INSIGHT: Future for shale gas in Europe will be tough

17 January 2011 17:13  [Source: ICIS news]

By Nigel Davis

LONDON (ICIS)--Environmental concerns could be sufficient to halt shale gas exploitation in the EU dead in its tracks.

Europe has significant shale gas potential with reserves greater than those in North America, some believe, but exploitation of that resource is another matter.

Caps on carbon emissions and, particularly, environmental concerns, look as though they could collectively crimp the development of this new source of natural gas and of natural gas liquids (NGLs).

Europe’s high population density is likely to make exploitation difficult. The EU’s drive towards a low-carbon economy does not look as though it can be satisfied by the step into shale gas plays.

A report from the University of Manchester’s Tyndall Centre for Climate Change Research published on Monday strongly recommends a wait-and-see approach in the densely populated UK, and in Europe generally

“Evidence from the US suggests shale gas extraction brings a significant risk of ground and surface water contamination and until the evidence base is developed a precautionary approach to development in the UK and Europe is the only responsible action,” it says.

The Tyndall Centre report expresses concern about the climate change impact of shale gas drilling and fracking and about the way that a focus on shale gas might remove some of the emphasis on the drive towards low-carbon energy production alternatives.

“Without a meaningful cap on emissions of global GHGs [greenhouse gases], the exploitation of shale gas is likely to increase net carbon emissions,” it concludes. “There is little to suggest that shale gas will play a key role as a transition fuel in the move to a low-carbon economy.”

The research centre was sponsored by the financial arm of the UK’s largest mutual retailer, The Co-operative, which on Monday called for a moratorium on all shale gas extraction in the UK.

Although at an early stage - there are no active drilling sites or horizontal shale wells in the UK - the research centre estimates a UK shale potential of 150bn cubic metres.

Cuadrilla Resources completed drilling for gas at Preese Hall Farm in the northwest of the UK on 8 December 2010. The UK’s only currently active rig is being moved to a location nearby but fracking at Preese Hall is expected to start this January.

“On the face of it new natural gas finds appear to be good news, but this important report highlights the significant gaps in our knowledge when it comes to understanding the impacts of shale gas extraction,” the CEO of The Co-operative Financial Services, Neville Richardson, said on Monday.

“That is why we are calling for a moratorium on any further exploitation of shale gas, which will allow the wider environmental concerns to be fully exposed and addressed.”

The Co-op has run a “Toxic Fuels” campaign which has highlighted the environmental and climate change issues associated with tar (oil) sands.

“As a responsible institutional investor we will continue to engage with energy companies in order to ensure they act responsibly and work to support the development of sustainable energy sources,” Richardson said.

Publication of the Co-op sponsored report coincides with the premiere in the UK of the film Gasland which, it says, “shows the astonishing implications of shale gas extraction in the United States”.

New York’s governor signed an executive order in December banning fracking of Marcellus Shale deposits in the state until 1 July 2011 at the earliest. The US Environmental Protection Agency (EPA) has a research programme looking at the potential for surface and groundwater contamination from fracking chemicals and the fracking process.

“The depth of shale gas extraction gives rise to major challenges in identifying categorically pathways of contamination of groundwater by chemicals used in the extraction process. An analysis of these substances suggests that many have toxic, carcinogenic or other hazardous properties. There is considerable anecdotal evidence from the US that contamination of both ground and surface water has occurred in a range of cases,” the Tyndall Centre report says.

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By: Nigel Davis
+44 20 8652 3214



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