European shale gas development still unlikely to replicate US growth

The shale gas revolution taking place in the US is unlikely to be repeated in Europe, at least at the pace currently taking place in North America.

Despite significant volumes of unconventional gas deposits in Poland, France, Germany, Hungary, Sweden, Turkey, and the United Kingdom—estimated in January 2011 by the Office of Gas and Electricity Markets to be close to 1,250 trillion cubic feet— shale gas developments are far behind those in the US, Palantir Solutions’s Bart J. A. Willigers said in August 2011.

“Shale gas skeptics have pointed out that the geology in Europe is less favorable for commercial development. The tax breaks that provided an important incentive in the US are not in place in Europe. The service industry for onshore drilling is much smaller and lacks the expertise that is present for operators in the US. Europe also has much stricter environmental regulations,” Willigers noted.

Fast forward one year and the outlook primarily remains unchanged.

Peter Kiernan, lead energy analyst for the Economist Intelligence Unit (EIU) commented recently on shale gas development in Europe.

“It is unlikely that shale gas development in European states will replicate the rapid growth that has been seen in the US in the last few years. Different laws regarding mineral rights for landowners, the cost of land, population density, public attitudes to the role of the state in environmental regulation, and the lack of existing industry infrastructure and services all point to slower development in the EU for shale gas than what has been seen in North America. Nevertheless as the EU's domestic production of conventional gas is in decline, shale gas production could mitigate greater dependency on natural gas imports, either in the form of LNG or pipeline gas from Russia," he said.

"Furthermore, gas-fired power is a preferable alternative to coal-fired power generation in terms of carbon emissions. The next boom region for shale gas after the US, however, is likely to occur elsewhere, most likely China; especially given the fact that France, Bulgaria and Romania have placed a hold on hydraulic fracturing, while in the UK, Germany and the Czech Republic the policy environment is uncertain. Only in Poland has shale gas been wholeheartedly adopted in Europe so far.

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