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Keith Johnson: Europe’s Shale Fiasco

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Keith Johnson, Pittsburgh Post-Gazette

A year ago, Russia’s lunge into Ukraine focused European minds on the dangers of depending on Moscow for their energy supplies, pushing countries across the continent to scramble onto the shale-gas bandwagon in a quest to copy U.S. success and move toward having the ability to produce all the energy they need on their own. Now, after a series of disappointments, Europe’s shale dreams seem to have all but evaporated.

And that makes it increasingly unlikely that Europe will reap the kind of gas-fired benefits that have rejuvenated sectors of the U.S. economy and greatly reduced American reliance on foreign energy. This will have implications for Europe’s economic competitiveness and energy security at a time when a sluggish economy and a snarling Russia worry European leaders in equal measure.

The latest blow to Europe’s hopes of pulling off its own energy revolution came last month, when U.S. oil giant Chevron pulled up stakes in Poland, the country where geology and politics had appeared most promising for a replay of the U.S. experience. Other international energy firms, such as Total, jumped ship last year. Energy companies there have balked at high drilling costs and disappointing results. They’ve also been frustrated by ever-shifting tax and regulatory regimes in Warsaw.

Shale has also hit other headwinds of late, with Bulgaria’s government doubling-down on a shale exploration ban: The new prime minister said greenlighting shale there would be “political suicide.” Romania, another potentially big shale play, is now treading water because of vocal public opposition. British legislators proposed a moratorium on fracking because of environmental concerns and Scotland banned the practice. Last year, foreign firms like Chevron also bailed out of other promising plays, including Ukraine and Lithuania, to focus limited investment dollars on countries with more definite upside.

“It’s a safe bet that shale is dead, and it’s always been dead in a way,” said Grzegorz Pytel, a shale-gas expert at the Sobieski Institute, a Polish think tank. A combination of corporate stumbles, overbearing regulators, tricky geology and oftentimes hostile public opinion have conspired to derail Europe’s fracking revolution, he said.

It’s not just Europe. Countries such as China and Argentina also have vast shale-gas reserves yet have struggled to muster the elusive combination of good governance, nimble energy firms and privately-owned mineral rights that has unleashed the shale boom in the United States.

New drilling techniques such as hydraulic fracturing have given the United States the ability in recent years to tap huge amounts of oil and gas that were trapped in shale formations. That shale gale has set the United States on the path to becoming an energy exporter, has led to lower energy prices and has been a shot in the arm for industries that need cheap fuel and feedstock.

On paper, Europe could do the same. Promising shale deposits underlie the continent, from the north of England through France and central Europe to eastern countries such as Poland and Ukraine. Together, says the U.S. Energy Information Administration, those countries have about 600 trillion cubic feet of technically recoverable shale-gas reserves — almost as much as the United States and enough to supply Europe’s consumption for more than 30 years. […]

Russia itself, which supplies about one-third of Europe’s natural gas, has spent years demonizing fracking in a bid to remove potential competitors. Last year, former NATO boss Anders Fogh Rasmussen said that Russia helped organize pan-European resistance to shale gas exploration. Russian media have gleefully chronicled Europe’s recent fracking frustrations.

In some ways, developing Europe’s shale resources is arguably less vital than it seemed just a few years ago. That’s because countries across the continent have started diversifying their energy options, even without tapping their own resources. The U.S. boom means there is plenty of natural gas that can be imported on tankers; Poland and Lithuania, for example, have recently used the construction of gas-import terminals to give themselves an alternative to Russian gas. Better pipeline connections between European countries have also made it easier to move gas supplies around, easing energy concerns for vulnerable countries, especially those in the east.

But another reason fracking is struggling to take off is that — despite Russia’s annexation of the Crimean peninsula and continued strong-arm tactics with its energy exports — many European countries are still less concerned about energy security than climate change.

Brussels hopes to build an “energy union” that can achieve the seemingly contradictory goals of making energy supplies greener, cheaper and more secure. Germany is ramping up its massive bet on clean energy. France sits atop plentiful reserves but won’t even consider fracking. Even in Britain, lawmakers from across the political spectrum warned last month that shale gas is still a fossil fuel and that decades of reliance on yesterday’s energy would impair Britain’s ability to dramatically slash greenhouse-gas emissions.

“Certainly the policymakers in Brussels and the Scottish government are just completely wedded to this vision of a renewable-energy future where we can phase out fossil fuels,” said Howard Rogers, a gas expert at the Oxford Institute for Energy Studies. “The most fervent of them don’t want to see shale gas developed because that might deflect focus from renewables.”

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