Opposition, disappointing data wither Europe's shale gas prospects
Post Date: 04 Feb 2015 Viewed: 334
U.S. energy major Chevron's decision to stop exploring for shale gas in Poland has highlighted the sector's uncertain future and role in strengthening energy security in Europe, analysts said on Monday.
A shale gas boom in the United States over the past few years has reduced its energy dependence, but Europe is in the early stages of development and no commercial drilling has yet started.
The U.S. Energy Information Administration has estimated Europe could hold trillions of cubic metres of recoverable shale gas but it is still uncertain where reserves are located, how large they are and whether they are commercially viable.
In fact, revisions to estimates of technically recoverable resources, disappointing outcomes and growing opposition to shale gas have reduced the hype about development prospects in Europe.
The surge in U.S. shale oil and gas production has also caused a large build in global supplies at a time of low demand, contributing to a sharp fall in crude oil prices since June last year.
"I don't know any serious person who thinks Europe is going to have a shale gas revolution in 15 years at least. It's just not going to happen, there are too many barriers to it," Paul Stevens, distinguished fellow at London-based think tank Chatham House, said.
"All we are seeing now is a few final nails in the proverbial coffin."
In the latest blow on Friday, Chevron Corp's Polish unit decided to discontinue shale gas operations in Poland because opportunities were greater elsewhere.
Disappointing early drilling results, difficult geologic conditions and an unclear regulatory front have already pushed oil majors Total and Marathon out of Poland -- leaving ConocoPhillips as the only foreign investor left. Some companies are also cutting exploration budgets due to the low oil price.
In nearby Romania, Prime Minister Victor Ponta said in November that shale gas did not exist in the country after it was initially estimated to hold enough reserves to cover domestic demand for more than a century.
Local opposition to shale gas fracking -- extracting gas and oil by pumping chemicals, sand and water at high pressure into underground rocks -- on environmental, health or noise grounds in a number of other European countries has also slowed development or stopped it completely.
France and Bulgaria have banned fracking. Germany, which currently has a moratorium on fracking, is drawing up new rules, and has promised strict environmental audits and a ban on drilling in areas where water is protected due to possible environmental damage.
The British government is keen to develop shale gas to help lessen the country's increasing dependence on imports as North Sea output declines. Shale gas explorers Cuadrilla and IGas have drilled a number of wells but no commercial production has started amid rising opposition to fracking.
Last week Scotland -- estimated to have enough shale gas resources to cover all of Britain's gas needs for more than 30 years -- announced a moratorium on granting of planning consent for all unconventional oil and gas development.
"It is certainly difficult to see now where shale will first take off in Europe," said John Williams, senior principal at consulting firm Poyry. (Additional reporting by Agnieszka Barteczko; editing by Susan Thomas)