No Shale Revolution For Europe

It’s looking increasingly unlikely that Europe will be able to sever its reliance on Russian energy supplies by developing its own shale gas industry.

For years, Poland has been regarded as the European Union’s biggest hope for developing indigenous sources of natural gas because it sits on large reserves of natural gas trapped in shale. According to the U.S. Energy Information Administration, Poland has 148 tcf (trillion cubic feet of technically recoverable shale gas reserves and 1.8 billion barrels of shale oil. By comparison, Russia has an estimated 285 tcf of shale gas.

Poland represents the European Union’s best hope at breaking Russia’s grip over natural gas supplies, and its government has been highly supportive of shale gas development, which is rare in the green-tinged political circles of Europe.

But things have not gone according to plan. Dozens of wells have been drilled since 2010, but almost none have been successful. In fact, Bloomberg reports, the most productive shale projects have returned gas flows that were just 30 percent of what is needed to be commercially viable.

Difficult geology has been a huge obstacle. ExxonMobil’s CEO Rex Tillerson said that the technology used to successfully extract enormous volumes of shale gas in the United States has not been successful in Poland. The geological conditions are simply not as favorable as they are in the U.S.

In 2012, in a sign of the country’s unmet expectations, ExxonMobil pulled out of Poland after drilling two wells that came up dry. Talisman, Marathon Oil, and Eni, three other relatively large oil companies, also gave up on Poland. Chevron is pushing forward with more plans to drill in Poland despite the setbacks. Active permits are now 43 percent below their peak in early 2013.

Complicating matters further is an array of “above the ground” problems in Poland. An effort by the Polish government to prematurely cash in on a shale revolution cast a cloud of uncertainty over the industry.

Another problem is the fact that Poland’s population, as well as the rest of Europe’s, is much more densely located. In the United States, companies can drill wells far away from people’s homes (although that is certainly not always the case). But in Europe, the most promising plays are located much closer to local communities.

More importantly, local communities see much less of the benefit, since they do not own the mineral rights beneath their properties. In the U.S., landowners can get paid to lease their rights to drillers, but that is not true in most of Europe.

Full article: No Shale Revolution For Europe (Oil Price)

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