A Broader View (of Shale Gas in Europe)

If you want to know what's happening in the global energy industry, just ask Dr. Stefan Singer, Director of Global Energy Policy at WWF International. As an environmentalist who has keen insights on the latest trends in energy, and what they mean for climate change policy, he offered Natural Gas Europe his thoughts on natural gas usage in Europe and the development of unconventional gas ahead of the European Unconventional Gas Summit being held in Vienna, Austria, 29-31 January 2013.

Doctor Singer, about a year or so ago you told Natural Gas Europe that you had no blanket condemnation of unconventional gas, but were moreso concerned with natural gas becoming a destination fuel and stealing the fire of the renewables push in Europe; how are you feeling about this issue now?

At WWF in the last couple of months we've been looking more deeply into the prospects for new energy developments, like fuel cells or shale gas, and looking at the environmental and other implications, like the difference in price of natural gas in the US versus in Europe.

Because of coal's replacement by gas in the US, more coal is being exported to the EU, because of weak targets and because the gas prices are very high here. That puts the claim that the shale gas ‘revolution’ in the US is replacing coal and hence a ‘low-carbon’ fuel into a more broader perspective.

We've also been looking at it from the aspect of 'What can the world digest?' which is of fundamental importance in order to stay below 2 degree global warming.

At the beginning of this week, the IEA came out with a very strong statement, saying two-thirds of the existing reserves of hydrocarbon resources should stay in the ground, so the world will have a remote chance of staying below 2 degrees - they see a 50% chance - unless carbon capture storage (CCS) is used. That means for shale gas and shale oil which all are ‘new’ reserves that those have to stay in the ground as well unless other parts of the fossil fuel reserves are given up.

The prospects for CCS are currently pretty weak, there's not much happening: too high costs for CCS, low carbon prices in the EU ETS, no strong carbon caps , etc.

In the IEA's report from May, the "golden rules" for the Golden Age of Gas, with special rules for unconventional gas, they also looked at their own gas scenario and, to the surprise of many, that scenario did not include any CCS until 2035, because shale gas sites in the US are the same ones for potential carbon storage and would destroy the geological safety of any permanent CO2 storage

Within that logic and in terms of the low carbon economy, CCS with coal - if it works - would be more environmentally friendly than gas. The jury is not out on that, but that could be the case. Hence, fossil gas is certainly not a long-term part of the solution.

In the WWF we have no specific position of saying no to shale gas; what we are saying is we'd like to see shale gas not contributing to additional freshwater resource scarcity, in particular in drier countries. Upsteam-wise and per unit of energy shale gas is using 1,000 times more water than conventional natural gas wells. Increased water usage and the carbon 'lock in' are both major concerns.

The 'conventional' threats can be overcome with stronger regulation: the issues of toxic substances being used in fraccing fluid will disappear if there is mandatory disclosure and exclusion of toxic chemicals.

But even if everything is being dealt with properly - even if you reduce fresh water consumption, don't use toxic chemicals, reduce the amount of drilling holes needed, reduce methane venting - we are applying the cautionary principle and saying unless these issues are solved, we remain very critical of shale gas because of its potential role to increase carbon exposure to the atmosphere, reducing investments in renewables and energy efficiency. The IEA had said similar things.

Wouldn't you rather have Europe burning natural gas than coal?

Yes, of course in the short term. I think it's also the aim of the European Trading System to allow substantively lower carbon fuels to be burned as an intermediate step, let's say in power stations.

But in order to stay below 2 degree global warming and looking into a decarbonized power sector until 2050, if you build up a gas infrastructure it creates a lock in, and of course no one likes stranded investments - that's the concern we have: once you have the pipelines in place, the LNG terminals in place, no one is going to say after 20 years let's go back to renewables - that's not happening.

So we like to see primarily investments in renewables and energy efficiency and not into new fossil fuel occurrences.

The Polish government is saying that shale gas gives it an opportunity to replace its high dependence on coal over time with domestic resources of low carbon fuels. I say okay, if you do that, it means Poland should change its position in the European debate on accepting stronger 2020 carbon reduction targets towards at least a 30% or promoting new 2030 targets. Are they? The opposite is happening. Poland is the sole objector to increasing the 2020 carbon targets for the EU; they're blocking everywhere.

Our suspicion is that the Polish are doing shale gas for reasons which are beyond climate and energy, just to replace the Gazprom natural gas dependency, because Russia is a red flag in Poland despite the fact that Russian gas contributes a very small percentage of their energy needs.

So they want shale as an additional resource - not for climate reasons - and that's our concern as it increases the exposure of carbon to the atmosphere. If governments do retire the equivalent coal resources somewhere else, then we can talk; but if that's not happening, then we're critical.

Poland looks like the last man standing at present with all of the hydraulic fraccing moratoriums. How do you see things playing out (or not) in Europe?

Taking off my environmental hat, I share much of the analysis of the IEA, who say that regardless of the bans in Europe, in the long term, if the world decides to go for a gas glut for a variety of reasons, then Europe's contribution to that will be comparably small because the resources are minor compared to other places like China, which has just issued a hydrocarbons subsidy because they see the shale gas opportunity.

If shale gas becomes bigger and bigger, then the Russians will not only look into new contracts, independent of oil prices, but they may also change existing contracts to lure in negotiations for new contracts very well in advance. The Russians are very nervous about it. But we should not forget that shale gas is just one new fossil resource. Overall, the unconventional fuels and including shale and tight oil as well as tarsands and deep sea oil are becoming economically available as well. And we have not talked about coal. In any case, to stay below 2 degree global warming requires to leave almost all of it in the ground. And in addition to existing reserves.

Do you foresee any loosening of the hydraulic fracturing moratoria?

I cannot hide that we are happy about those bans, regardless of where they are happening, and they're happening for a variety of reasons: in France it may be the long arm of EDF, but the country may not have such a resource base anyway. We have a ban in Northern Westphalia to some extent; there may be movements in Ireland or Denmark, but overall I fear unless there is strong regulation the moratorium will not stop the overall shale gas exploitation worldwide - Europe, the EU is just a smaller portion of that.

As you go further east, there is more shale potential in Ukraine and Belarus; in Russia, no one knows. Geologists say that where there's coal, there's likely to be shale gas, and Russia has a lot of coal.

Delegates at a recent natural gas industry event in Vienna grappled with the fact that the European policy of investing in renewables was stealing their fire in that investments are not being made into natural gas. How do you see this?

I hope that they are right, that renewables make the race for investments and not fossil gas.