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Msg  3503 of 13357  at  12/7/2009 8:00:29 AM  by


Shale Gas in the EU

 Not exactly a sure thing,  the estimates (35TCF)  are not that high although it  certainly could contribute and the drilling issues could be significant.  Estimates of $9 per MCF required to support it, still gives low cost producers like IOC a significant advantage.

Bubbling under

Dec 3rd 2009
From The Economist print edition

Oil firms hope to repeat a trick that yielded big gas supplies in America

 ACROSS Europe, a stealthy land-grab is under way. Exxon Mobil is drilling in Germany’s Lower Saxony. ConocoPhillips has joined 3 Legs Resources, a small firm based on the Isle of Man, to explore a large tract of land in Poland. Austria’s OMV is testing geological formations near Vienna. Shell is targeting Sweden. A host of smaller firms is fanning out across other countries, including France. They are all looking for natural gas trapped in shale (a type of flaky sedimentary rock)—a resource that has transformed the market for gas in America and may have a big impact on Europe, too.

America’s natural-gas stocks are at record highs and prices have collapsed. The country, one authority proclaimed in July, suddenly has 100 years of supply. There is even talk of converting planned import terminals for gas into export terminals.

The reason for this “quiet revolution”, as Tony Hayward, the boss of BP, recently described it, is a drilling technique known as “hydraulic fracturing”, in which a mix of water and chemicals is blasted underground to create fissures in gas-bearing rocks. This has made it much easier and cheaper to extract gas from shale, coal and other less permeable geological formations (which yield so-called “tight gas”).

The extent of such “unconventional” gas reserves in Europe is unknown. The International Energy Agency (IEA), which monitors the energy business for rich countries, recently estimated it at 35 trillion cubic meters—far less than in North America or Russia, but about six times the continent’s conventional reserves. That would be enough, the IEA calculates, to displace 40 years of gas imports at current levels. Almost half of it is thought to be in shale; the rest comes from coal-bed methane and tight gas. The German Research Centre for Geosciences is in the midst of a more detailed assessment, backed by oil firms.

More will be revealed as firms start drilling in the coming months. ConocoPhillips and 3 Legs Resources should have the results of their first wells in the north of Poland late next year. They say the prospect is “promising”. Rhodri Thomas, an analyst at Wood Mackenzie, an energy consultancy, says the geology of the Polish shale is similar to that of the Barnett Shale, a giant field in Texas that now supplies about 7% of America’s gas.

But however promising the geology, there will be plenty of obstacles above ground. Most countries in Europe lack both the small wildcat exploration firms that spearheaded shale-gas exploitation in America, and the myriad competing oilfield-services firms that support them, thus driving down costs. Indeed, the rush for shale assets in Europe has been led by many of the big firms that at first overlooked unconventional gas in America.

Exploiting shale also requires drilling lots of wells—something that might prove harder in densely populated Europe than in America’s wide-open spaces. Even in America, concerns about what blasting chemicals into the ground does to the water supply are hampering some developers. Chesapeake Energy, one of the biggest shale-gas firms, recently abandoned plans to drill in New York state after such worries were raised there. European consumers are not likely to ignore such matters, even if the industry says the practice is safe.

Yet strategic imperatives may prompt some countries to overlook such concerns. By happy coincidence, many of the most promising shale-gas deposits in Europe are in those countries most vexed by their dependence on imports of Russian gas, such as Poland, Hungary and Ukraine.

Mr Thomas says production would be viable at a gas price of around $9 per million British thermal units—far higher than spot prices during the present global glut, but well within expectations for the years ahead. Nonetheless, he does not expect shale gas to have a “material effect” on European supply for a decade, since drilling will take some time to ramp up. Even if shale gas does not live up to expectations in Europe, the continent is already benefiting from it: as America imports less gas than expected, that helps bolster supplies and reduce prices for Europeans.


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Msg # Subject Author Recs Date Posted
3505 Re: Shale Gas in the EU salineriverfisherman 0 12/7/2009 11:26:55 AM
3506 Re: Shale Gas in the EU zebra4o1 0 12/7/2009 11:33:59 AM

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