Will Europe Walk Away from Its Shale Gas Reserves? Part II

by Christina Nagy-McKenna, Enerdynamics Instructor

In last week’s post I discussed the state of Europe’s natural gas markets and cited some reasons why, despite a growing need for natural gas, many European markets are electing to dismiss the potential of plentiful shale gas reserves. Reasons include:

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

But not every European country is on board with ignoring its shale resources. Poland and Ukraine are two countries that have been hit harder by the global recession than their Western European cousins and are thus very motivated to find new revenue streams. Both countries are also interested in gaining energy independence from their neighbor, Russia, from whom they import large amounts of natural gas but with whom they share a historically tenuous relationship.

Poland is taking a very proactive stance, telling the E.U. that shale gas development will create jobs and spur the economic recovery that the Eurozone so desperately needs. Poland’s government has publicly stated that in its testing there were no environmental issues with fracking. And although ExxonMobile returned their development licenses because they do not believe the Polish gas fields to be robust enough, Chevron, Conoco Phillips, Talisman Energy, and Marathon Oil are still active in the market. Poland’s challenge will be to have sufficient pipeline capacity to export gas to markets in the West.

The Ukraine is several years behind Poland and is just now getting ready to drill exploratory wells. In May 2012 Royal Dutch Shell, Plc. won a license to produce shale gas in the Yuzivska field in eastern Ukraine, and the company is very bullish on its potential. Shell has stated that it believes it will be able to double or triple production in the Ukraine in a decade. Ukraine also holds a strategic advantage regarding pipeline capacity as it owns the natural gas pipeline that Gazprom, the natural gas supplier half owned by the Russian government, uses to transport natural gas to Western Europe.

So, clearly the question of European participation in shale gas production is not easily or fully answered at this time. If Poland and the Ukraine enjoy the type of success that U.S. producers have enjoyed, it’s hard to imagine the rest of Europe sitting by and watching. If ground water contamination is suspected, then environmentalists will call for the shuttering of the projects. At this point it is too early to accurately predict what will happen, but one thing is for certain: In Europe as in the U.S., shale gas has the potential to be a game changer.


References:

“Ukraine Looks to Texas for an Energy Path,” Andrew E. Kramer, The New York Times, May 4, 2011.

“Ukraine to Potentially Triple Shale Output in Decade, Shell Says,” Kateryna Choursina and Daryna Krasnolurska, Bloomberg News, September 19, 2012.

“Polish Environment Minister:  EU Needs Shale Gas,” Reuters, September 22, 2012.

“Polish Shale Gas Has a Future Despite Exxon Exit,” Jon Mainwaring, E&P News, August 9, 2012.

“The War Against European Fracking Gets Dirty,” Wolf Richter, Business Insider, September 1, 2012.

“German Government to Oppose Fracking,” Der Spiegel, Spiegel Online International, May 7, 2012.

“Bulgaria Becomes Second State to Impose Ban on Shale-Gas Exploration,” Mirel Braun, The Guardian UK, February 14, 2012.

“World Shale Gas Resources: An Initial Assessment of 14 Regions Outside the United States,” U.S. Energy Information Administration, April 5, 2011.

About Enerdynamics

Enerdynamics was formed in 1995 to meet the growing demand for timely, dynamic and effective business training in the gas and electric industries. Our comprehensive education programs are focused on teaching you and your employees the business of energy. And because we have a firm grasp of what's happening in our industry on both a national and international scale, we can help you make sense of a world that often makes no sense at all.
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