Shale gas, a natural gas trapped in rocks, could eventually
greatly expand global supplies of energy. It is increasingly
adopted in the US and reports show vast untapped resources in
Europe. But hydraulic fracturing, or fracking , the
method of extraction which involves pumping pressurised water,
chemicals and sand underground, is criticised by many
environmentalists, who believe it can pollute water supplies.
Any widespread adoption of the process will have to overcome
many political and policy hurdles to gain universal
| Cuadrilla Resources, which was exploring
shale reserves in the UK before it was
ordered to stop by the government said
it will apply for another drill permit.
Fracking has revolutionised the
potential of the global oil and gas sector, most notably in the
US. This is a well-stimulation process which, together with
horizontal drilling, is used to maximise the extraction of
underground resources, including oil, natural gas, geothermal
energy, and even water. The oil and gas industry uses fracking
to enhance subsurface fracture systems to allow oil or natural
gas to move more freely from the rock pores to the production
wells that bring the oil or gas to the surface.
The stages are defined as:
pre-production, which includes site preparation; drilling,
hydraulic fracturing, well completion, waste and wastewater
treatment; production and processing; transport and
distribution and well plugging and abandonment.
Shale gas - or
unconventional or new gas - along with
new finds of conventional gas, will allow many more countries
to produce their own gas and make it available for export from
many more places, many of which are less difficult to deal with
than some traditional oil-producing countries.
Fracking may be a controversial
process, but it is also a very dynamic and developing process.
In addition to the classic route with water, promising new
- Slickwater fracks, which
adds chemicals known as friction reducers to water
to allow for more efficient gas extraction
- Non-hydraulic extraction (or
waterless fracking), which is a cheaper and more effective
extraction method and does not affect groundwater, and includes
LPG gel and foam fracking, with the latter replacing water with
- Green fracking
fluids, which are moving away from using diesel or harmful
chemicals to more polymer-based fracturing chemicals.
Potential for fracking in
According to the US Energy
Information Administration (EIA), Europe has up to 480 trillion
cubic feet [tcf] of technically recoverable shale gas
resources, compared with 862 tcf in the US, but getting
the gas out of the earths crust is a heavily industrial
process and will be more tightly regulated in the EU than in
Despite this, EU nations have
barely scratched the surface on shale gas: there are just two
dozen test drills around Europe, compared with an estimated
35,000 fracturing sites in the US.
Shale reserves in
(see table 1)
Geological studies have shown the potential for large shale gas
reserves in the lower part of Austria, which could cover the
countrys domestic requirements for 30 years.
Prll, the governor of Lower Austria, has recently called
for legislative changes to be introduced to preclude the
drilling for shale gas due to concerns over the potential
impact of hydraulic fracturing. This September saw oil and gas
group OMV abandon Austrian shale gas plans, stating that the
introduction of the law obliging companies to have a detailed
environmental inspection before each planned project meant its
own projects were not economically viable.
Shale-gas reserves are estimated to be at least 300 bcm,
according to its Economy and Energy Ministry and are several
thousands of meters deep.
Bulgaria has joined France to become the second European
country to ban exploratory drilling for shale gas using
fracking. On 17 May 2012, an ad hoc parliamentary
committee scrapped some of the texts of a recently-adopted
decision to impose a moratorium on shale gas exploration and
extraction as they also hinder the production of conventional
Article 1 of the moratorium bans
the underground injection of fluids at a pressure of more than
20 atmospheres, which hinders the exploration and storage of
conventional gas as well, state-run Bulgarian News
Agency (BTA) quoted the committee chairman Dian
Chervenkondov as saying.
Bulgaria adopted the shale gas ban
in January 2012 under pressure from environmental organisations
and the public.
biggest potential area of reserves is in the south near
Austria, where Czech mining company MND hopes to extract gas as
soon as 2014.
Czech government has proposed a temporary ban on shale gas
exploration until a new law is passed that would address
extracting the new energy source. Environment minister Tomas
Chalupa said in September 2012 that the current law is
insufficient and a moratorium until the middle of 2014 would
give authorities time to propose legislation that would
take into account the current technologies and their
could be close to Poland in holding the biggest reserves in
western Europe, although it remains to be seen what fraction of
this resource base is likely to prove commercial and be
saw France became the first country to outlaw the use of
fracking to tap into shale gas reserves following fears over
environmental consequences. French president Francois Hollande
adopted a publicly tough tone against fracking in September
2012, confirming previous president Sarkozys ban by
declaring it too early to rule out any environmental damage and
ordering his energy minister to withdraw seven exploration
Hollandes move to leave
French shale gas untapped in order to maintain a frayed
alliance with Green parties may come back to haunt him as the
domestic economy stalls.
Moreover, the government remains
split, as industry minister Arnaud Montebourg has been quick to
point out that Hollande has only rejected hydro-fracking, not
shale gas itself, leaving open the door to production if other
country has large unconventional gas reserves which can be
safely exploited if the right regulations are in place,
according to the first findings of a continuing long-term study
by federal authorities.
The Federal Institute for
Geosciences and Natural Resources said between 0.7-2.3 tcm of
the gas could be technically extracted. This is calculated at a
10% extraction rate it believes is achievable from the 6.8-22.6
tcm of shale gas located.
Two studies by experts into the
environmental impact of hydraulic fracturing have been
commissioned by the Federal Ministry for the Environment and
the State of North Rhine-Westphalia and these studies are
likely to inform Germanys approach to regulation.
Germany is considering tighter regulation of a technique to
unlock natural gas from impermeable rocks because of concerns
it is harmful to the environment.
According to a report commissioned
by the German Environment Ministry, Chancellor Angela
Merkels government should ban hydraulic fracturing,
or fracking, near drinking water reservoirs and mineral springs
and require developers to conduct environmental impact
saw the first major milestone of shale gas development in 2007
with a joint venture between Hungarian gas and oil company MOL
and ExxonMobil to evaluate the unconventional potential of the
Mak and Bks basins.
According to the EIA, the joint
reserves for Romanian, Bulgarian and Hungarian shale gas in the
Carpathian-Balkanian basin is around 538bcm. The most promising
exploration area is thought to be Mak, in the southern
part of Hungary. A number of other companies are involved in
shale gas exploration in Hungary, including RAG Hungary Kft.
and Cuadrilla Resources Ltd.
Reserves: The EIA
estimated in April 2011 that Lithuania may hold approximately
120bcm of shale gas reserves in the south-west of the country,
not far from the Polish border. Earlier estimates have even put
potential amounts of reserves at 480 bcm, but these were only
theoretical and not based on geological data.
country saw the first evaluation from
independent research organisation TNO in 2009, commissioned by
Energie Beheer Nederland, which confirmed high potential for
shale gas, although with uncertainties over the gas-in-place
estimates. Opinion on the potential for shale gas in the region
is divided. TNO is currently working on refining shale gas
estimates based on additional data collection and an integrated
multidisciplinary approach. Investigations are focusing on the
Jurassic Posidonia shale formation and the deeper Namurian
Recoverable shale gas reserves are thought to be as much as 187
tcf. According to a new Polish geological report, there are
indications of large shale oil deposits near Warsaw, Radom and
Elblag near the Baltic coast.
Poland is keen to pursue its shale
gas opportunities on a commercial scale, with more concessions
for exploration granted than in any other EU country. While
ExxonMobil ended exploration after tests failed to find
gas in commercial quantities, five Polish
state-controlled companies joined forces this July to invest up
to 1.72bn zlotys ($515m) in the project.
PGNiG, copper group KGHM and power
groups Tauron, PGE and Enea signed a cooperation agreement on
shale gas exploration and extraction within PGNiGs
Wejherowo licence on the Baltic coast. Other companies active
in Poland include Chevron and ConocoPhilips, as well as smaller
potential for shale gas and oil in Poland is seen as a
promising alternative to Russian energy imports.
A new tax is proposed on
hydrocarbon production to ensure that there is a fair return
for Poland but without discouraging investment from foreign
companies who have the means and knowledge to help take
Finally, Finance Minister Mikolaj
Budzanowski said on 13 October that Poland will invest 50bn
zlotys ($16bn) in the exploration of shale gas by 2020.
has unconventional resources, such as shale gas and tight gas,
in the Carpathian-Balkanian Basin, and in the
and local groups in Romania have begun to organise in the
Brlad area and are co-ordinating with their counterparts
in Bulgaria because of the large shale gas reservoir that
straddles the border between the two countries. Romanian
parliamentary opposition has recently proposed a ban on
hydraulic fracturing, while local protests have been supported
by members from both the governing and opposition parties.
has seen some activity from Ascent Resources PLC, which
completed a fracture stimulation in November 2011 on a well at
Petiovci where tight gas was found. As of February 2012,
tight gas reserves have been estimated to amount to 14.3bcm at
the Petiovci Project, which could significantly change
the state of the Slovenian gas market and render it less
dependent on imports.
reserves of shale gas could exceed 1,000 tcf, although energy
company Cuadrilla suspended test drilling for shale gas last
year after a study linked it to earth tremors.
Cuadrilla Resources has said that it plans to apply for a
permit to drill a horizontal well at its Annas Road,
Lancashire site. UK exploration was halted after earth tremors,
which were possibly a result of hydraulic drilling operations
in Lancashires Bowland Basin. Cuadrilla has discovered a
rich and thick geological formation that could make the UK,
like the US, self-sufficient in natural gas. The results of a
government consultation on fracking are expected shortly.
has approximately 83 tcf of technically recoverable shale gas
reserves, according to the EIA, predominantly in the Alum
Shale. It produced approximately 3.76tcf of natural gas in
2010, of which 3.6tcf was exported, accounting for nearly 94%
of total gas production.
The Norwegian Petroleum Directorate
forecasts that this will increase to 3.96tcf in 2015. As a
result, Norway is not dependent on developing any shale gas
reserves, and it is deemed that any extraction of shale gas
will not be economically viable in the foreseeable future.
Reserves: There is
no shale production and no published estimate for
unconventional reserves in Russia. However, it is the largest
natural gas supplier in Europe.
Russias economy ministry sees
serious risks posed by shale gas to the revenue of
Gazprom beginning in 2014, as higher supply from the
non-traditional hydrocarbons may hurt prices and demand for
Russias pipeline gas.
government hopes to unlock what may be the worlds richest
shale plays in western Siberia by using tax incentives to coax
international companies to invest in the new energy.
Moscow is actively implementing a
number of large projects along the whole gas supply chain, from
exploiting the gas resources of the Yamal Peninsula, eastern
Siberia and the far east to building LNG plants, export
pipelines and underground gas storage facilities.
shale prospects may be expected to advance as its regulatory
approach to unconventional resources progresses. The country so
far has focused primarily on its shale oil basins. However,
energy company NIS invited bids last year for the exploration
of unconventional gas in the northern part of the country, at
the southern edge of the Pannonian Basin. Drilling was proposed
to extend to a maximum depth of 4,500m and extend over five
phases, the last of which was expected to terminate in early
2012, over a total area of 532km2.
estimates by the EIA are around 42tcf of shale gas reserves.
The Skifska field has a potential yield of 3-4bcm of
hydrocarbons, and the Foroska field 2-3 bcm, according to press
A quarter of all gas consumed in
the EU goes from Russia through Ukrainian territory, making it
the largest transit state on the continent. In addition,
one-third of all inter-seasonal gas supplies in Europe are
located in underground storage facilities in Ukraine. Ukraine
is eager to collaborate with the EU to modernise its pipeline
system for energy to travel through the country.
Ukraine has previously kept
international energy majors at a distance, but last June
invited bids for potential partners for the two offshore
fields, picking Shell and Chevron to lead large-scale onshore
exploration to help unlock offshore oil and gas using fracking
and other non-conventional means. Production sharing agreements
for both the onshore and Black Sea projects are expected to be
signed within a year.
shown interest in exploring its large shale gas resources.
State-run Turkish Petroleum Corp. recently announced that there
are shale gas basins in the regions of Diyarbakõr,
Erzurum and Eastern Thrace, with 20 tcm of natural gas and
500bn barrels in reserves.
On 16 August, Anatolia Energy
spudded its first exploratory well at the Dadas Shale, the most
promising formation in southeast Turkey, estimated to contain
about 159m barrels of unrisked reserves, mostly shale oil.
Together with Besni, Sinan, and
Bismil, all in southeast Turkey, the total unconventional asset
base is 206.1m barrels of oil equivalent, with conventional
reserves estimated at 233.2m barrels.
TransAtlantic Petroleum, a
pioneering junior in Turkey, has focused on the Dadas Shale
alongside the Thrace Basin in the northwest. Valeura Energy of
Canada is also dividing its operations between Thrace and the
southeast, while Shell is exploring around Diyarbakir in the
Environmental and health
An unavoidable impact of shale gas
and tight oil extraction is a high land occupation due to
drilling pads, parking and manoeuvring areas for trucks,
equipment, gas processing and transporting facilities as well
as access roads.
There is also the problem of air
emissions of pollutants, groundwater contamination due to
uncontrolled gas or fluid flows from blowouts or spills,
leaking fracturing fluid, and uncontrolled waste water
Water issues and environmental
concerns have sparked objections to shale gas development in
the US and Europe, where environmental bodies claim that shale
wells have contaminated groundwater supplies and drinking
water. Measures to mitigate the environmental impact of shale
drilling, perhaps in anticipation of the types of protests that
have occurred worldwide, are being studied.
The price of gas has been an
important factor in the rapid increase in shale gas production
in the US and will be an equally important driver of future gas
demand in Europe. US natural gas prices were around $3/mmBtu in
September 2012, the level regarded by analysts at which
utilities switch power generation from natural gas to coal. The
price of gas in the US is now disconnected from the price of
However, the shale-gas boom in the
US, and the potential for similar successes around the world,
is turning the sector into a buyers market, promising
deep and liquid markets with a growing diversity of supplies
that improves security for buyers. The danger is that new large
consumers, such as China and India, will make bilateral
arrangements for large supplies of gas with big producers,
which could set back the development of a global market.
At the same time, due to plunging
prices, US natural gas companies are faced with the collateral
damages of lower profits and large write-downs in their
reported reserves. The companies involved in US shale gas
production are recognising that their investments are in
trouble at current gas prices.
Prices of crucial shale gas
by-products, such as ethane and propane, have tumbled to
10-year lows due to booming output, further hurting the
profitability of energy already battling with very low natural
Water is integral to shale-gas
drilling and there is a growing market, estimated to be worth
up to $100 bn in the US, for wastewater treatment. There is no
question that shale gas has been a game-changer in
the US. From virtually nothing ten years ago, shale gas now
accounts for around a quarter of domestic natural gas
As with most energy issues, shale
has significant geopolitical ramifications.
Although fracking has seen US
natural gas prices to fall to below $3/mmBtu, the price in
Europe is well over $10/mmBtu. EU bans and moratoria could
delay by at least a decade the replacement of much of the
high-priced Russian and North African gas with cheaper domestic
production, although the EU could benefit from cheap imports
from the US. European countries may soon have to import shale
gas from Russia and the US if there is no domestic European
The prospect of even deeper
reliance on Russian gas, together with a new rush to coal
burning, may the unintended yet inevitable consequences. Just
as the German phase-out of nuclear energy production has
resulted in Germanys increased imports of French and
Czech nuclear energy, Europes blockage of shale
exploration is providing Russia with a good reason to intensify
its own shale extraction.
The coal industry is greatly
affected. For example, US coal miners are cutting jobs as
increased use of natural gas for power generation hits demand.
As shale-derived natural gas has become cheaper in recent few
years, many US power companies are opting to use it, rather
than thermal coal, to generate electricity. If this shift is
extended outside the US, it will benefit shale-energy producing
countries, but will hamper those whose economy depends on
A more dramatic scenario is
presented by Dr Aviezer Tucker, assistant director of the
Energy Institute at the University of Texas, who wrote an
article in the Washington Times on 13 July, which
described shale gas as the New Cold War.
In a subsequent interview, Dr
Tucker claimed that Russia was inflaming environmental
fears of shale gas development in Europe in order to dominate
The Russian/Gazprom methods
for stirring and financing local environmentalist opposition to
shale gas exploitation resemble their method for encouraging
and supporting the anti-nuclear movements during the
1980s, Tucker said.
There is obviously a conflict
between the US and Russia. The US is interested in promoting
energy security and independence for the nations of Europe.
Russia wishes to maintain its virtual monopoly over the supply
of gas to eastern and central Europe and the economic
dependence it implies. It also has an interest in maintaining a
high price for gas in Europe in general since it is the largest
single supplier, he added.
In considering the status of
various European countries and their stance on shale gas,
Tucker drew the following conclusions:
We lost Bulgaria. We are
likely soon to lose the Czech Republic. We gained Ukraine.
Poland has always stood with us. Germany hedges its bets.
France definitely is not with us. The UK probably will side
with us. The Baltic States would love to join us if they have
the resources. A fierce battle rages over Romania, he
The established natural gas
supplying countries will have to be very aware of the new
situation created by the revolution in shale oil and shale gas,
and design their policies accordingly. In a bid to gain energy
independence from Russia and Gazprom, central and eastern
European countries appear more determined to develop hydraulic
fracturing than those of western Europe.
The main relevant policy issues
- Environmental and
- Protection of public health
and safety in general;
- Enhancing and protecting
- Price volatility;
- Investment uncertainty;
- Tax policy.
Although shale gas activities are
underway in Germany, Spain, the UK and Ukraine, commercial
production will not begin immediately.
European countries are also subject
to legislation beyond granting authorisation and permits for
hydrocarbon exploration and production. This will obviously
delay operations further.
France, Germany, Poland and Sweden
all have, or had, shale gas projects in their territories,
although the number of projects, and the stage they are at,
In Sweden, for example, the areas
licensed for shale gas prospection activities are small in
comparison to other member states, while Poland has granted the
highest number of authorisations of all scrutinised states.
Exploration projects for shale gas
are largely only in an initial phase throughout the EU, with
only Poland, and to a more limited extent, Germany, seeing
actual drilling activity. A ban on hydraulic fracturing has put
all shale gas activities in France on hold, while Sweden is the
only member state where an exploitation concession has been
granted and then, only for small-scale operations. However,
this has not led to the actual launch of any exploitation
Acknowledging that evidence
indicates that shale gas is the form of unconventional gas with
the most promising growth potential in the EU, DG Energy, the
Directorate-General for Energy, European Commission, has
invited proposals by public authorities in EU member states in
relation to organising public debates and information campaigns
on shale gas in the region.
EU policies will have to deal with
issues related to land access; higher production costs than in
the North American market; heightened environmental concerns;
the difference between EU and US in property rights; and the
fact that shale gas fields in the US occur far away from
populated areas, whereas in Europe shale gas operations would
be nearer to inhabited communities.
On 30 March 2012, the European
Parliament [Committee on Industry, Research & Energy,
Rapporteur: Ms Niki Tzavela] issued a Draft Report On
Industrial, Energy And Other Aspects Of Shale Gas And
Oil. This is a Motion for a European Parliament
Resolution on industrial, energy and other aspects of
shale gas and oil.
The motion believes that
expectations about the pace of shale gas development in the EU
should be realistic and calls on the Commission, in
line with the EU Energy Roadmap 2050 strategy, to evaluate the
impact of and prospects for unconventional gas in the EU,
whilst recognising that the extent of unconventional gas use in
the EU will ultimately be decided by the market.
The report also calls on the
Member States to ensure they put in place the necessary
administrative and monitoring resources for the development of
shale gas activities; encourages cooperation between relevant
EU and US companies with a view to reducing costs (...) without
delay to check and, if necessary, improve regulatory frameworks
in order to ensure their adequacy for shale gas projects,
especially with a view to being prepared for possible future
commercial-scale production in Europe (...) adopt a
one-stop-shop approach to authorisation and licensing and the
examination of compliance with environmental regulations, which
is the usual practice in certain Member States for all energy
projects (...) and calls on the Member States to
evaluate their legislation to see whether proper account is
taken of this aspect.
Furthermore, the report
stresses the importance of fully consulting the public,
particularly in the context of the introduction of a new
approach in gas exploration; points out that, in certain Member
States, there is a lack of public consultation in the
A similar attitude is expressed in
a European Commission presentation early in 2012, which stated
that the Commissions role is:
- Neither to open nor to close the
door to shale gas operations in Europe;
- To obtain a clear picture on
potential risks/impacts; and
- To ensure that hydrocarbons
operations comply with all applicable EU legislation and offer
a high level of safety for the environment and for
Lastly, a study has been undertaken
in September 2012 by the Joint Research Centre, the European
Commissions in-house science service, titled
Unconventional Gas: Potential Energy Market Impacts in
the European Union, JRC Scientific and Policy Reports,
European Commission. The report emphasises aiming
at zero harmful emissions and the lowest possible environmental
footprint; aiming at 50% cost reductions for large-scale
drilling campaigns; investing in research and development, as
well as human resource capacity and establishing and building
the required technology in Europe; supporting large-scale field
developments with several hundreds of rigs operating in Europe
for many decades, and developing and building the required
The concluding comment is that,
The development of shale gas will only be successful in
Europe if the environmental and economic boundary conditions
can be fulfilled.
Clearly the potential for shale gas is there, with a will
for its successful adoption. But many hurdles still remain
before it becomes a reality.
*Vasili Nicoletopoulos owns Natural Resources GP, a consulting
and brokerage firm www.naturalresources.gr. Maria Kalaitzaki,
environmental engineer, contributed to this article.
Relevant Work by Natural Resources
Rare Earths and Shale Oil &
Gas: Technology, Environment and Politics, presented at
Sustainable Mining Development in Europe, International Fair
Plovdiv, Plovdiv, Bulgaria, September 24-25, 2012
Fracking for Shale Gas & Shale
Oil Worldwide, presented at 2nd Tunisia Oil & Gas Summit,
Hammamet, Tunisia, September 22, 2012
Hydraulic Fracturing, IENE,
September 26, 2012
Hydraulic Fracturing and the Growth of Shale Gas and Shale
Oil Internationally, comprehensive study by Natural Resources
GP, July 2012
Other impacts on the environment could be:
- Earthquakes induced by the hydraulic fracturing process or
waste water injection;
- Air and noise pollution;
- The mobilisation of
radioactive particles from the underground;
- Fugitive methane emissions
from hydraulic fracturing processes can have a large impact on
the greenhouse gas balance; and
- The chemically laden water affecting livestock, with
deaths occurring in major US fracking areas such as Louisiana
and Pennsylvania as a direct result of hydraulic