Shale Gas Offers Diversity Over Game Playing

If geological formations are like children, as the head of a gas exploration company recently said, proclaiming shale gas as a revolution is akin to stating your child will be the leader. There needs to be fertile ground for a revolution to take hold, not self proclaiming prophecies.  Shale gas extraction technology is evolutionary rather than revolutionary offering diversification rather than independence.

The gathering of policy and energy experts for the ninth annual Transatlantic Energy Governance Dialogue set out to understand if shale gas was a game changer for European energy security.  The event was hosted by Central European University (CEU)* in coordination with Brookings and the Global Public Policy Institute (GPPI). With the knowledge of the assemble experts and active participation by audience members, the impact of shale gas was examined on May 12, 2011. Discussion and analysis went back and forth with evolution topping revolution for most participants. My personal skepticism was slightly shifted in favor of the role that the ‘new’ technology can have on European energy security.

The fact that shale gas production accounts for 20 percent of the United State’s gas mix with an expected growth to 35 percent, demonstrates the history and the potential of the technology – even if these heights are never reached in Europe. As Wolfgang Reinicke, director of GPPI pointed out, not only is this last statistic significant but the large mix of ‘unconventional’ oil in the market, makes it almost conventional, indicative of things to come for shale gas. The long term impact on the European gas market, whether through domestic or foreign production will be felt in the continents energy mix.

The perceived balance emerges between security of supply and environmental considerations. This choice was posed by Nick Butler of King’s Policy Institute of Kings College and set the stage for the discussion at the conference. What does society think about this energy technology? Will Europe have another production technology that is rejected in one country but fully embraced in another? By framing the technology in this context, energy insecurity among Central Eastern member states, may collide with environmental concerns held by citizens and politicians in Western Europe; creating further strain in the ongoing debate for supply diversification plans for Europe’s energy mix.

It is the energy mix equation that begins to shift the role that shale gas can play in Europe. While one participant placed the energy demand of Europe in context to the monstrous energy appetite of Asia, almost making any attempt at carbon diversification futile, the fact is Europe will increase its gas imports while tying its gas trading partners more closely. While Asian demand can drive the price of carbon energy sources, locking in domestic and external supplies can provide Europe with security and long term price stability. The transit projects in northern Europe and the southern gas corridor demonstrate the long term investment (and political) commitments that companies and countries make in linking upstream supply and downstream demand.

Shale gas emerges not as the panacea to break from gas imports, whether Russian or North African, but as a raw percentage of the energy mix. For those countries with a higher level of energy insecurity, or reliance on a single supplier, increased domestic production can help meet increased domestic consumption. Just as gas produced in Poland, Romania or Hungary today is used on their domestic markets, which allows low priced local gas to mix with higher priced imports, gas from shale becomes part of the domestic supply mix.

The history of energy production is non-revolutionary. In present terms, technologies or policies may be framed as ground breaking, but as pointed out by Melanie Kenderdine, the executive director of MIT Energy Initiative, shale gas technology in the US had a long and sustained period of research and development that was aided by government support. While the US government may now seek to export this technology, the evolutionary application of it means there will be a long period of scientific evaluation of Europe’s geological structures and how the technology can be applied.

The arguments for European shale gas have shifted my opinion slightly on the technology. If the history of its development is considered, then it is clear it will take a long time for moderate amounts to contribute to Europe’s energy mix.  The restless children are not the gas particles seeking to escape, but anyone seeking to emulate the recent dramatic growth in US shale gas on the market. Shale gas production will not dent the level of imported gas in the foreseeable future, but will play a part in the diversification of energy sources essential for Europe’s secure energy supply. It is evolution rather than revolution that will describe this story.

*  The author is an employee of Central European University.

Michael LaBelle is Research Project Manager at the Center for Climate Change and Sustainable Energy Policy at Central European University.  His blog can be found at www.energyscee.com