POWER April 2013 - 8

Europe Embraces Shale Gas
Several European governments have so far this year bucked a
reluctance to extract shale gas via hydraulic fracking even as
the practice continues to be strongly opposed in countries like
France and Bulgaria. Following the UK's move in late December
to lift a ban on shale gas exploration, Germany on Feb. 26
unveiled a draft law that permits development of the unconventional
fossil fuel through fracking, albeit with conditions.
Reversing a previous decision, Romanian authorities on Jan.
31 awarded energy giant Chevron certificates to explore for
shale gas in the eastern part of the country, while a Ukrainian
regional council voted to approve a deal with Shell to develop
a shale gas field.
These decisions come on the heels of the European Parliament's
rejection of a ban on shale gas. And late last year, the
European Commission (EC) Joint Research Centre issued a key
report (Figure 1), which finds that under a best case scenario
(one that takes into account environmental considerations),
future shale gas production in Europe could help the European
Union (EU) maintain a stable dependency on energy imports,
keeping them at the current 60% of total EU energy needs.
The report acknowledged, however, that considerable uncertainty
exists about recoverable volumes, as well as regarding
technological developments and public acceptance of shale
gas extraction. Critically, it noted, the EC remained " neutral "
to member states' decisions concerning their energy mix, but
it stressed that the commission would continue to ensure that
an appropriate framework was set up to enable " sustainable "
shale gas extraction that fits within EU policy objectives of
working toward a decarbonized economy. The framework is
expected sometime this year.
Germany Warms to Fracking
In industry-heavy Germany, shale gas drilling has been a headline-making
and contentious political subject that features
prominently in the rhetoric of politicians seeking votes in this
year's Sept. 22 national election. Germany chose to shut down
six of its nine remaining operational nuclear reactors by 2022
after the Fukushima Daiichi accident in March 2011, but it is
now struggling to secure replacement power. The draft legislation
released by Chancellor Angela Merkel's government in
February introduces environmental safeguards by outlawing
fracking in protected areas and near drinking wells-an area
estimated to cover about 14% of German territory. All projects
must also undergo environmental impact studies.
Experts suggest that the proposed restrictions may not appease
fracking opponents in the Greens and Social Democratic
parties, which have urged the government to institute a moratorium
on shale gas development until better techniques are
found. Proponents say, meanwhile, that Germany's economy
would get a badly needed boost if it exploited its estimated
2,300 billion cubic meters (bcm) of technically recoverable
shale gas reserves. They point out that fracking isn't new to
Germany: About 300 wells have already been fracked since the
1960s. But, as Germany's domestic supplies of conventional
natural gas dry up, the country continues to consume about
86 bcm/year of natural gas-about 40% of which it is forced
to import from Russia.
8
Romania's Government Backs Shale Gas
After the re-election-with an absolute majority in both the
Chamber of Deputies and the Senate-last December of Romania's
Social Liberal Union party, Prime Minister Victor Ponta
has publically said he supports environmentally responsible
shale gas exploration. The statement is a U-turn from Ponta's
previous stance, before he was appointed as prime minister
in May, to ban shale gas exploration (he proposed a bill that
was overwhelmingly defeated by the Senate). Despite public
protests in southeast Romania, where the country's shale
gas reserves are situated, Chevron in January reportedly obtained
zoning certificates enabling it to explore for shale gas
with fracking.
Ukraine Prepares Shale Gas Deal
Ukraine also made headway in January, as deputies of the
Donetsk regional council voted to approve a deal with Royal
Dutch Shell to develop the Yuzivska shale gas field. The eastern
European country harbors Europe's third-largest shale gas
reserves (at 1.2 trillion cubic meters, behind France and Norway)
but is mired in a contentious 10-year deal signed in 2009
by the previous government with Russia's Gazprom for $430
per thousand cubic meters of imported Russian natural gas.
Former Prime Minister Yulia Tymoshenko is serving a sevenyear
prison sentence-the subject of a high-profile human
rights campaign-as a result of that contract, signed after a
payment dispute between Russia and Ukraine over gas supply
and transit left much of eastern Europe in the cold in the
first three weeks of 2009. Tymoshenko is charged with asking
Ukraine's Naftogaz to commit to the exorbitant price while
market prices were relatively low.
In January, meanwhile, as Russia's Vladmir Putin and his
Ukrainian counterpart Prime Minister Mykola Azarov failed to
1. Unconventional gas production to 2040. A recent report
from the European Commission's Joint Research Centre projects
that in a scenario most favorable to shale gas development, the U.S.
will capture the lion's share (70%) of the world's total unconventional
gas production by 2020. But U.S. shares will decline to 30% as East
Asian markets (and China's in particular) see a surge in production after
that. Other regions will see moderate but steady growth, and of the
world's total production by 2040, Central/South America will produce
9%, Europe 8%, Africa 7%, and Canada 6%. Source: European Commission
Joint Research Centre
3,500
3,000
2,500
2,000
1,500
1,000
500
2010 2015 2020 2025 2030 2035
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W. Europe
U.S.
Southeast
Asia
Mexico
India
Former
Soviet
E. Europe
Central/S.
America
China
Canada
Australia
Africa
2040
POWER | April 2013
Million tons of oil equivalent
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POWER April 2013

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