INSIGHT: EU won’t put the brake on shale gas - yet

17 January 2014 17:22 Source:ICIS News

By Nigel Davis

LONDON (ICIS)--To a sigh of relief in some corners, and consternation in others, the European Commission had decided not to propose legislation to control fracking.

It will issue guidance next week on shale gas and oil exploration but wait 18 months before a further review.

Non-binding regulations are expected, which would require member states to carry out full environmental impact assessments and public consultations as far as shale gas projects are concerned.

Europe’s response to shale has been mixed, with outright bans on shale gas exploitation in France and Bulgaria, and government support for fracking in Poland and the UK.

A change in approach from the Commission has come about after “quiet but intense lobbying efforts” by the UK and Poland, ICIS news was told on Friday.

“The Commission is due to publish proposals on the Framework for Unconventional Hydrocarbons on 22 January and we have made our position clear,” a spokesperson for the UK’s Department of Energy and Climate Change (DECC), said.

“Decades of ambitious EU environmental directives have left the EU uniquely suited to handling the challenges of shale gas development, from water use through to methane emissions. The UK has over 50 years of experience in regulating onshore oil and gas and has been working with the EU to impart this knowledge. We therefore do not believe there is a need to legislate further. We must ensure EU action is proportionate, and does not result in the over-regulation of this emerging industry," he added.

Development of Europe’s unconventional onshore oil and gas deposits will be closely scrutinised and take time, so a shale gas boom like that seen in North America is not expected.

But the benefits of shale, particularly the promise of greater flexibility in the supply of natural gas, are attractive enough to encourage a light regulatory approach.

Poland is pushing ahead with fracking to try to lessen its dependence on imported Russian natural gas.

Local authorities in the UK are being promised incentives to approve shale gas projects. The UK’s Environment Agency is aiming to reduce permitting times for low-risk fracking activity from 13 weeks to about 2 weeks during 2014.

UK prime minister David Cameron said on Monday that the country was “going all out for shale”.

Coming late to the game, however, the benefits of shale gas and oil exploitation are unlikely to match those in North America.

The shale gas revolution is radically altering the energy supply picture in the US and working to lift investment in US chemicals and manufacturing. The unprecedented boom in chemicals investment is driven by shale gas economics.

The American Chemistry Council (ACC) has identified 136 US chemicals sector construction projects related to shale since 2011 and thinks the total will surge to between 150 and 170 representing an investment of $110bn. Some 54% of the current project total represents foreign direct investment.

The prospects for Europe’s chemicals sector are radically different. Shale gas would eventually replace some natural gas import volumes from Russia before it had an impact on chemicals.

Energy major BP put the global shale gas supply picture into some perspective in its latest Energy Outlook, published on Wednesday.

Looking out to 2035, the review suggests that North America will dominate shale gas supply but that China is the next most promising country for shale gas growth.

“Together, China and North America will account for 81% of shale gas by 2035,” BP says.

Apart from revolutionising the energy industry, gas will gain market share in the industrial sector in the US and will start to penetrate transport to the extent that it almost matches biofuels.

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By Nigel Davis