Europe wants to replicate America's shale gas boom. Will it succeed?
The British government this week mapped out which parts of England, Scotland and Wales it could offer for the development of shale gas, the latest in a string of halting European efforts to start replicating the so-called "shale gale" that has dramatically transformed the U.S. energy picture in the last half-decade.
Coaxing more natural gas out of the ground couldn’t hurt the British, who’ve been poleaxed by rising energy prices and greenhouse-gas emissions, exactly the opposite of what’s happened in the U.S. But neither the U.K. nor Europe as a whole is about to steal a page from the U.S. playbook and ride a shale gas boom to a cleaner energy sector and a revitalized manufacturing base. For Europe, that means there are still no easy answers to its decade-old quest to achieve cheaper and cleaner energy while boosting energy security at the same time. Europe is set to finalize its energy and climate plan for 2030 by early next year. For the moment, it’s far from clear that shale will — or should be — be part of it.
The U.K. assessment, released Tuesday, opens up about half of Britain to the prospect of shale exploration. That has exercised the British press, who are worried about the "industrialization of the countryside" and scores of heavy trucks rattling through densely-populated areas day and night.
Government officials, like their counterparts in the U.S., acknowledge the need to tap shale deposits in a responsible fashion, but say that opening up more areas for hydraulic fracturing could prove an economic boon.
"Today marks the next step in unlocking the potential of shale gas in our energy mix," said British Energy Minister Michael Fallon in presenting the new plan. "It is an exciting prospect, which could bring growth, jobs and energy security."
British steps to start unlocking its shale potential matter, because Britain has almost all the ingredients needed to actually make the shale revolution happen: a clear regulatory framework, robust capital markets, nimble producers, existing gas infrastructure, and potentially favorable geology.
That’s more than can be said for plenty of other European countries that have abundant shale gas resources on paper — such as Poland or the Ukraine — but which need to make wholesale changes to their regulatory landscape and massive investments in their natural gas infrastructure. At the same time, shale-gas development, due to heavy initial depletion rates, requires lots and lots of drilling rigs, something else that Europe and the rest of the world conspicuously lack compared to the United States.
British steps to start tapping shale offer a stark a reminder that the raw resource base (China, anyone?) probably matters less for shale development than all the boring things that could actually make it possible. Of course, Britain, like other countries in Europe, faces plenty of local and environmental opposition to fracking, just as in some parts of the U.S.
"If there’s one country that could pull it off, I would bet on the U.K. But the public opposition is pretty substantial, and the government would be wise to go slowly," said Tim Boersma, an energy security analyst at the Brookings Institution.
What’s especially interesting about the nascent British embrace of shale is that comes right alongside a new energy bill meant to kick start $180 billion of investment in clean, low-carbon sources of electricity over the next decade. The bill includes financial support for nuclear power and renewable energy to ensure that Britain, which has been gobbling up cheap U.S. coal to keep the lights on, can meet its goals of cutting greenhouse-gas emissions.
Why not just count on shale gas to do that? The U.S., after all, has slashed emissions in the energy sector to levels last seen in the early 1990s, in large part because the electricity sector is burning more gas and less coal. The recession also helped by dampening electricity demand.
The U.K. shale assessment makes clear how hard that would be to pull off. Even if Britain figures out just how much shale it has, and how much it costs to get out of the ground, British shale gas isn’t likely to displace dirty coal, as it did in the U.S.
Rather, the government-commissioned study says, British shale gas would most likely displace pricey, imported liquefied gas. As a result, the report found, British shale development would have a negligible effect on national greenhouse-gas emissions.
And that highlights a fundamental misunderstanding about the nature of the U.S. natural gas revolution and its appeal for the rest of the world: Gas is relatively cheap in the U.S. not because it comes from shale, but because shale unleashed so very much of it at the same time. Coaxing gas out of underground shale formations by shattering the rock with a high-pressure cocktail of water and chemicals is more expensive than tapping free-flowing gas fields; the U.S. has enjoyed relatively cheap gas simply because so many producers tapped so many wells in such a short space of time.
"Shale gas would mean alternative gas for Europe, not cheap gas," said Boersma.
Estimates of the cost of European shale gas vary, since so little exploration, let alone actual production, has taken place, but will probably cost about twice as much as shale gas in the U.S. That means it wouldn’t be able to knock coal out of the energy system the way that cheap gas has undermined coal’s appeal in the U.S. Indeed, coal that got pushed out of the U.S. has poured into the U.K. over the last couple of years.
Some European countries are pre-emptively shutting shale out of the equation before even grappling with the challenges of economic extraction and distribution. France and Bulgaria have banned it outright. Germany is still trying to make up its mind.
All of which isn’t to say that shale-gas development doesn’t offer benefits for Europe. British officials talked up the growth and jobs benefits from shale development, and that’s one of the positives underscored by the latest U.K. shale assessment.
Especially in the wake of Russia’s latest standoff with the Ukraine, in which Russian gas supplies were first dangled as a carrot, then brandished as a stick, and then finally as a temporary carrot, finding reliable, alternative sources of gas can ultimately be more important than finding cheap sources of gas.
Just look at the excitement Tuesday in Baku, Azerbaijan, at the signing ceremony for the Trans-Adriatic Pipeline. The volumes of Caspian gas aren’t huge, and they won’t reach Europe until the end of the decade, but it’s a start. Plenty of Europeans are hankering after U.S. gas too, since the U.S. will start exporting modest amounts of liquefied natural gas in a few years.
All of this is set to come to a head. Europe is trying to finalize its energy and cli
mate plan for 2030 by early next year.
At issue, as it has been over the past decade, is precisely how the continent can manage to promote low-carbon energy sources in order to curb greenhouse-gas emissions, while making energy less expensive for cash-strapped governments, families, and businesses. Simultaneously, Europe aims to increase its own energy security. The three objectives never clearly meshed, and often came into conflict. Tapping shale gas won’t solve all those problems, but it has forced its way into the discussion.