European Shale Gas Industry is Still at Nascent Stage

Thursday 13 October 2011, Amsterdam

Europe's shale gas industry is still at its nascent stages of development. However, the results of initial exploration activities that are taking place in European countries are likely to increase future investments in the sector.

Currently, large investments are focused on acquiring shale gas acreages across different countries in Europe. Both international and domestic companies in the European oil and gas industry plan to expand land acquisitions in prospective areas across Europe. As the region's shale gas potential has not been proven, the acreage cost in Europe is significantly lower than that in the US.

Poland is inviting investments in its shale plays through the provision of attractive fiscal terms. As the cost per acreage in Poland is very low, many IOCs have already invested to acquire acreage in Poland. These companies include: ExxonMobil, Chevron, ConocoPhillips, Marathon Oil and Talisman Energy. In May 2011, Chevron invested EUR30m ($44m) for a drilling license in Bulgaria.

Geopolitical Factors are Driving Shale Gas Development in Europe
Geopolitics is one of the key factors driving shale gas development activities in Europe. The region has very high natural gas consumption. Also, the region heavily depends on gas imports (primarily from Russia, Norway and Algeria) to meet its natural gas requirements. Russia supplies about 26% of total European imports of natural gas. Eastern Europe is highly dependent on Russian gas imports due to their close proximity; however, this poses a threat to the energy security of Eastern European countries. Western Europe has oil and gas resources in the North Sea but is increasingly dependent on natural gas imports due to declining North Sea production. The success of shale gas in the US could help European countries that hope to replicate the success through the development of their own unconventional gas sources.

Environmental Concerns are Key Challenges for Shale Gas Development
Shale gas development in Europe faces serious challenges due to the alleged environmental implications of hydraulic fracturing (fracking), the process of shale gas extraction, which include drinking and surface water contamination. Considering these alleged environmental implications, a number of countries in Europe have enforced moratoriums on the process. For example, the France's Senate approved ban on hydraulic fracturing. The bill, however, does not outlaw extraction of shale gas by other means.

Poland and Germany are the Primary Focus of Activity
Poland has the largest shale gas reserves in Europe which is estimated to be 30% of the total Europe shale gas reserves. This has prompted the Polish government to develop its shale gas resource as an opportunity to take its economy forward and also fulfill its much needed energy security. Germany though has only 1% of the total shale gas reserve in Europe is encouraging shale gas development. Developing shale gas reserve will add to Germany's efforts to secure its energy requirements through various sources such as storages, renewable energy and unconventional energy.

Most land leasing activity for shale gas development is in Poland and Germany, which both plan to develop their shale gas assets in order to secure energy supplies. In 2010, Poland drilled its first vertical well and its success led to the drilling of a further horizontal well. In Germany, ExxonMobil has a number of shale well drilling plans and has tested shale gas potential in three wells. Despite environmental concerns, Poland is keen to develop its shale gas assets for the domestic production of natural gas in order to become self-sufficient and no longer rely on Russia. Both Poland and Germany have favorable fiscal policies to encourage shale gas development.

In Europe, Indigenous Land Rights May Pose a Challenge for Access to Underground Shale Gas Resources
Countries in the European Union (EU) are not legally or culturally homogenous, as each EU member state has its own legal system. In addition to this, oil and gas rights are controlled by the host country, and this could damage the development of European shale gas reserves. Poland, Germany, the UK and Ukraine are all actively developing shale gas reserves.

Furthermore, access to shale resources in Europe is difficult because surface landowners can hold their land rights indefinitely. This could make it difficult for companies to procure mineral rights for the land required to develop shale reserves. Europe also requires consent at various levels, such as county, regional and local government, and this can make the process time consuming.


About the research:
"Gas Shales in Europe, 2011 - Market Analysis, Industry Development and Competitive Landscape" is the latest report on the European shale gas industry, published on ASDReports.com. The report presents shale gas potential in Europe, and provides details of key exploration areas, major companies engaged in the exploration of shale gas in Europe, drivers and challenges in shale gas development in Europe, and key merger and acquisition (M&A) activities in the European shale gas industry. The report discusses the development of shale gas exploration in Poland, detailing concessions awarded, companies involved, drivers and challenges associated with the development of shale gas in the country, and expected economics. The report also details key developments in shale gas resources in other European countries and analyzes potential implications of shale gas development in Europe on the global oil and gas industry.

Visit ASDReports.com for more information on this research, a direct link is available in this article.