Posted on: September 16, 2009
Shale Gas May Reduce Europe’s Reliance on Russia, Adviser Says
By Ewa Krukowska
Sept. 16 (Bloomberg) — The use of shale-gas deposits could help Europe diversify its energy supply and cut dependence on Russia, according to Fellon-McCord & Associates Inc.
The European Union relies on Moscow-based OAO Gazprom for about a quarter of its gas, about 80 percent of which is shipped via Ukraine. The bloc is seeking additional sources after the second price dispute in three years between Russia and its neighbor left more than 20 countries without fuel for almost two weeks in January.
Shale development, where rock formations are horizontally drilled and fractured using water and other liquids under high pressure, is driving a surge in U.S. natural-gas production. “There’s potential here in Europe, with preliminary estimates of shale gas deposits at 510 trillion cubic feet,” Brian Habacivch, senior vice president at the Louisville-based energy consultant Fellon-McCord, told a seminar in Brussels. “It’s very good for Europe, as it requires a very small drilling footprint and reserves have a long shelf life.”
The Haynesville shale formation in Louisiana helped boost gas production by almost 6 percent in 2008 from the previous year, according to U.S. Energy Department estimates. Companies are also developing the Marcellus field, a shale deposit spread over Pennsylvania, West Virginia, New York and Ohio.
Shale gas accounts for about a third of the 1,836 trillion cubic feet of potential U.S. gas resources, according to estimates from the Potential Gas Committee, a group of industry, government and academic volunteers.
Unconventional Projects
StatoilHydro ASA, Norway’s biggest oil company, and Chesapeake Energy Corp. are examining more than a dozen shale formations in Hungary, Poland, India, Australia, China and other countries to determine where they can invest in unconventional natural-gas projects, Oivind Reinertsen, president U.S. and Mexico operations for StatoilHydro, said in a May interview.
ConocoPhillips, the third-largest U.S. oil company, said Sept. 9 it expects to drill its first shale-formation well in Poland in the first quarter of 2010. Larry Archibald, a vice president for exploration, said the project in Poland is attractive because of gas demand in Europe, favorable terms and ease of access.
In western Europe, countries that have the potential to boost their shale gas production include Germany, Netherlands, France, Sweden and U.K., according to Fellon-McCord.
The extraction costs of shale have been steadily falling and are among the lowest in Europe, Habacivch said.
U.S. Pace
“If European shale gas deposits can be developed at the U.S. pace, that would mean they have a measurable impact on the European gas market in as little as five years,” he said. “That would help diversify supply at the times when we see geopolitics affecting the markets.”
As the winter season approaches, concerns are mounting that Russian gas supplies may again be inaccessible. The EU urged member states in July to fill natural-gas storage sites before possible disruptions of Russian supplies via Ukraine.
The 27-nation bloc also helped Ukraine broker a deal with international lenders at the beginning of August. The European Bank for Reconstruction and Development, the World Bank and the European Investment Bank said they may lend the Ukrainian government $1.7 billion to increase the security of gas supplies from Russia to the EU.