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Page added on February 18, 2013

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Is Europe Next for a Shale Natural Gas Boom?

Business

Chevron (NYSE: CVX) and Royal Dutch Shell (NYSE: RDS.A) are getting an early start on shale exploration campaigns in eastern European countries. With the United States fast emerging as a shale natural gas leader, European economies eager to bolster their own energy independence are working to follow suit. Shell plans to spend more than $400 million to tap into Ukrainian shale, while Chevron has similar ambitions in eastern Romania. While regional shale gas production isn’t going to match that seen in the United States, it’s expected to eventually weaken the Russian grip on the region’s energy sector.

The U.S. Energy Department’s Energy Information Administration estimates that, together, Bulgaria, Hungary and Romania may hold many trillion cubic feet of shale natural gas. That was enough to give U.S. supermajor Chevron the confidence to move ahead with an exploration campaign there. The company began taking on shale concessions in 2010 and has since announced plans to start exploration. If EIA estimates are close to accurate, there may be enough shale gas in Romania to cover its energy needs for the next 40 years. The company, however, still needs environmental permits to move forward with its campaign.

Royal Dutch Shell, meanwhile, announced in January it was spending $10 billion to develop the shale potential in neighboring Ukraine. Chief Executive Officer Peter Voser said on the sidelines of last month’s economic summit in Davos, Switzerland, that his company sees “a lot of potential” in Ukraine, where the EIA puts the reserve estimate for shale natural gas at 42 trillion cubic feet. That’s the third largest for shale of any of the Eastern European countries. Kiev says domestic natural gas productions should eventually eliminate the need for imports altogether.

Russian energy company Gazprom said Friday there was no way Ukraine could avoid paying the $7 billion it owes for unused natural gas last year covered under a “take-or-pay” scheme. Both sides have been at odds over gas contracts since at least 2006 and last year, the European Commission launched an anti-trust probe into the natural gas giant’s business practices in the region.

For shale oil, PricewaterhouseCoopers reported that production could add another $2.7 trillion to the global economy per year by 2035. For shale, the picture could be just as bright. In the United States, shale natural gas could add another $118 billion to the country’s gross domestic product by 2015 and triple to $231 billion by 2035. In parts of Europe, however, nearly 70 percent of the gas consumption is covered by imports and as much as 90 percent of that is from Russia. In terms of conventional reserves, however, few in Eastern Europe have enough conventional reserves to make a difference. Dutch company KPMG says that Romania and Ukraine are among the leading shale gas markets in the region, however. While the reserve potential is significant, it’s no match for the United States. Nevertheless, KPMG, in a 2012 audit, found that shale gas production in Eastern Europe may eventually contain Russia.

“Shale gas production will not reach the same volumes as those of North America, it is expected to be a competitively-priced source of energy, as compared to that of imported Russian conventional gas,” the audit states.

By. Daniel J. Graeber of Oilprice.com

 



12 Comments on "Is Europe Next for a Shale Natural Gas Boom?"

  1. DC on Mon, 18th Feb 2013 8:31 pm 

    The US has been working hard to turn Ukraine into a satrap so they can squash any opposition to fraking there(among other things). Not sure how much in the pocket Romania is to the US, but im sure there are greasing palms there too. Romania is a poor country, harder to resist US corporate harrasment. Oilfarce can keep dreaming that Europes citizens will allow US global oil corporations a free hand to turn there homes and valleys into the cratered wastelands of say, Northern Alberta, buy they better not count on it. Unlike in the US, where the citizenry, literally, cannot say ‘no’ to the oil companies, things are a quite a bit a different in the civilized nations.

    Also too bad for Oilfarce, Russia has plenty of conventional NG and is a reliable supplier to Europe.

  2. Plantagenet on Mon, 18th Feb 2013 9:24 pm 

    DC is such a dope he doesn’t even know that Shell is an EU company.

    And as far as Russia being a “reliable” supplier of NG to Europe, Russia is charging the EU FOUR TIMES what NG costs in the USA.

    OF course the EU and the Ukraine and every other country in Europe is going to move towards frakking—they don’t want to be overcharged by Russia for NG.

  3. GregT on Mon, 18th Feb 2013 9:39 pm 

    Yup,

    Let’s just frak the world.

    What else could we possibly need all of that fresh water and land for?

  4. DC on Mon, 18th Feb 2013 9:48 pm 

    I am well aware Shell is Dutch.

    And Plant is such a dope he doesn’t even even know that US frak gas is isnt paying its own way, you know…selling at a loss, get it? Seems to me like the Russians are the smart ones. They, at least, are selling NG at a profit, unlike all those geniuses in the US. You can dream on about the US selling frak gas pulled out of Montana or wherever to Europe-not going to happen. As for what the EU is being charged for gas, your concern for there well-being is touching, but put it out of your mind. Those two parties are both adults and I am sure they can negotiate prices w/o any interference from the US global oil cartel.

  5. J-Gav on Mon, 18th Feb 2013 10:42 pm 

    Enough sniping guys, that’s not the style on this website, mutual respect is what reigns here and you know it, even if it’s sort of in a ‘dysfunctional mode’ as somebody once put it …

    Debate, correctives proposed for some viewpoints, maybe accepted, maybe not, that’s the game. Shell’s Dutch, great. BP is British, Exxon, Chevron, etc are American and Total is French. The Russians and Canadians are there, the Chinese too with Petro-China, Indonesia,etc.

    What’s the point? The future of shale (oil or gas) is already compromised. This will be apparent in the next few years. Why? Water! And the necessarily attendant energy requirements to continue getting it out of the ground over time (dedicated nuclear? dedicated gas?)

    If you don’t agree with me, tell me! I’m open to different points of view.

  6. J-Gav on Mon, 18th Feb 2013 11:21 pm 

    Sorry, I should have added “as I understand it” after “on this website” in the first line above. I have no skin in any website other than peoplesnaturalheritage, a French site which is trying to recover after a major hack. I live in Europe and thus am watching the unravelling from a somewhat different perspective.

  7. Laci on Mon, 18th Feb 2013 11:51 pm 

    @ Plantagenet: Just so you know, they already tried to explore some of the most promising places in Eastern Europe. They drilled in Poland, and in Hungary, and they found out that there is no point going forward with comercial production, even with the higher NG prices in Europe. We shall see about Romania, Ukraine, and Bulgaria. These are highly corrupt countries, so they may be able to cut costs by bypasing the need for environmental safety, but even so, we shall see!!!

  8. Dmyers on Tue, 19th Feb 2013 12:59 am 

    There’s a widespread belief that Europeans are more cultured, intelligent, and steeped in true humanity than Americans. Now, we will find out if this is true. If the Europeans go for fracking, it will, at last, be clear that they are not superior to Americans in any way.

  9. BillT on Tue, 19th Feb 2013 3:10 am 

    Dmyers, it is doubtful that Europeans are intelligent. After all, look at the Euro-zone and the Euro. They thought they could make 20 odd countries, with long histories of wars and cultural differences, into one happy family.

    That even worked, like everything else, as long as the money was easy and the energy was both plentiful and cheap. Fast forward to today where energy is getting more and more expensive and in less and less supply and the dream is crumbling. Germany is trying to conquer Europe with money, but I see them either bailing out of the EU or going down in a sea of debt as the other EU ‘family members’ spend all of the German’s wealth and want more.

  10. KingM on Tue, 19th Feb 2013 1:04 pm 

    “Dmyers, it is doubtful that Europeans are intelligent. After all, look at the Euro-zone and the Euro. They thought they could make 20 odd countries, with long histories of wars and cultural differences, into one happy family.”

    You’re right, they should have kept killing each other like they’ve been doing for generations. Now *that* would prove they’re intelligent.

  11. Kenz300 on Tue, 19th Feb 2013 6:30 pm 

    Europe’s dependence on Russia for natural gas has been a problem.

    They need to do all they can to diversify their types and sources of energy.

    Wind, solar, wave energy, geothermal and second generation biofuels made from algae, cellulose and waste can all contribute to a more energy secure future. Locally produced natural gas will be part of the effort to diversify.

    They need an all of the above strategy

  12. J-Gav on Tue, 19th Feb 2013 10:02 pm 

    Europe has major energy issues, no doubt about it, including Germany, France and the UK, the supposed ‘leaders’ of it all as concerns manufacture, ‘cultural’ products and finance, respectively. The only question, where 27 countries are involved, is how fast the unravelling will occur. This doesn’t mean that Europeans are less intelligent than, say, Americans (don’t know who in the ‘developed’ world could rival that level of exceptionalist nonsense), it just means we’re all in the same sinking boat. Start bailing … and looking for efficient paddles. Hope there are at least two of you in the boat.