With the U.S. reaping the benefits of domestically produced shale gas, all eyes are on Europe. When will it follow suit? Yet, while shale gas development in Europe is expected to spur economic growth and reduce unemployment, many experts do not see shale gas as a “game changer in Europe the way it has been for the U.S.”
A recent study commissioned by the International Association of Oil & Gas Producers quantifies how much Europe’s economy could benefit from shale gas production. According to the study, shale gas production could add a total of more than 3 trillion euros to the economy during 2020-2050 and up to 1 million jobs by 2050. These gains additionally would result in higher tax revenues, more internal investment, more disposable income, better security of supply, and, ultimately, more prosperity.
Understanding potential benefits at stake, some European governments are worried about falling behind the U.S. on unconventional gas and technologies, and are eager to follow the U.S. lead. Many oil and gas companies are enthusiastically looking for new opportunities. Encouraged by significant shale gas reserves, the UK government is planning to open up thousands of square miles of countryside to shale gas exploration, despite protests by local communities. Chevron and other oil and gas giants are already involved in shale gas exploration projects in Poland, Romania, and Lithuania. The company just signed an agreement allowing it to explore for shale gas in Ukraine.
And yet, despite the potential gains from shale gas, European countries are not fully convinced that its pursuit is in their best interest for several reasons. Firstly, Europe’s geology is different from that of the U.S. Deposits in European countries are smaller, more complex, and lie deeper underground. It is also difficult to obtain water for shale gas drilling, as accessible water is less available in Europe. These differences in the environments require more advanced technology than in the U.S., so simple technology transfer would not do. Plus, Europe is already behind the U.S. in terms of its oil and gas infrastructure, equipment, and skilled labor availability.
Population density and land ownership is different in Europe as well. Shale gas drilling requires access to land. Because of Europe’s population density, many deposits lie in industrial and urbanized areas. As a result, shale gas development presents serious environmental and health threats. At the same time, in Europe, individuals do not own underground commodities, as they belong to the state. Being sensitive to uncertain environmental consequences of hydraulic fracturing, Europeans have little incentive to support drilling nearby.
All of the factors mentioned above make shale gas development more difficult and costly in Europe. Furthermore, several recent studies suggest that shale gas prices are not likely to be competitive with cheaper natural gas imports and will not lower gas prices in the near future. In addition, shale gas exploration would require additional incentives from the governments, which will put shale gas development in direct competition with renewable energy sources.
Experts agree that shale gas is not going to play the same role in Europe as it has in the US. After all, most recent European shale gas projects, such as the ones in Poland or Romania, so far remain unsuccessful.
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