Europe: Climate Protection Takes the Back Seat

While the expression “game changer” is thrown around fairly loosely at shale gas events and in the press, industry leaders are batting around how unconventional gas changes all sorts of dynamics in terms of Europe’s natural gas demand and supply.

Two questions that speakers at the European Unconventional Gas Summit in Krakow, Poland grappled with was “How desperate will Russia be?” and “How far will it go to protect its market?”

“The impact could be tremendous,” said Frank Umbach, Senior Associate and Head of the International Energy Security Program at the Centre for European Security Strategies. “That’s the reason Gazprom is going everywhere and saying how dangerous unconventional gas is. If you look at Russia’s dependence on natural gas revenues for their state budget, they’re very much alarmed.”

He noted that a Gazprom representative had also recently been shocked at the release of a natural gas study that showed lessened European demand.

Umbach added, “It wouldn’t just affect their state budget - pipeline dependencies have always been an important political tool.”

He mentioned, for example, Russia’s dealings with Ukraine, and negotiations over that country’s hosting of the Black Sea fleet. He hypothesized that Russia could change its entire gas strategy and be a supplier of unconventional gas.

Benny Peiser, Director of The Global Warming Policy Foundation conjectured that many of the environmental NGOs might be receiving a lot of money from Russia to campaign against shale gas.

Mr. Umbach noted that there would rarely be an expert in Germany who would defend fossil fuels like unconventional gas. He suggested that Poland build an LNG terminal near the border with Germany.

“One big change we might see is what is going to happen in Britain,” explained Mr. Peiser. “There might be a big change to energy policy in Poland. There is the assumption that the gas price will go up - if it doesn’t then the subsidies will be seen as flawed. 

“In all likelihood we will see a big change in energy policy and a downgrading of the ‘20/20/20’ obsession,” he continued, speaking of the EU target of reducing carbon emissions by 20%, and establishing that renewables comprise 20% of energy supply, both by 2020. “The reality is, climate policies isn’t a big agenda item and there are other economic concerns, which are taking higher precedence. This is the attitude and mood swing that I’m witnessing in the UK.”

He contended that other countries were being encouraged to have a look around in their own back yards for unconventional gas.

Peiser said, “Given that the climate issue has been pushed to the back, I wouldn’t be surprised if it were much easier for policy makers in Europe to advance the unconventional gas agenda.”

One delegate from the audience stated: “I am doubtful that the unconventional gas revolution can be recreated in Europe, because no there is no services market, and because of the pragmatic approach of landowners and politicians of the impact. 

“The ‘not in my backyard’ syndrome is more pronounced in Europe than in the US,” he added.

“The only counter argument is that when the gas is there and there is a flare, even the Socialists in France might take advantage of it,” said Benny Peiser. “I don’t expect a replication but I would assume there will be some amount of unconventional gas in Europe and it will be economic. What it boils down to is how much is there and if the investors are happy to get it out of the ground.”

Frank Umbach suggested: “We need to make it plain to the public what the alternatives are. At the same time RWE is discussing building joint power plants with Gazprom.”

“For the first time, the Greens were voted down in the European Parliament, so the mood has changed,” noted Mr. Peiser. “The climate issue is no longer at the top of the agenda. The targets won’t be changed; they will no longer really be taken that seriously.”

The biggest impact, he said, would be on the renewables industry, because the investments wouldn’t be made. “Investors realized it is not sustainable, not politically, and shale has changed the debate and the market.”

“In all likelihood they will not hit ‘20/20/20,’” he concluded. “Renewables can only survive on handouts, and by revenues these sectors cannot compete.”