GAS AND POWER: EU shale subdued on low demand and rising supply
| DOI | http://doi.org/10.1111/oet.12542 |
| Published date | 01 December 2017 |
| Date | 01 December 2017 |
GAS AND POWER
EU shale subdued on low demand and rising supply
For some time, the EU has been seeking to reduce its
reliance on Russian gas. At one stage, the domestic pro-
duction of shale gas was seen as part of the answer in
a number of countries until political and other issues
began to dampen enthusiasm forit. Liqueed natural gas
(LNG) then emerged as another option as supplies rose
and a worldwide glut was pred icted. Meanwhile, EU gas
demand showed little sign of stronggrowth. All the time,
however,RussiahasbeenincreasingitsexportstotheEU
and looks likely to be the cheapest foreign source of gas
evenintheeventofanyfutureriseinEUdemand.
Shale is the answer
e EU Commission has been fretting for some time
over what it regards as the EU’s over-reliance on Rus-
sia for its natural gas [1]; but with the EU’s production
of gas in long-term de cline, there appeare d to be no
way of using domestic resources to curb the expected
increase in Russian imports. e US, however, was
showing that there might be such a way: by exploiting
non-conventional reserves of gas, particularly shale gas.
Surveys showed that large deposits of gas-bearing shale
existedinvariouspartsofEuropeandambitiousplans
were made to develop them. Many of these plans, how-
ever, are now being delayed or abandoned altogether.
e EU’s reserves of shale gas are estimated to be
larger than its conventional reserves. An assessment
by the US Department of Energy’s Energy Information
Administration (EIA) puts the EU’s technically recov-
erable shale gas reserves at about 470 tcf [2], which is
more than ten-times its proven conventional reserves.
e shale reserves remain unproved. However, when
compared with the EU’s unproved conventional reserves
they appear to be about two-and-a-half times larger (see
Tab l e B) .
e main interest initially was in Poland,which is esti-
matedtoholdnearlyathirdoftheEU’sestimatedtotal
(see Table B). Exploration began in 2010, and in 2014,
the government declared that the development of the
shale gas sector was a national priority; but shale gas
hasnotliveduptoitsearlierpromise.Anumberoffor-
eign companies complained that the licensing process
for exploration was too cumbersome and slow; but the
main problem has been that the country’s complicated
geology makes exploration too expensive at current gas
prices. In 2016, the London-registered Manx company,
3Legs Resources, which pioneered exploration for shale
gas in Poland, announced it was quitting, having f ailed
to nd commercial deposits of gas. Other foreign rms,
including ExxonMobil, ConocoPhillips and Total, have
also le, leaving only Polish companiesto carr y on.is
Table B
EU: Estimated Gas Reserves
Country Reserves
(tcf)
Shale Gas∗
Poland 146
France 137
Romania 51
Denmark 32
UK 26
Netherlands 26
Others 52
Total 470
Conventional Gas
Proved 45
Unproved 184
∗Unproved, technically recoverable resources
Totals rounded
Source: EIA; (Proved conventional reserves) BP Statistical;
Review of World Energy,2017
year, the operator of the country’s gas grid, Gaz-System
said it would increa se the capacity of its LNG regasica -
tion terminal at Swinoujscie by 50%, to 725 mn cfd.
e EU’s other big fan of shale, the UK, is also nd-
ing it dicult to make progress with exploration. Local
groups have been largely successfu l in halting or delaying
exploration and this issue is turning into a national one
as the UK’smain political parties line-up as either pro- or
anti-fracking. In the May 2017 general election, the rul-
ing Conservative Party came out in favor of shale while
the opposition Lab or Party said it would ban it, and the
Scottish parliament voted in October for a ban. A small
number of rms remain interested in exploring both for
natural gas and gas liquids from shale, but there seems to
be more interest in convent ional gas from the North Sea ,
where costs have been falling against a background of
slowly recovering gas prices. Public opposition to shale
developments remains strong, and this may discourage
some companies from exploring and some banks from
lending to shale explorers.
What’s the alternative?
With low prices and rising availability, LNG looks to be
a good short-term option for additional gas supplies to
Europe, though the window for making new deals may
last only a few years before global markets tighten once
more. LNG exporters are, in any case, moreinterested at
presentinsupplyingAsiaratherthanEurope,giventhe
higher prices and better netbacks available in markets
east of Suez.
© 2017 John Wiley& Sons Ltd
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