by Christina Nagy-McKenna, Enerdynamics Instructor

U.S. producers have enjoyed great success using hydraulic fracturing (fracking) to extract natural gas from shale formations. Fracking is a game changer that has swelled domestic gas supplies and sent U.S. gas prices falling even as they climb in other markets worldwide. The U.S. Energy Information Administration (EIA) forecasts that by 2035 shale gas production will account for 46 percent of U.S. natural gas production.

A logical next question: Who else is ready to join the U.S. as a supplier of natural gas produced through fracking? Surprisingly not Europe, even though the EIA estimates it is sitting on an estimated 639 Tcf of shale gas resources, and despite Europe’s growing need for additional natural gas.

The European natural gas market is growing in demand, in part due to the continent’s preference for a cleaner-burning alternative to coal, and in part due to its changing relationship with nuclear power. Europe has a long history of burning coal for heat and power, but well-documented environmental issues resulting from the use of coal have pushed the continent towards natural gas and nuclear energy.

The three largest gas users have very different philosophies regarding the future of energy resources:

• Germany’s government is bullish on renewable energy;
• the French government continues to be the largest cheerleader for nuclear power;
• and the Italian government is encouraging the use of more natural gas.

Supplies come from a myriad of sources: the U.K., Norway, the Netherlands, Russia, Libya, Algeria, and an ever-increasing amount of imported LNG.  Some of these sources are less than perfect, however. Transportation of gas from Libya to Italy was suspended last year during its civil war; Russia has shown a propensity to interrupt deliveries for days at a time to other nations, putting into question its reliability; and U.K. supplies that originally were destined for export to other parts of Europe are now being consumed in the U.K.

Europe is also wrestling with how to adjust its nuclear power industry in the aftermath of the Japanese earthquake and tsunami of March 2011 that caused a large atomic accident at the Fukushima nuclear power plant. Germany has announced that it will exit nuclear power production entirely by 2022. France has taken the opposite tact, and is unwavering in its support of its nuclear industry.

Indirect effects of Fukishima are already hitting the continent. LNG imports were down 34 percent in the first quarter of 2012. Tankers scheduled for Europe were diverted to Japan, where the market for natural gas is more robust and the need very great as a significant amount of nuclear power is simply not returning to the grid.

Why not shale? So, with growing demand and the uncertainty about domestic and imported gas supplies, why is Europe unwilling to embrace shale gas produced by hydraulic fracturing?

The easy answer is that three large obstacles stand in the way of shale gas production in Europe:

• environmental concerns
• population density
• inadequate pipeline capacity to move the gas to consumers

The more complete answer is that it depends on which part of Europe you are talking about.  The UK, France, Germany, Bulgaria, Poland, and the Ukraine house the largest potential shale gas reserves.  But:

• Environmental concerns have temporarily shut down production in the U.K. after a series of earthquakes was linked to hydraulic fracturing.
• France outlawed fracking in July 2012 after wine makers and other environmentalists strongly protested the practice  due to concerns over possible ground water contamination.
• In Germany, ExxonMobile is eager to proceed with test drilling in the states of North Rhine-Westphalia and Lower Saxony, however residents are opposed. According to German news magazine der Spiegel, German Economic Minister Philipp Rosler and Environmental Minister Norbert Rottgen, both oppose hydraulic fracturing.  It would not surprise anyone if Germany also banned fracking.
• In Bulgaria, citizens replied with a curt “no thank you.”  In January of this year, the Bulgarian parliament withdrew the permit they had issued in 2011 to Chevron to begin development of a shale gas reserve.  Later the parliament went a step further and banned exploration of shale-gas reverses using hydraulic fracturing.

This isn’t to say that shale is completely obsolete in Europe. Next week’s post we will  take a closer look at the European markets that are tapping this resource and why.