. John Avaldsnes, head of E&Y’s regional oil and gas team, says the industry must overcome some difficult obstacles if shale-gas development is to progress across the continent.

“There appears to be no consensus across Europe on shale-gas development and government attitudes vary, in some cases markedly. Public opinion on the issue is similarly divided, adding to pressure on governments to take action to either support or restrict shale-gas development with most countries adopting a ‘wait and see’ attitude,” he says.

Rich pickings for some

E&Y says the effect of shale gas will differ from market to market, depending on factors such as the country’s energy strategy, degree of import dependence, and the cost and social acceptability of alternative and competing supply sources. It could also provide rich pickings for the small and mid-sized independent companies pioneering shale gas exploration in Europe, as well as providing opportunities for oilfield services companies.

The pace of development is also likely to depend on the development of new technologies that could cut the cost of shale-gas extraction, potentially making it a more economically viable option in a region, where the lack of existing infrastructure makes production more expensive than it is in the US, E&Y says.

An executive from Schlumberger, the world’s largest oilfield services firm, told last week’s Shale Gas World Europe 2011 conference in Warsaw that shale-gas drilling in Poland was three times more expensive than in the US. Peter Richter, manager at Schlumberger’s unconventional-technology division, said the average cost of drilling a 2,000 metre horizontal well in Poland was $11 million, compared with $3.9 million in the US. He also said Poland’s shale-gas push would be slowed by inadequate pipeline infrastructure.

Winning over the public

The problems of gaining public acceptance for shale-gas drilling were also illustrated at the conference, which was interrupted by protestors who chained themselves to the stage.

Meanwhile, for the second time in two months, protestors last week climbed a rig in northwest England, owned by Caudrilla Resources, whose fledgling exploratory programme was halted after drilling caused two earth tremors earlier this year. Campaigners against the use of hydraulic fracturing (fracking) have held protests in a number of other European countries, including Bulgaria and Germany.

Polish advances

In Poland, meanwhile, wher shale exploration programmes are advancing with government support, state-controlled PKN Orlen plans to start drilling a test well next week on one of its shale-gas licences in the east of the country. This follows on from another test drill earlier in the year at another site, around 60 km from the new well. The company said it would decide whether to start horizontal drilling on the wells within six months.

In October, the firm said it would spend more than $150 million drilling six shale-gas wells by the end of 2013. It holds eight licences for conventional and shale exploration, for oil and natural gas, in Poland.

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