EU Reports Should ‘Green-light’ Shale Revolution

EU Reports Should ‘Green-light’ Shale Revolution

Europe’s reluctance to follow the United States and pursue its own shale gas revolution is well documented. Partly it’s been down to the anti-shale, anti-fracking environmental lobbies having a much stronger political voice in Europe; partly it’s down to the fact that the U.S. had drilled more wells offering greater certainty about the potential of reserves. But a clutch of new reports should finally green-light Europe’s own shale gas revolution. But then the EU still has a nasty habit of shooting itself in the political foot.

There is no question that an industry operating in what was believed to be the twilight era for hydrocarbon energy is, as Ed Crooks argued in a recent Financial Times special on energy, being “transformed” as a result of how America has “entered a new era of plenty”. With the oil majors leading the way, the global spread of the revolution is only a matter of time.

Oil Majors And the Shale Gas Revolution

Chevron has already bought up operating rights across a swathe of land in Eastern Europe from the shores of the Black Sea to the Baltic, in anticipation of the anti-fracking tide turning in Europe. Bucking the EU trend, Poland and the UK have already opted not to put barriers in the way of the domestic development of significant shale gas resources. The German government, after its knee-jerk reaction to Fukushima, is currently in “two-minds” over shale development. But it is currently searching for a way to back-track on its commitment to total nuclear closedown; not least in the face of a looming energy ‘gap’ that its renewable energy industry won’t be able to fill. Bulgaria is also re-visiting its fracking ban. Meanwhile, French oil companies are concerned at the country’s potential dismissal of its own vast domestic shale gas resources and have called for shale drilling experiments to be conducted to calm an over-heated public debate.

Shale gas’s transformation of the U.S. energy scene may not translate to the same degree in Europe, but the benefits to EU economies with few domestic energy resources and a total reliance on foreign gas imports, particularly from Russia, ought to be plain. Shale gas development is already the key bright spot in a troubled U.S. economy. By the end of 2011, 600,000 new jobs had been created in America. A report

by Price Waterhouse Cooper suggests U.S. manufacturing will, by 2025, see the impact of shale gas development create a further one million jobs. A study by global market consultants IHS estimates that by 2035, U.S. jobs from natural gas production could peak as high as 2.4 million and generate $1.5 trillion in tax and royalty revenue. For good measure, the national switch from coal to natural gas has seen domestic gas prices halved and has, as the new EU reports acknowledge, led to a flat-lining of global (and European) gas prices. Something unheard of just a couple of years ago, energy independence is today being widely touted as a more than realistic proposition for the U.S.

According to the Energy Information Administration, shale gas could increase the world’s technically recoverable gas resources by a full 40 percent – and that’s a conservative estimate. If the obvious economic benefits elsewhere don’t thaw the European anti-shale freeze-out, then perhaps a clutch of the EU’s own new reports will. UK shale advocate, Nick Grealy, takes up the case of how the latest EU reports ought to re-direct shale gas policy.

The three EU reports, published on September 7, are, says Grealy, “extremely significant”. He notes how the three reports – covering impact on the energy markets, climate and on local environments – while highlighting the risks (to groundwater etc.) come to the “broad conclusion they can be mitigated” and contain “no smoking guns”. Fascinatingly, the reports actually point out that domestic shale gas production would generate fewer emissions than those currently generated through importing Russian and Algerian gas. The EU reports reveal that the continent’s shale gas resources stand at around 80 percent of those in the U.S. As Grealy points out that’s “40 years total Western European gas use”. He goes on to highlight other key factors in the EU reports:

  • Shale gas development has the potential to see natural gas claim 30 percent of the world’s total primary energy supply by 2025. That is likely to rise to 35 percent by 2040, eclipsing oil as the world’s foremost source of energy.
    • Analysts suggest that domestic shale gas production will largely be used within the region it is produced, with no single region producing sufficient to allow it to shift from becoming a net importer to a net exporter.

 

    • Shale gas production has the significant potential of cutting natural gas prices.

 

  • Shale gas could induce a significant growth of gas in transportation.

 

Grealy rightly observes that, above all, these EU reports should help to change “a common public perception” that “we need to take a break and study shale gas development before we can make any decision”. More than that, if Europe doesn’t green-light its own shale gas revolution and soon, it will soon find itself well behind the global shale gas development curve – and missing out on an early boost for many of the EU’s ailing economies.

 

Interestingly, the three EU reports mirror the inherent bias in the European debate on shale gas and fracking: one on key energy and economic impacts, two on environmental impacts. Yet, in an irony of ironies, the switch from coal to shale gas this year saw the United States out-perform the EU and its regulatory regime in achieving significant carbon emission cuts. In August, U.S. emissions were reported to have hit a 20-year low with a report at Investors.com attributing the dramatic drop “to a supposedly environmentally unfriendly technique that has created an abundance of cheap natural gas” and acknowledging that “the free market, it seems, does a better job than the Environmental Protection Agency.”

 

And plainly a better one than EU regulations, I might add.

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