EU & Unconventional Gas: Picture This

It was a picture worth a thousand wells, illustrating how different the development of unconventional gas in Europe would be than in North America.

In his presentation at Shale Gas World Europe 2011 in Warsaw, Poland, Michael Schuetz, Policy Officer, Directorate-General for Energy at the European Commission showed a green, lush Irish landscape from an area called Leitrim, where there is shale gas potential, if E&Ps are able to get past social acceptance and other issues.

“I have not used Photoshop to put a gas drilling rig there,” said Schuetz. “Either you see beautiful nature or you see houses in Leitrim. Shale gas production is possible but not via the brute force methods applied in the US. The industry needs to be very diligent; one or two incidents could harm the whole industry in Europe.”

Shale gas was important because gas was important, he said, as natural gas made up one quarter of Europe’s energy mix. He said the continent faced challenge of security of supply and that according to predictions rising import dependency was expected for Europe.

Mr. Schuetz mentioned the International Energy Agency’s “Golden Age of Gas” which showed that estimates of unconventional gas across the globe had been revised upwards.

“We will not run out of gas,” he said, “which is a good or bad thing depending on security of supply or environmental aspects.”

According to an IEA chart shown to delegates, gas production would rise worldwide, and have an impact on gas prices. The increased utilization of LNG had impacted on the EU gas market, as more LNG had become available for Europe following the shale gas revolution in the US.

While figures had been available on gas in place or technologically recoverable resources - 60-200 BCM in 2030, according to IHS Cera – Schuetz admitted it was difficult to predict.

“We don’t know to what extent will we be able to recover it. Exploration has just started. There have been many licenses but not much follow up of drilling activity,” he observed, tallying the 19 active exploratory drillings in Europe, reaching back to 2008.

“The level of exploration overall is relatively low,” opined Schuetz. “We’ll only know in a few years’ time what the contribution will be to the European energy mix. We look at the evidence we have now in the Joint Research Centre, in the Netherlands; they look through all the literature, studies and at how reliable the underlying evidence is and use energy models to plot the impact.”

Results, he said, would be available early next year.

“We will still be confused but at a higher level,” quipped Mr. Schuetz of the European Commission, who went on to outline EU Energy Policy developments.

“We do not do fuel specific policy,” he explained. “We have several energy initiatives ongoing that will be relevant to shale gas also. We are working on improving further the internal energy market. Will there be companies drilling for unconventional gas and will they be able to sell it?”

He said that by further liberalizing energy markets, unconventional producers would be able to find customers.

He spoke of how this would occur through an EU Directorate-General called “Internal Market,” implementing a process started more than a decade ago, which was accompanied by three package initiatives. Delays, he said, were occurring in implementation.

According to him the goals of the Directorate comprised harmonizing market rules; increasing access to infrastructure; and improving that infrastructure.

Mr. Schuetz said: “Shale gas is normal natural gas once it’s out of the ground. Improving infrastructure is important in any case. We still have national gas markets and not enough interconnectors.”

He showed a slide with EU priorities for 2020 and beyond, among them the Southern Gas Corridor. “These projects of common interest would benefit from streamlined planning rules,” he said.

According to him, it was necessary to show what role shale gas could have in a low carbon economy. He said, “There are legitimate concerns that a way towards gas can harm our 2050 goals, which he explained were 80-95 percent below the CO2 levels of 1990 levels by 2050.

“The power sector needs to be virtually decarbonized by 2050. Gas, if it wants to stay in the energy mix, needs to apply carbon capture storage,” he added.

Shale gas would affect gas prices in Europe, also the prices of renewables, regardless of whether or not it was actually produced in Europe.

“The whole gas industry should address what their role should be by 2050,” commented Schuetz.

The second challenge, he said, was public acceptance. “There are many more people skeptical about shale gas, but not everyone has time to secure themselves to a stage,” he commented, referring to an earlier disruption of the conference by protesters. 

“These concerns may be bigger than in the US because of the higher population density in Europe, or because of areas of natural beauty.”

All operations, he explained, needed to be in line with the EU regulatory framework. He noted shale gas was not specifically addressed by new legislation, but that it covered both conventional and unconventional exploration.

“Member states can set higher, more stringent standards; they can decide on the conditions for exploration and production.”

Mr. Schuetz said there was an interest in developing indigenous energy resources. “Unconventional gas would reduce energy imports,” he explained, “but Europe should not neglect policies like energy efficiency.”

“It will be a market decision in the end, made on the basis of cost and price,” he said.

“We need to use the next years before production starts – 2-3 years in Poland – to prepare our frameworks on all government levels on production. You need more wells, more hydraulic fracturing, but the more you do, the more can go wrong.

“We need to be ahead as regulators,” he continued. “Regulation should be in place before production starts. Only with a robust regulatory framework will you get public acceptance.”

He said consulting and informing citizens preferably before concessions were granted was key, and it was important to look at ways that citizens could benefit from an unconventional gas project.

“The industry needs to use the next few years to improve technologies and practices,” said Shuetz. “Make it efficient and acceptable in Europe.”

“It can have a future, and will contribute to safe and secure energy supply at competitive prices,” he concluded.