European Student Think Tank

The U.S. shale gas suc­cess story

Around the turn of the mil­len­nia experts pre­dicted that the United States would soon become the largest importer of nat­ural gas and policy makers in Moscow and the Middle East were expect­antly rub­bing their hands. Ten years later the United States over­took Rus­sia for the first time as biggest nat­ural gas pro­du­cer in the world. What had proven to be the game-changer was the decision of pre­vi­ous admin­is­tra­tions to fur­ther intensify the explor­a­tion of uncon­ven­tional gas sources. Today shale gas amounts to around 20% of annual nat­ural gas pro­duc­tion, skyrock­et­ing from around 1% in 2000! Ana­lysts pre­dict that by 2035 around 50% of nat­ural gas pro­duc­tion will be covered by gas from uncon­ven­tional sources.

The suc­cess story of the shale gas boom in the US has not gone unnoticed. Canada, but also South Africa, China and, more reluct­antly it seems, the EU are look­ing to rep­lic­ate the Amer­ican exper­i­ence. The most vocal sup­porter of shale gas exploit­a­tion in the EU is Poland which hopes to free itself and its neigh­bours from Russia’s grip. Warsaw already announced that dur­ing its term at the helm of the EU’s rotat­ing pres­id­ency the pro­mo­tion of shale gas will be among its top pri­or­it­ies. There are a num­ber of reas­ons why Warsaw’s move might prove bene­fi­cial for the EU. How­ever, there are also dif­fer­ences to the US story that need to be high­lighted and might res­ult in a lower-than-expected impact of shale gas on the European energy market.

Gas, gas, gas!

The Inter­na­tional Energy Agency (IEA) estim­ates that West­ern Europe alone might hold shale gas reserves of around 15 tcm (tril­lion cubic meters). This would be enough to sat­isfy Germany’s energy need for around 175 years. Equally import­ant how­ever, and explain­ing Warsaw’s optim­ism, is another fig­ure: shale gas reserves are cal­cu­lated at around 3 tcm in Poland alone, more than 200 times the amount needed to cover its energy con­sump­tion. If those num­bers prove right and exploit­a­tion turns out to be eco­nom­ic­ally viable, this would cata­pult Poland into the top tier of energy export­ers in the EU – increas­ing state rev­enue due to energy exports and boost­ing its lever­age among the big Mem­ber States due to its stronger eco­nomic pos­i­tion in the Union.

Gas is more cli­mate friendly than coal, Poland’s primary energy source right now, and would help reduce emis­sions sig­ni­fic­antly, though only after 2020, while ensur­ing secur­ity of energy sup­ply. Fol­low­ing the course set by the United States, shale gas fuelled power plants could replace dirty coal power plants in the region, whilst the lat­ter resource could be used as a emer­gency back-up. Con­sid­er­ing Poland’s great coal reserves, sur­plus coal could be expor­ted to coun­tries with car­bon cap­ture and stor­age (CCS) equipped fossil fuel power plants.

Gas prob­lems!

Even though there are a num­ber of advant­ages of shale gas – reduced depend­ency on Rus­sia and Algeria, bet­ter envir­on­mental fin­ger­print, and lower trans­port­a­tion costs due to its prox­im­ity to mar­kets – a num­ber of draw­backs exist.

Envir­on­ment­al­ists claim that even though shale gas might be releas­ing fewer green­house gases (GHGs) into the atmo­sphere than coal and oil, its exploit­a­tion is very harm­ful to the envir­on­ment due to the need of chem­ical com­pon­ents to crack the ground and keep those fis­sures open and the release of meth­ane in the pro­cess of ‘frack­ing’ (hydraulic frac­tur­ing). The level of ground­wa­ter con­tam­in­a­tion though has been repeatedly ques­tioned and seems to vary from case to case, as most of the water pressed into the ground to ‘frac­ture’ it is usu­ally recovered and pur­i­fied again. Non­ethe­less, a cer­tain risk remains and as long as com­pan­ies do not dis­close which chem­ic­als they use in the pro­cess, it remains likely that health risks will be one of the biggest obstacles to a shale gas rush in the EU.

Another issue at hand that could slow down exploit­a­tion or greatly increase pro­duc­tion costs are envir­on­mental stand­ards in the EU which are sig­ni­fic­antly higher than in the US. Fur­ther­more, most proven and estim­ated shale gas reser­voirs are loc­ated in deeper ground, mak­ing them eco­nom­ic­ally less viable. Com­bined with higher labour costs in the EU many drilling sites might become unat­tract­ive to pro­du­cer companies.

Pub­lic dis­con­tent and fear of envir­on­mental, health and secur­ity risks, might prove another prob­lem for pro­du­cer. As wit­nessed recently, the EU’s pop­u­la­tion might be in favour of renew­ables and other energy sources to secure their sup­ply of energy, how­ever, they are not will­ing to have pro­duc­tion sites any­where close to their homes. Since the EU is more densely pop­u­lated than the U.S., many wells could be situ­ated in close prox­im­ity to cit­ies and set­tle­ments – a tricky situ­ation indeed.

Last but not least, the EU has so far failed to endorse shale gas as a future com­pon­ent to tackle cli­mate change. The com­mis­sioner for Energy, Guen­ther Oet­tinger, remains non-committal on the issue. Without offi­cial EU sup­port, many infra­struc­tural pro­jects, such as pipelines and stor­age facil­it­ies, might be too expens­ive for coun­tries to build, fur­ther redu­cing the suc­cess chances of shale gas in Europe.

It remains to be seen if the shale gas fever will remain in Europe, or if enthu­si­asm will cool down and fade away, just like a nor­mal fever. Poland will fight for it to stay, for its own sake.

Related posts:

1. Shale gas I: The future of shale gas in Europe
   May 17th, 2011
2. The power of the Atom: nuc­lear energy and the les­sons from Fukushima
   March 28th, 2011
3. How will Germany’s decision to phase-out nuc­lear power affect the EU?
   June 19th, 2011
4. Why Poland’s new old gov­ern­ment is good news for the EU
   Octo­ber 18th, 2011
5. What changes to expect in post-election Poland
   Octo­ber 26th, 2011