Shale Gas in Europe; the balance between technology, policy and public support July 31 2014

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Helge Lund of Statoil believes that the lack of public and political support for shale gas, coupled with the population density in Europe, will hamper [development] efforts in the near future. And with BP ruling itself out of shale gas drilling in the UK (in February 2014), the Swede is in good company. In the Netherlands (which has traditionally been a big producer of natural gas), the government won't even decide whether or not to allow drilling until 2015. The gas pipeline network in the EU is a long way off being complete - in many cases the infrastructure between countries is almost non-existent.

Marcus Pepperell from Shale Gas Europe, a platform run by FTI Consulting is cautiously optimistic that things are not as bleak as Helge Lund and others may think. He states, "The European Commission estimates that Europe could see the start of commercial drilling as early as 2015 in member states where trials are most advanced. Exact reserves are unknown and further exploration needs to take place. However, current activity is well ahead in the UK, Poland and Romania. In many other parts of Europe, such as the Netherlands and Denmark, the authorities are undertaking extensive studies to estimate shale gas potential."

Indeed, the UK and Poland have gone so far as to join forces in this arena, declaring themselves 'natural allies' and agreeing to produce joint research to detail how "the potential of shale gas can be realised." (France, however, have a ban on hydraulic fracturing).

Pepperell does believe there is a compelling business case evident already. He explains: “Industry is an important part of the European economy but Europe has higher energy prices than in other parts of the world. The recent Commission study on energy costs shows that European gas prices are much higher than in Latin America or continental Asia and more than three times higher than in the USA. This has an impact on the competitiveness of European industry, especially for high-intensive energy industries such as the chemical, paper or metal sectors. It means European business is at a disadvantage when competing in the global market.”

Pepperell goes on to say “In Germany, for example, the phasing out of nuclear energy and support for renewables, energy taxation and carbon licenses, has led to much higher energy costs than elsewhere in Europe. Other member states, such as Poland and Bulgaria, are very dependent on a single external energy supplier that imposes high costs. Industry in these countries is therefore at a disadvantage. The development of new potential domestic energy sources, for example shale gas in the UK, is also dependent on the creation of a reliable regulatory and enforcement process to achieve policy support.”

Political clout

It's the politicians that could prove key to improving the situation with regard to energy costs. Pepperell and his colleagues at Shale Gas Europe recently issued a press release calling for political leaders to step up and address the future competitiveness of energy-intensive industries. Pepperell says simply: "Politicians are an important part of the policy-making process and energy policy has a direct impact on energy costs."

"A survey by FTI Consulting conducted in April 2014 shows that in the UK, 47% agree that in light of the crisis in Ukraine, the need for the UK to consider fracking for its own gas supplies increases, while only 21% disagree."

A big-name player that concurs with this is Cuadrilla Resources, which has recently gone one step further and put a - hesitant - starting date on it. The company has stated that by the end of 2015 it is hoping to fuel British homes with shale gas. They said, "For example, local communities will receive £100,000 for every exploration well site that is hydraulically fractured in addition to 1% of revenues from future shale gas production. This could equate to over £1 billion over a 20 to 30 year production timescale in Cuadrilla's Bowland Basin licence area alone."

Cuadrilla announced their intention to apply for planning permission to drill, hydraulically fracture and test the flow of gas from up to four exploration wells on two sites - one at Preston New Road and the other at Roseacre Wood.

UK's biggest shale gas explorer created

In May 2014 IGas acquired its rival Dart Energy to create the UK's largest shale gas explorer. The deal was worth almost £120m and the combined portfolio covers 1 million acres of potential fracking land.

IGas produces around 3,000 barrels of oil and gas a day from 110 sites in the UK while Dart holds licences to produce gas from coal seams in Scotland.

The new business will also harness the power of two joint venture partners in Total and GDF of France. The overall venture will be far larger than Cuadrilla Resources, which has been the most well-known name in the UK market thus far.