Shale Gas Revolution Will Rock the EU Energy Market
Shale gas development will lead to changes in traditional gas relations and an increase in energy security in Europe.
In a report titled Unconventional Gas – Chance for Poland and Europe, Krakow-based Polish think tank Kosciuszko Institute believes an "unconventional gas revolution," could lead to significant changes in the EU gas market over the next 10 years.
The report prepared by over 20 academics and scientists from the U.S. and Europe., said the development of the unconventional gas sector in Europe, chiefly shale gas, could lead to increased energy security, reduced CO2 emissions and a reduction in gas prices, which are currently affected by oil indexation and long-term contracts (mainly with Gazprom).
Even if European shale gas exploration and production costs are 50% higher than in the US, gas prices may still be lower than Russian gas, which currently accounts for a quarter of the EU's supplies, the report said.
"Unconventional gas is likely to have a significant impact on current European gas supply dependency on Russia. Once the European unconventional gas industry has developed to scale and has properly got its costs under control, it will be very competitive against both Russian gas, hauled all the way from Siberia, and LNG," Professor Alan Riley from City University in London said in the report.
Marcin Tarnawski from Krakow's Jagiellonian University said that large-scale industrial exploitation of unconventional gas in the US, Europe and Asia could seriously upset the balance of power between existing gas exporters and importers.
"It may lead to a situation where new investments in the trans-European pipelines, such as Nord Stream and South Stream, will not prove to be economically viable," he said.
The report estimates that Poland, with resources estimated as high as 5.3 trillion cubic meters and considered one of Europe's most promising shale gas plays, may deliver up to 100 billion cu m/year of production in 10-15 years, although a more probable scenario is 20-30 billion cu m/year.
But that would more than cover the country's current annual consumption of 14 billion cu m and transform Poland from a country which relies on Russian supplies for two thirds of its consumption to a gas exporter.
Mariusz Ruszel, The Kosciuszko Institute's energy expert, said Poland could begin to export gas to neighboring countries such as Germany, Czech Republic, Slovakia and Lithuania, and even further afield.
Prof. Riley also found that “a focus on gas would allow the EU to rapidly cut CO2 emissions”.
“Unconventional gas would be an important supply addition to supplement new pipeline and LNG imports that will also likely be required in Europe” added Guy Lewis, Trevor Smith and Kent F. Perry, the report’s contributors from the Gas Technology Institute.
However the report stated two significant obstacles to shale gas becoming a significant alternative to Russian supplies in Europe -- the lack of a single gas market and environmental barriers.
"Liberalization, both legal and physical, needs to be completed as rapidly as possible to open up the European gas market to new gas sources," Riley said.
The report also noted that measures adopted in the US over the last 20 years to mitigate environmental impacts such as surface footprint, emissions, water usage, waste disposal or habitat fragmentation, should be adopted in Europe.
Poland, in particular, needs to develop a competitive and commercial gas market and de-regulate its gas prices, develop and modernize its gas transmission and storage infrastructure, and create favorable conditions for investors, the report said.