International experts differ on prospects for shale gas production in Europe

June 12, 2013 5:59 pm

The annual St. Petersburg International Economic Forum (SPIEF) will be held under the theme Finding Resolve to Build the New Global spiecEconomy on 20–22 June 2013. It is expected that the event will bring together around 5000 attendees including leading economists, businessmen and politicians, and will provide the participants with the opportunity to discuss the most pressing issues affecting the world today:

  • political challenges
  • the fragility of the global economic recovery
  • the economic and social fractures emanating from the crisis
  • the importance of capitalizing on new emerging opportunities
  • the ongoing shifting power equations.

According to the observers, traditionally one of the most important topics of the meeting is the issue of energy security, but this year the participants are also likely to focus on the aspects of shale gas production.

The success of US shale gas development has prompted optimistic forecasts for the possibility of significant change in European energy markets. However, the development of new projects is slowed due to a number of serious reasons, including high cost of production, rapid exhaustion of deposits and significant environmental risks: according to the studies, 43% of wells leak toxic chemicals used in hydraulic fracturing (HF), which can cause cancerous diseases.

Marlene Holzner

Marlene Holzner

According to Marlene Holzner, spokesperson of the European Commission for energy, the Commission is open to the exploration and exploitation of unconventional gas as long as it can be done in an economic and environmentally acceptable way:

“Shale gas exploitation may offer economic benefits and an increased security of supply in the medium term, particularly against the shale gas boom in the US and four times higher gas prices in the EU than in the US with negative consequences for competitiveness of European industry. Competitiveness challenges posed by low US energy prices need to be taken seriously, as do environmental risks and related public concerns.”

Holzner added that the EU policy objectives towards a decarbonised and resource-efficient economy remain a key priority, together with EU commitments towards improving energy efficiency and further developing renewable energy sources.

“In this regard the Commission conducted a series of studies focusing on three main aspects: potential energy market impacts in the EU, including aspects relevant for the economic viability of unconventional gas in the EU as well as energy market impacts stemming from developments outside Europe; climate impact of potential unconventional gas production in the EU and potential risks for the environment and human health. Studies have been conducted on all three matters. The Commission is currently assessing the reports. Furthermore a public consultation on shale gas has been launched in order to consult with relevant stakeholders and the public on this topic. The outcome of the public contribution will feed into the Commission’s initiative on shale gas later this year,” Holzner explained.

Daniel Kammen, distinguished Professor of Energy at the University of California, Berkeley, believes that it is certainly economically beneficial to exploit shale gas in Europe.

“Shale gas technology in Europe is still behind that of North America, but the potential across Europe and central Asia is very large. North America and Asia are larger resources, but European production can have a significant regional impact,” the expert said in an interview with news agency PenzaNews.

He also noted that shale gas is not a singular amount, and its impact on the environment depends on the full life-cycle of its extraction, refinement and end-use.

In turn, David Buchan, senior research fellow at Oxford Institute for Energy Studies, stressed that the main environmental pollution risk is water

David Buchan

David Buchan

contamination.

“The risk is related to pollution of the huge amount of water pumped into shale gas wells in order to create hydraulic fracturing, or fracking. Water is the main constituent of fracking fluid, but it also contains some chemicals. Most of the fracking fluid stays in the underground, but the water that flows back to the surface contains chemicals and some traces of minerals and metals, some of them weakly radioactive. This “flow-back” water has to be carefully treated at the surface,” Buchan explained.

He also added that the other important problem is social impact.

“Shale gas is a noisy, disruptive and intensive industrial process, which may be tolerated in more remote parts of central and Eastern Europe, but not in southern England, the Netherlands and northern Germany where there are shale deposits. Therefore, I predict a slow development pace for these projects. Public acceptance will be slow as the European public realize what an intensive industrial process this is, and has to be, in order to remain economic for the companies involved,” the expert added.

Sergei Sorokin, researcher at Oil and Gas sector development department for Russia and the World, the Energy Research Institute of the Russian Academy of Sciences (ERI RAS) suggested that Europe would not be able to repeat the success of US shale gas production.

“Actively engaged in a search for shale gas on its territory in the past five years, European countries, with the active support of international companies, did not receive encouraging results from geological exploration. Given the uncertainty as to the presence of commercial quantities of shale gas in Europe, there is no answers yet regarding its production and technology costs. However, public protests have already led to a moratorium on shale gas development in several countries,” Sorokin said.

Furthermore, in his opinion, the issue is politicized.

“Energy is inseparable from politics. There is a lot of media hype around shale gas and attempts to influence public opinion. Just now this approach is being replaced with more balanced analysis of this new phenomenon in the global gas business,” Sorokin noted.

From his point of view, production of shale gas will not allow Europe to achieve energy independence in the medium term.

“According to the calculations on the ERI RAS model of the global gas market, shale gas production in Europe will be about 5 billion cubic meters by 2040 in the baseline scenario. In the case of a technological breakthrough, the production volumes could reach 13 billion cubic meters by the end of the forecast period. Moderately optimistic estimates do not allow us to speak about the possibility of a significant reduction in imports of natural gas to the region,” the expert explained.

Corin Taylor

Corin Taylor

Meanwhile, Corin Taylor, senior economic adviser at Institute of Directors, said that shale gas production has clearly provided immense benefits to the US and could do the same for Europe. In his opinion, shale gas can benefit the environment, among other things.

“Firstly, it can replace coal in electricity and heat generation, reducing carbon dioxide and improving air quality. Secondly, if well regulated, European shale gas production emits less carbon dioxide than conventional gas production from outside the continent, either by pipeline or LNG. Thirdly, if shale gas supports manufacturing in Europe rather than in countries such as China, global emissions will be lower, as European industry is generally more energy efficient and less reliant on coal. Fourthly, natural gas has great potential as a transport fuel, as we are seeing in the US, which can also cut carbon dioxide and reduce air pollution. Provided that all aspects of the shale gas production process – good design and construction, hydraulic fracturing operations, waste-water treatment, etc. – are well regulated and inspected, the environmental risks, in our view, are very small,” the analyst said.

Taylor also believes mass shale gas production in Europe could bring about lower gas prices.

“All European countries could potentially benefit from lower gas prices, but only those who allow production to go ahead will see the jobs and tax revenues associated with production,”  he added.

In turn, Thomas Spencer, research fellow in climate and energy efficiency at Institute for Sustainable Development and International Relations

Thomas Spencer

Thomas Spencer

(IDDRI) expressed confidence that the environmental risks of shale gas will be higher in densely populated Europe than in the US.

“The risks of chemical leakage are significant. At the same time, careful regulation can reduce the worst of the risks of local environmental damage. However, it is clear that such regulation could slow the development and increase the cost of shale gas production,” the expert noted.

He also suggested that the use of shale gas could be one aspect of a strategy to reduce emissions of greenhouse gases that warm the climate, but called it a temporary solution.

“Gas can help as a “bridge” to zero-carbon technologies, especially for countries that are heavily reliant on more polluting fuels such as coal. However, to keep global warming at manageable levels, Europe needs to move to zero-emission technologies by the middle of the century. So even gas is a short-term solution and we need to rapidly develop and exploit other solutions: energy efficiency and renewable energy,” Spencer explained.

From his point of view, for Europe, shale gas production could be environmentally justified only for some less densely populated countries, heavily reliant on coal, like Poland.

“It is unlikely that there will be mass production of shale gas in Europe in the coming two decades at least. There is significant social opposition, based on the perception of risks linked to local environmental pollution. Europe is still at quite an early stage of its exploration and shale gas exploitation, so there is still a lot of uncertainty about whether and how much commercially-exploitable shale gas exists. Moreover, the European drilling industry is still under-developed, and regulatory environment is likely to be more restrictive than in the USA,” the expert said.

Zsuzsa Foltanyi, strategic advisor and board member of the Hungarian Environmental Partnership Foundation, shared Spencers’ opinion about the negative impact of shale gas production on the environment.

“The risk is very high. There are very few studies on this problem and my personal concern is that actually none of the European governments care enough about the issue,” Foltanyi said.

From her point of view, mass shale gas production in the EU is hardly possible.

“Apart from the risk of water pollution, we should take into account geological risks that may have a long-term impact on the environment, such as the possibility of earthquakes and landslides. Europe is densely populated, so there are very few areas where such investigations can make sense,” she added.

“I am sure that this type of gas production makes no sense in any part of the world – even if politicians, economic experts and sometimes even social experts do not speak about these risks, the long-term environmental and social impact may be very dangerous,” Foltanyi concluded.

Shale Gas Production

Shale Gas Production

Shale gas is natural gas that consists mainly of methane. Shale gas deposits are not large. It is held in natural fractures, in pore spaces, or absorbed into organic material.

Mass production became possible with the introduction of new and expensive technologies in the 21st century. The technologies used are as follows: horizontal drilling, microseismic imaging, massive hydraulic fracturing or propane fracking.

According to the researchers, disadvantages of shale gas exploration include high production cost, fast exhaustion of deposits, the fact that shales, which host economic quantities of gas, are not numerous, and could cause high environmental risks. In particular, shale gas production can affect the environment through the leaking of extraction chemicals and waste into ground waters, which are the source of drinking water for the population.

To date, a ban on hydraulic fracturing is imposed in France, Bulgaria, the north-west of Germany and some US states, with a temporary introduced in the Czech Republic. Luxembourg and the Netherlands also suspended drilling. Costs of compliance with environmental regulations in Austria make shale gas production unprofitable.

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