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   “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.”

   On the one hand, surveys have located eye-watering deposits. The U.S. Department of Energy says Poland could be sitting on 5.3 trillion cubic meters of unconventional gas – enough to satisfy over three centuries of domestic supply and enough to deal a massive blow to Russia which currently supplies around two thirds of this demand. The thinking is that Poland along with Ukraine, Norway, and others thought to have hefty reserves, can emulate the example of the United States where in 10  years – practically overnight in the plodding history of energy – shale gas production rocketed to almost 5 trillion cubic feet, according to the U.S. Energy Information Administration.

   But 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. Natural gas deposits trapped in shale rock are accessed through underground horizontal drilling as sand and chemical laced water is blasted down to keep the fissures open. The latter process – hydraulic fracturing, or “fracking” – has spurred fears that it contaminates groundwater and could trigger subsidence and even earthquakes. A recent documentary film on the side effects of fracking making waves in the United States depicts a man setting fire to tap water as it runs from the tap in his house.

   France, Switzerland and Bulgaria have banned fracking outright because of environmental worries. In the United Kingdom where small deposits have been located in the north, it has been suspended amid calls for a blanket ban and its viability is currently being debated in Germany. Moreover, 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.”

Green Lobby

   The green lobby wields less muscle in coal-reliant Eastern Europe, while opinion polls in Poland late last year found that only 4 percent oppose shale gas. Poland’s shale gas lobby got a boost when the Polish Geological Institute released the findings of a scientific study carried out in a well in Lеbien in northern Poland which found that drilling did not damage the environment and produced toxic refuse that could be reused.

   Poland yearns to escape its reliance on Russian gas, but it will cost much more than sheer political will to make these shale gas dreams a reality, said Valery Nesterov, the senior oil and gas analyst with Troika Dialogue. The different composition of European shale rock and the higher cost its production entails could mean it would struggle to compete commercially with traditional pipeline gas and imported LNG. Shale deposits in Poland are deeper underground than in the United States, have lower SiO2 and higher loam content, lower TOC and thermal maturity with possible presence of nitrogen, all of which make for more expense during gas treatment and processing.

   Mitrova said that while the average breakeven cost for shale gas is $4-7 per MBtu in the United States, in Poland it could reach $10-15 per MBtu – more than the current price in costly long-term oil linked contracts. This point was hammered home in February this year when ExxonMobil, the world’s largest energy company by market value, abandoned exploratory drilling in two wells saying that the gas was not flowing in sufficient quantities to remain commercially viable.

Disappointing results

   The initial results of drilling by 3Legs Resources Plc. and BNK Petroleum Inc. have also been disappointing. “Only drilling holes in the ground will show whether the geology is indeed suitable for commercial production of shale gas. So far, there has been very little drilling in Europe and the results were quite disappointing,” said Mitrova. Based only on “cabinet” surveys, the estimates of shale gas deposits may well be optimistic. And significantly, on March 1, Miroslaw Rutkowski, a spokesman for the Polish Geological Institute, said that Poland expects to scale back last year’s estimates and would issue a revised survey later this month.

   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.

   Combing, 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. 

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