Shale gas in Europe: revolution or evolution?
The energy spotlight is on Europe as it begins shale exploration. Will Europe find the same success story as the US?
European shale gas potential
Shale resources are believed to be present in at least 14 countries across Europe, though no shale gas play has yet been brought into production. Three-quarters of estimated European shale gas reserves are concentrated in just four countries: Russia, Poland, Ukraine and France.
In a report published by the US Energy Information Administration (EIA) in April 2011, World Shale Gas Resources: an Initial Assessment of 14 Regions outside the United States, technically recoverable shale gas resources in Europe were estimated at 605 Tcf. This represented a little over 9% of the global shale gas resource potential.
Changes to estimates of technically recoverable shale gas resources in Europe
Source: US Energy Information Administration
Evolution rather than revolution
While there has undoubtedly been a shale gas revolution in the US, we believe shale gas development in Europe will follow a more evolutionary path.
There are a number of factors that will influence the pace and feasibility of shale gas development in Europe; these factors are summarized in the chart below.
Shale gas in Europe — revolution or evolution
Source: EY analysis
European energy markets: The impact of shale gas is unlikely to be transformational for the European energy market as a whole, but it could prove to be significant for individual countries by helping reduce their dependence on imports.
Government and public attitudes: There is no consensus across Europe on shale gas development. Government attitudes vary, in some cases markedly, as exemplified by the positions of France and the UK. Public opinion on the issue is similarly divided, adding to pressure on governments to take action to either support or restrict shale gas development.
Factor’s influencing country benefits: The impact that shale gas will have on energy markets will differ from one country to the next, depending on the country’s national energy strategy, degree of import dependence, projected growth in gas demand, and the cost and social acceptance of alternative and competing supply sources.
The shale gas debate has become increasingly contentious, but there is no denying the economic benefit that the evolution of a shale gas industry could bring to individual countries in Europe.
The increase in government revenues from taxes on shale activity, and private sector job creation, would be especially welcome in these times of fiscal austerity.
Most of the issues used by opponents to call for restrictions on shale gas development are not exclusive to shale gas activity. But environmental concerns are likely to bolster public support for a strengthening of the regulatory regime governing shale gas development.
Any risks that are shown to be linked to shale gas development need to be balanced with its potential contribution to energy security and economic development. Many hope that the experience in the US can be replicated in other countries. This experience also needs to include learning the lessons from studies under way on the environmental and public health impacts of shale gas development in the US and using them to shape appropriate regulation where necessary in Europe.