“There’s a lot of potential, but we are not quite at the point where this is going to change landscape on European gas,” said Nikos Tsafos, head European gas analyst with PFC Energy, the Washington-based energy consultancy. “People recognize that this is big, but they don’t recognize what it will take to get there. People are talking about unconventional gas as a panacea for Europe without necessarily understating what needs to happen. And the gap between reality and expectations worries me.”

While only in the early exploratory phase, companies are racing to secure acreage in Sweden, Poland, Germany, Hungary, Austria, France, and the UK to determine whether North America’s success in developing unconventional gas resources can be replicated.

The shale gas fever involves the likes of Shell, OMV, BNK Petroleum, ConocoPhillips, and Exxon Mobil. But it’s going to take at least another five years just to complete the most comprehensive review of Europe’s shale gas potential that only began earlier this year. Gas Shales in Europe, as the program is known, is spearheaded by GeoForschungsZentrum (GFZ), the German research center for geosciences in Potsdam, and financed by Exxon, Marathon Oil, StatoilHydro, GdFSuez, Vermilion, Total, and a new, but still confidential sponsor.

Last week, in its World Energy Outlook, the International Energy Agency estimated that the US has eight times more shale gas in place than Europe. In fact, Europe has the least amount of shale gas globally, except for Sub-Saharan Africa. Only China and Central Asia are believed to hold amounts of shale gas comparable with the US. But the IEA also warns that only North America has been sufficiently studied to draw solid conclusions.

Even assuming bigger quantities of shale gas in Europe, with outdated studies estimating more than 500 trillion cubic feet, there are huge geological differences with the US. Experts don’t expect shale formations here to have nearly as much gas trapped in them as North America ones. It is unlikely to be as profitable as the gas plays are probably smaller in size and have more rapid decline rates.

And that’s without compounding a myriad of other challenges, including population density, water shortages, insufficient infrastructure, overregulation, environmental policies, and technological uncertainty.

“I believe that there are shale gas plays in Europe and that there could be high local content in them, but I do not think we will have this situation like in the US,” said Hans-Martin Schulz, a senior geologist with GFZ who is also one of the coordinators of the study. “I do not share that shale gas will be a game changer in Europe. It will satisfy some local gas demand, but it will not be a game changer.”

In the US, shale gas production reached 4.8 billion cubic feet a day, or 8% of total production in 2008, according to the IEA. Some forecast expect it to reach as much 20 percent by 2020. In many cases, the cost is lower even than conventional resources.

In contrast, Europe has no significant shale gas production. It is uncertain how much shale gas recoverable reserves even exist. And while that is expected to change, especially after 2020, the share in total gas production will remain small, according to analysts and the IEA.

“Shale gas in Europe can be real, but not yet. We’re thinking very minimal volumes before 2015, and some gas by 2020,” said Tsafos.

That doesn’t mean Europe won’t reap the benefits of shale gas. North American success with unconventional gas supplies, especially shale gas recent additions, is expected to drastically cut imports in the form of liquefied natural gas.

While world gas markets will remain mostly geographically detached, the IEA expects a gas glut over the next few years, which will likely send spot gas prices lower. US gas prices, already under pressure from plummeting demand, have shed two-thirds of their value from their highs in mid-2008.

So yes, Europe will indeed probably get some wiggle room from Russia’s grip as it increases cheaper LNG imports. And yes, gas exporters, including Russia, will be under intense pressure to renegotiate long-term contracts for pipeline supplies. And further unconventional gas production elsewhere will continue to add downward pressure to prices. International trade will also rise fast. And coupled with climate change policies, the reshaped European energy market will probably increasingly drive a transformation in the power sector to gas, away from coal.

But even if there is little action in Europe, its companies are no longer standing idle. BG, Eni, and StatoilHydro, among others, are getting in on the shale gas action in the US and starting to explore other continents. Their goal is to capture some of the game-changing action the IEA believes shale gas will bring globally.

Europe will take its time. “There are still some codes that can’t be cracked,” Tsafos said. “In Europe, you’ll need a lot more activity before trial and error produces the same results as in the US.”

The environmental impact, including water use, roads, and pipelines, will also be contentious due to Europe’s higher population density.