Feb
2012
Should we use the F-word?
Shale gas and fracking are considered dirty words in much of Europe – and yet the number of shale gas wells drilled and fracked in Europe remains small. Opposition has surfaced here much more quickly than the infant industry is developing.
The shale gas industry has not yet had a chance to prove that there have been many lessons learned from the US where it has truly flourished and is now a victim of its own success in terms of the sharp decrease in gas prices. But in the US, shale gas has put the country in a position where it will soon be self-sufficient in gas and potentially a net exporter and it has created many tens of thousands of jobs.
The same could certainly happen in Europe, where there is a clear need for increases in energy sources in order to keep the lights on over the coming years. This is something that has been highlighted again by the recent European cold snap that has seen wholesale gas prices rising by over 30% (http://www.bbc.co.uk/news/business-16916577), supplies from Russia being tested to the limit and the Italian government huddling in crisis talks and contemplating using fuel oil instead of gas. This will have inevitable consequences for European consumer energy bills – something that shale gas should eventually help to counteract in future years.
Earlier this week, Ofgem published a report that it had commissioned with Poyry, the international energy consultancy. The Impact of Unconventional Gas on Europe looked at the UK, European and global shale gas markets and reviewed many of the challenges the industry faces. Chief among its conclusions was that the major challenge that shale gas faces in Europe is political, as a result of negative public opinion.
The Gasland movie (http://gaslandthemovie.com/) has had success in highlighting the environmental concerns and has raised industry standards, but we need to be careful that it does not alarm the public. The public needs to believe that technological advances and changing standards will ultimately help them keep warm and keep energy bills down.
The industry admits that European shale gas wells will be more challenging to develop than those in the US; they are deeper, are situated near more heavily populated areas, the subsurface rights do not exist in a way that incentivises landowners to allow development and they remain unproven commercially. But the benefits of providing domestic supplies of energy from an energy source which emits lower levels of greenhouse gases than the European staple of coal are likely game changing and will have gas exporters reliant on European markets watching closely.
The industry stands at a moment where it needs to respond to critics – sensibly, carefully and ensuring best practice. If Europe doesn’t push forward to develop this source of energy, then the shale gas bandwagon will inevitably roll on into developing markets and without the benefit of the learning and standards set by a well regulated Europe. Europe will also lose the stimulus of job creation and growth from shale gas exploitation and in these times of austerity this is not something that Europe can afford to shun without careful consideration.
