This is the third article of a series of four articles that will try to shed some light upon the hydraulic fracturing technique and its economic, environmental and geopolitical consequences, especially for the US and Europe.This third article will focus on the status of European shale gas and oil reserves.
The status of fracking in Europe.
The European Union did not adopt a stance on hydraulic fracturing. The only legislative act the EU has passed is the “Commission recommendation of 22 January 2014 on minimum principles for the exploration and production of hydrocarbons (such as shale gas) using high-volume hydraulic fracturing”.
With this act, the Commission affirms that, according to Art. 292 of the Treaty on the Functioning of the European Union, “Member States have the right to determine the conditions for exploiting their energy resources, as long as they respect the need to preserve, protect and improve the quality of the environment”.
Thus, the EU itself declared that it has no competence on the fracking matter, insofar as the matter does not touch fields of its competence, such as public health, environment and climate. The recommendation is limited to the expression of the “minimum principles that support Member States in the exploration and production of natural gas from shale formations and ensure that the climate and environment are safeguarded, resources are used efficiently, and the public is informed.”Commission recommendation of 22 January 2014 (2014/70/EU)
These minimum safeguards are criteria such as minimum depth requirements and wastewater disposal according to environmental laws. The decision whether to authorise or prohibit fracking falls into the national governments hands.The Commission Recommendation 2014/70 also reports that the European Union needs to diversify its energy supply; to do so, the EU believes it is essential to develop indigenous energy resources.
Is fracking a possible solution to this problem?
Europe Member States employ different mixes of energy sources: France, Belgium, Czech Republic and others are dependent on nuclear energy for more than 30% of their electricity production (which represents around 80% of energy consumption of a country); others, like Austria, are dependent on hydroelectric; Italy, Uk and the Netherlands rely on oil and gas.
So, it is quite difficult to have a common point of view and unanimous decisions regarding the energy sector at the European level: national interests are strong, divergent and sometimes irreconcilable. It seems therefore impossible to develop a strategy that could achieve energy independence and it seems equally difficult to reach a shared approach in shales exploitation. Some countries, such as France and Bulgaria, decided to ban fracking operations after several protests. In Germany and the Netherlands explorations are legal but need to be authorised by the government, which has declared a moratorium on new drilling sites. Others, especially Poland and England, believe that shales may be the solution to their energetic problems.
In 2011, the US Department of Energy commissioned an assessment to study shale-gas resources worldwide. It was calculated that Poland holds about 5295 billion cubic metres (bcm) gas, the most shale gas of any nation in Europe at that time. If all of that gas could be extracted, it would be equivalent to 325 years of Poland's current gas consumption. But according to the Polish Geological Institute (PGI) estimate of 2012, a more realistic figure is just of 346–768 bcm of recoverable shale gas.INMAN Mason, Can fracking power Europe?, Nature News & Comment, 01 march 2016. In July 2012, the US Geological Survey (USGS) released another study of Poland's shale-gas resources: there may be just 38 bcm of recoverable gas.
Of the 72 wells drilled by the end of 2015, 25 were successfully fracked to gas release. However, these wells yielded only about one-third to one-tenth of the flow that would be required to turn a profit and none has become a commercial producer. Therefore, prospects of profitable exploitation in Poland look very dim, although it must be borne in mind that these wells did not turn a profit at current prices and that if prices should rise, Polish shale gas may be profitable.
Another country that may become a very important shale player is the United Kingdom. According to a 2013 assessment by ARIadvanced Resources International, a consultancy firm based in Washington DC., UK holds 17600 bcm of gas, of which only 5% is judged to be technically recoverable: if that could be profitably extracted, it would satisfy the United Kingdom's gas needs for about a decade. The British Geological Survey, instead, estimated that there are at least 39900 BCM of gas in England, and possibly up to 68400 bcm. This study did not distinguish between recoverable and not recoverable gas. However, even if only five percent of the lowest figure is profitable gas, there would be more than 30 year of gas independence ahead.
A European Scenario
Some argue that England is an isolated case of possible success. However, according to ExxonMobil, gas is going to be the “fuel of the future” due to an impressive increases of shale production (up to 65% from current level in the US) and it esteems that “with production technologies that exist today – including those that recently unlocked shale gas – technically recoverable natural gas resources would last for over 200 years at current demand levels”.The Outlook for Energy: A View to 2040, Exxon-Mobil, 2016.
Europe is the only region that will not see an increase in gas production and will become even more dependent than today on imports. As a matter of fact, some oil and gas companies believe that there is not much potential for shale gas in Europe, partly because of popular opposition, partly because even in those countries that granted permissions to conduct exploration drills, most companies pulled out of shale drilling efforts due to disappointing yields.https://www.nature.com/news/can-fracking-power-europe-1.19464.
Having looked at polish and british shales data, the only thing that is certain is that there is too much uncertainty to allow a reliable assessment of the feasibility of shale gas production.
Still, according to a report from Pöyry, a Finnish international consulting and engineering company, in the 28 European countries there are at least 54000 bcm of shale-gas and even assuming the worst case scenario, at least 2500 BCM are commercially available after technical, environmental and practical constraints.Macroeconomic effects of European shale gas production: a report to the International Association of Oil and Gas Producer (OGP) November 2013, Pöyry, p. 41.
[...] natural gas resources would last for over 200 years at current demand levels.”
- Exxon Mobil - Outlook for Energy 2016
There are positive consequences for the European economy in both scenarios.
- Wholesale gas prices down between 6% and 14%, with annual savings ranging from €12 billion to €28 billion.
- Average reduction in wholesale electricity prices between 3% and 8%, resulting in average annual savings of €12 billion and €27 billion respectively.
- Gas import dependency could reduce from 89% in 2035 in the No Shale Scenario to 78% in the Some Shale and 62% in the Shale Boom Scenario. This could result in total balance of trade benefits between €484 billion and €1.1 trillion.
- As stated in the second article of the series, the production of shale gas in Europe will not affect the growth of renewables but it will erode the share of coal burned in electricity generation.
With all these different numbers and figures, the only thing that is clear is that we may not run out of gas any time soon. It must be considered that estimates of recoverable gas are very difficult to asses and that they are generally revised upward by further explorations. The case of Marcellus Shale (the biggest gas field in the US, spanning across 6 states) is a paramount example: estimated recoverable gas went from 1.2 TCF (trillion cubic feet) in 2002 to 141 TCF in 2012, and proven reservesGas with a probability to be recovered under current economic and technic conditions > 90% went from 13 TCF in 2010 to 148 TCF in 2015.