Shale Gas in Europe: If Poland Fails…

Fivos Spathopoulos, Consultant, Unconventional Shale Exploration, and Visiting Lecturer in Petroleum Geology at Imperial College London, said the last time he was in Warsaw at a shale gas conference he noticed that the optimistic mood for shale gas in Poland had changed considerably.

He recalled: “There was a lot of talk of the new report from the Polish Geological Institute, which downgraded the reserves of gas and oil in the basin. And then there was the announcement of arrests by the secret police of seven people, related to corruption charges, so I suppose that cast a rather dark pall over Polish shale gas.

“The Institute are not supposed to work with any foreign bodies, as I understand, but exclusively work for the Polish government, so that was a big change,” noted Mr. Spathopoulos, who spends 50% of his time consulting as a black shale geologist and the other half teaching and building expertise on the geochemical side of shales.

Of the optimistic outlook for shale gas in Poland in the very beginning, he recalled: “The whole idea about Poland was that it was the first country to open up for shale gas and the Polish government made things really easy for the companies to come in – at least that was my impression – easy access, easy data acquisition, and of course it created an image for the whole of Europe, and when other countries proved much less open than Poland, then there was a surprise.”

He said he was a bit concerned at the time about too much focus on Poland.

“If Poland was wrong, then there would be a huge disappointment. Of course I wasn’t wishing for Poland to prove a disappointment, far from it.

“Companies in Poland need to look for other shale rocks, in my professional opinion,” said Mr. Spathopoulos, “because it’s a very large country and, apart from the Silurian shale, there are quite a few other black shales that could be seen as targets.

“The problem I saw was that everyone was focused on the Silurian and there was very little work on other black shales,” he explained, offering a contrast of how things had changed.

“There are several other source rocks in Poland apart from Silurian, and I can see now that companies are differentiating, and that’s a good thing. They are moving to other countries, looking at things more analytically. Over the last 5-6 months shale gas exploration has become much more scientific. For me, that’s great news. Up until last year, everything was based on empiricism – people were comparing everything to American basins and rocks.”

Still, he noted that ExxonMobil had reported disappointing results, in Poland and in Hungary. (Not to mention ExxonMobil's recent departure from Poland.)

“In the lower Saxony basin in Germany ExxonMobil have problems because of the environmental issues and the political reaction.”

“There was great optimism 3-4 years ago, when companies moved to Europe. They were expecting huge reserves of gas and I think they came without understanding the geology; they took acreage without understanding the political & cultural issues – not to mention the environmental issues and other non-technical parameters in Europe. You cannot do anything you like in the European Union – there are very strict rules,” he said.

More recent developments had also been tough on the industry, according to Mr. Spathopoulos, but these were contributing towards a better industry approach.

He said: “A few months ago, Bulgaria was the new target for shale gas, but it only took a small demonstration in Sofia to stop everything. So I think there is a climate now that operations in Europe must be considered in a more serious way, in a more organized way than coming in and taking whatever you like. Companies are now being forced to look at all the factors, rather than just coming in and asking ‘where is the easiest exploration?’ and going there.”

This adaptation, he said, was a natural process.

The two places with big shale gas potential were Germany and France, according to Spathopoulos, who admitted that political issues would have to be faced in both countries.

“The geology of France, Germany is well known, studies have been carried out. When the governments are ready, companies will be ready to move in. Some companies are already there: ExxonMobil is already waiting in the Lower Saxony basin and several other companies in the Paris Basin.”

He added that once the environmental issues were settled in those places, oil shale would, also, emerge as a good prospect, but it would require greater investments.

“Of course, the UK is another candidate and, again, the problems there are political and environmental - how to deal with the opposition - but I think sooner or later the host governments will give the go-ahead for shale gas,” he opined.

The US selling natural gas to China and the announcement that, by 2025, the US may be self-sufficient in oil according to him, would prompt a lot of thinking on the continent.

“European governments, I think, are battling over what to do. Especially with the euro crisis, they are being forced to look for some domestic income. Of course if you can produce any energy, you can make money without having to borrow, so I’m sure that the unconventional project will be re-evaluated by European governments who will reconsider previous decisions.”

Meanwhile, public acceptance issues, he said, were not just about shale gas and shale oil.

“It’s about everything regarding energy,” he explained. “Here in the UK a few days ago, in Norfolk, north of London, they were planning to build a wind turbine near a village. The residents didn’t want it, so they went to court and the judge said that between the preservation of a traditional way of life in the village and creating renewable energy, ‘I prefer preservation of a traditional way of life’, so the wind turbine is not going to be built.

“The reaction is not only about shale gas/oil drilling, it’s anything really that bothers people in their backyards. So it’s a new era in energy acceptance issues. You have to go and speak to the people, get public acceptance for any project you want to implement. I think that companies are moving towards this, so apart from the geology you have to work on that as well, which I suppose is good news and I think that companies will do it.”

An additional obstacle to the industry in Europe, contended Mr. Spathopoulos, was the booking of natural gas reserves, when soft issues like public opposition impeded a development.

“I’ve spoken to some of the auditing companies and they say that it’s one thing to find the resource and another to be able to book it. Like what happened in the UK, Cuadrilla Resources drilled a well north of Manchester, found gas but can’t do anything with it because of the public opposition.

He added, “Unconventional projects always have a much longer time scale than conventional. In the conventional world, you take the value, find the oil and start producing within a year or two. With unconventional, it doesn’t work like this exactly – it involves a much longer period of testing, especially in Europe.”

Calculating the volumes of the resource, he offered, was another challenge.

“In the conventional world we all had one formula which was acceptable to the industry and could calculate the volumes available for production. The unconventional world does not have that; in America they use one type of formulae, which will be difficult to use in Europe. So it’s almost impossible to calculate how much volume of gas/oil is there before we start drilling,” he explained, offering that he was working on his own project towards a solution.

He contrasted how the industry did things in North America.

“In America what they do is, they have an unconventional prospect, drill 2-3 wells which cost a few million dollars and then they use these new wells to find out how much gas or oil there is. In Europe, it is not easy to do that, because the cost of the well is about $15 million, so you must have an idea before you spend your $15 million, about how much volume there is, and that has been an issue, definitely.”

Now, O&G explorers would need to calculate additional expenses.

“Environmental issues, public acceptance exercises. You also have to take into account O&G regulations for the European Union, like the Natura 2000 areas – that’s a big issue, because you can’t drill anywhere you like. Issues like production water and the protection of the water table have also to be considered,” he listed.

Mr. Spathopoulos continued: “In my opinion, all of these technical issues have been solved in one way or another. There are techniques to clean the water, and keep the environment clean; polluting aquifers by shale gas wells has never been a problem. Pretty much everything technical having to do with drilling unconventional wells has been discussed. The only thing that remains at the moment is to discuss the public acceptance issues, which is something the companies must do.”

He said the costs of that were not prohibitive. “If they have to accept the costs, they’ll do it, because it’s big money to invest in drilling and producing.”

Meanwhile, unconventional petroleum science, he contended, was becoming a new science on its own.

“Still, there are not a lot of geologists, engineers, economists etc who are experts at this. Most of the professionals that work on this come from the conventional world, like myself. So we have to-re train ourselves, as well as train a new generation of petroleum geologists on this subject, because it is a completely different science.”

He noted that American universities were releasing numerous theoretical studies on shale exploration. These days, more studies come from academics than from companies.

“That shows that shale gas and shale oil exploration are moving into a scientific world, which is great because then all issues can be explained instead of just comparing with historical data,” concluded Fivos Spathopoulos.