Fracking Doesn’t Threaten Russia’s Gas Power

From Live Mint

By Leonid Bershidsky

It is an uncomfortable fact for European politicians professing resistance to Russia’s geopolitical assertiveness that their energy dependence on Russia is growing. In 2013, the Russian state-controlled natural-gas monopoly, Gazprom OAO, increased its market share in Europe and Turkey to 30%, the company proudly announced. This share is bigger than the 2011 historic maximum of 27%. Gazprom’s exports to Germany increased by 21%, to Italy by 68% and to the UK by 54% in 2013.

While hydraulic fracturing—or fracking—of shale formations is helping the US achieve energy independence, giving it a freer hand in Middle Eastern policy, the expected effects of the shale revolution for Europe haven’t materialized. Liquefied natural gas from the Persian Gulf could have been diverted from the US, where demand has shrunk, to Europe. But in 2013, LNG supplies to Europe actually dropped: They mostly went to Asian markets where exporters could command higher prices. If the U.S. manages to export LNG in significant quantities, its price will be roughly the same as what Gazprom charges, a little less than $11 per million British thermal units, not counting delivery costs from ports to the heart of the continent, according to the International Energy Agency (IEA).

The US shale revolution, then, isn’t doing much to help Europe expand its range of energy sources. Sustainable energy subsidies are going out of fashion even in Germany: They are too much of a burden on industry, which already pays three times US rates for electricity. Only a shale boom of its own could help Europe out of this predicament. Or could it?

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