15 March 2013 09:27 [Source: ICB]
Standfirst: Europe's fracking revolution, if it happens, is going to take some time. One UK-based expert describes a number of unique hurdles making major progress unlikely in the next decade
It is no mystery why chemical companies in Europe have been so vocal in their calls for European policymakers to rally round shale gas extraction the same way it has been embraced in the US.
Europe shale development could be a long way away
Speaking at the annual IHS CERAWeek energy conference in Houston, US-based ExxonMobil Chemical president Stephen Pryor heralded unconventional energy as a "new age" for the US.
"The prospective impact is unlike anything we have seen in this country since the dawning of the age of oil some 150 years ago," he said.
It is a perspective echoed by Paul Stevens, a senior research fellow specialising in energy for UK policy think tank Chatham House, who delivered a lecture in London in early March for the Institution of Engineering and Technology on the scope for replicating the US shale gas boom in Europe.
"I've been looking at this industry for 45 years, and the shale gas revolution in the US is one of the most spectacular events in the history of energy in the last 50 years," he said.
Shale gas extraction in the US is characterised as a "revolution" because of the speed and scale of its growth in the country.
In 2000, shale gas extraction was almost non-existent. By 2011, it represented 20% of US gas production, and it is expected to reach 50% of production by 2030, according to Houston-based think tank The Baker Institute.
Energy independence in the future has suddenly become a possibility, and the prospect of an energy-independent North America raises a raft of geopolitical questions, from the policing of international waterways to the ramifications for Middle Eastern affairs.
REPLICABLE IN EUROPE?
Arguably the key concerns for the European chemical sector are whether the industry can remain competitive with a feedstock disadvantage, and whether shale can become a force in Europe. And if so, how soon?
Stevens is less equivocal on the question of to what extent the US shale gas boom is replicable in Europe, if at all. He is more cautious on Europe's prospects, predicting that any significant change in energy fortunes is unlikely within the next five to 10 years.
"Can it be replicated elsewhere? I don't know, but I doubt it's going to happen very quickly. There's a lot of uncertainty there, and what this is doing is inhibiting investment in gas operations," he said. "If you're going beyond 10, 15 years, then certainly I think shale gas is going to play an important role, but not in the near term."
In his talk, Stevens identified a number of positive factors for the development of a shale gas sector in the US, including favourable geology, a strong collection of drill core data, tax credits, loose environmental regulation - thanks in part to an exclusion for shale in the 2005 Energy Policy Act, known to critics as the "Cheney-Halliburton loophole" - and a dynamic service industry.
On all these issues, the European environment looks less favourable.
Shale fields in Europe tend to be more fragmented and less productive than in the US, and often feature a higher clay content, making them a much more difficult prospect for hydraulic fracturing than the brittle rock often found in the US.
CORE DATA AVAILABILITY
Core data - developed when drilling a well for oil or gas - is less available in Europe than in the US, making it more difficult to judge "sweet spots" for fracking.
"Operators in Poland tell me they're tearing their hair out because they know somewhere in Poland there is some core data, but nobody knows where it is. In the US, it is very easily available," Stevens said.
Also an issue is the MAMBA ("miles and miles of bugger all") versus NIMBY ("not in my back yard") contrast. North America has huge stretches of empty land, where extraction can take place with comparatively little opposition. Europe, on the other hand, tends to be much more densely populated, meaning that any extraction projects are likely to face challenges and delays from local residents and pressure groups.
This opposition also extends to numerous European governments. While Germany is to prepare federal rules on fracking, and the UK is getting ready to greenlight the practice following a temporary suspension, many countries are still unsure of or hostile to the idea.
The French government has vetoed fracking, and Italy has reportedly decided against shale gas exploration in favour of increasing its conventional hydrocarbon extraction levels.
This is due in part to fears of earthquakes and water aquifer pollution that may be overstated, but there are other issues with shale where the impact has yet to be fully determined. This includes the quantity of greenhouse gases released during the process.
"I think this is going to be where the real controversy arises with shale gas, rather than fracking as such," Stevens said.
There is also "the issue of governments' willingness to fund basic scientific research", according to Stevens, contrasting the recalcitrance of numerous European governments - and the EU - with the US government's willingness to spend money on technical data.
Research on areas such as low-permeability operations was carried out by the government and shared with private-sector operators.
Although the research carried out by the US government may have some application in Europe, the two regions are technically different enough for hydraulic fracturing that a lack of data was one of the reasons cited by ExxonMobil for the disappointing performance of its Polish shale explorations. The company pulled out of Polish shale gas exploration in June 2012.
There is also the issue of the shale gas service sector, which remains underdeveloped in Europe.
Stevens said: "The shale gas revolution in the US was based on small entrepreneurial companies using a very competitive, dynamic service industry to do all the work. On the Barnett shale play in Texas at the peak of operations in 2008, there were 199 rigs drilling. In July 2010 there were 34 rigs in the whole of western Europe. We simply don't have the service industry capability."
Regulations can be instated, research and technology can improve and service industries can expand if the demand is there, but all this takes time, argues Stevens.
Shale gas may yet be a transformative force in Europe, but development moves at the pace of the continent's bureaucracy, which is rarely revolutionary.
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