Russia (and allies) shrug their shoulders on European Shale Potential

An interesting story from Oil and Gas Eurasia signifies a more subtle side of shale opposition. Overt opposition to shale depends on objections based on actual environmental fears, or occassionally honest up front fears, as from Caroline Lucas the other evening, that shale disrupts the carbon debate. 

Covert opposition to shale takes the form of either denying geology, over-estimating commerical issues or exaggerating public opposition. Caroline Lucas and the Guardian often cite a Deutsche Bank analysis on shale from last October for example that says European shale won’t amount to much due to the same reasons the Poyry report for Ofgem echoed recently.  First deny geology, while talking up issues now irrelevant such as population density and water needs and the old chestnut that Europe has no service industry. Tell that to the dozen exhibitors at the recent Barcelona unconventional conference for one example. But within the DB analysis is something more covert and sneaky. Stressing public opposition to shale as a self fulfilling barrier to shale creates a pessimistic view of potential. These views serves some interests far removed from Green or local protestors. For example, back in the former USSR, Oil and Gas Eurasia find Russian financial interests more than happy to talk up opposition to shale as one more reason for them to be blasé about shale:

 Poland last year unveiled designs not only to cast of its irksome energy dependence on Russia, but also to become a European energy exporter by making a drive for shale gas production starting in 2014. The European power is hoping to repeat the United States’ shale gas revolution after Poland published surveys that estimated it is sitting on colossal untapped gas deposits lodged in shale rock. Such reserves may extend throughout Europe. But Russian gas majors are coolly unperturbed by the grand vision to upset the status quo in Russia’s most lucrative market – and analysts in Moscow are skeptical too. 

 Frankly speaking I don’t share this optimism,” said Tatyana Mitrova, head of Global Energy at the Skolkovo Energy Center. “It usually comes from politicians and other public persons who do not have experience in the gas industry. According to our estimates, unconventional gas in Europe is not a game changer – it will most likely develop, but a repeat of the U.S. shale gas boom is doubtful”.

 Well they would say that wouldn’t they? Note Ms Mitrova’s prominence, especially as member of the Valdai Club. But later on in the story, another interesting specific rationale, or perhaps hope is to accentuate the fear:

the road to unleashing Europe’s volumes is paved with stumbling blocks, say analysts. Not least of these is the fear of the pollution and geological instability potentially triggered by shale gas drilling.

And yes, you can see this one coming:

 Europe’s drive for unconventional gas is only in its nativity and the list could grow, given the continent’s restrictive environmental law, high population density, numerous protected areas and the likely noisy opposition of local governments fearful of the impact on the tourist industry. That, at least, is the feeling in Moscow: Gazprom, which has publicly dismissed Europe’s shale gas vision, says that the entire process carries “significant environmental risks.”

But this isn’t just the feeling in Moscow. Ofgem couldn’t put it better themself.  In fact the infamous Poyry report on whether shale will be a UK game changer is a direct echo of the Gazprom line. But why listen to the monkey when you can hear it from the organ-grinders: 

Europe, moreover, has scant expertise in shale gas and the United States holds close to a monopoly on technology and know-how. Gazprom is also skeptical that Europe has the infrastructure to prop up the drilling boom that the United States has witnessed. Mitrova said in the whole of Europe, there are only 67 land rigs, compared with thousands in the United States. Planning restrictions, moreover, will be harder to obtain with the high population density. Additional factors like Ukraine’s relatively poor business climate could harm its ability to coax foreign investment and expertise – potentially nixing its hopes to tap into what Vadim Chuprun, the deputy head of Naftogaz state energy firm estimated as the fourth largest reserves in Europe with 2 trillion cubic meters, Reuters reports. Combined, these factors are major stumbling blocks that will hinder the dramatic reconfiguration of the European gas market.

   “However much they might want it, whether via shale gas or via LNG, unfortunately for the Europeans have no prospects of reducing their dependence on Russian gas and Gazprom in the next fifteen to twenty years,” said Nesterov.  

 There is legitimate local concern over something new in the neighbourhood, but how valid is the alleged public opposition issue at the national or political level? Judging from the pathetic turn outs at the UK ant-fracking movement, this is not something that appears to be engaging the public even when negative issues are exaggerated. Popular opposition to shale in Europe is neither widespread or deep. It’s a legitimate issue, but not an intractable one. Overplaying the public acceptance issue  is directed at governments and investors in an attempt to separate them from credulity in the first place and money in the second.  



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