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Barriers to shale gas development in Europe:
Universidade de Sâo Paulo - Instituto de Energia e Ambiente
PEN 5028 - Regulaçâo e Politica do Petróleo e Gás Natural
Professor: Hirdan Katarina De Medeiros Costa
Student: Pol Oliva Martí - [email protected]
Exchange student - IFP-School “Petroleum Economics and Management”
Introduction and objective:
To assess and analyze the reasons why European Union countries are generally reluctant to promote
shale gas
Objective
Background
Shale gas revolutionized the US energy sector & economy
International competition to host the next shale gas revolution
European economy still not recovering
Some EU members banning or placing moratoriums on shale
Europe heavily dependent on expensive Russian gas
Qualitative Methodology (I): Sections
Inclusive approach: Identify & classify the barriers which are generally relevant for most of EU
countries
Section 1
Country-specific: Focus on relevant countries and provide an overview of the scenario and the main
barriers
Section 2
UK PolandFranceSpainE.U.
Discussion & Results: Section 1 (1/2)
Politics
Higher relevance of green parties in Europe ·Fear of reducing electoral support ·Reluctance to harm political relationships with Russia·
Economycs
2014 did not provide the EU economical recovery·Financial difficulties of independent companies (25M$/well) ·
Social - Envirom
ental
Higher population density and environmentally concerned·Potential groundwater contamination, flowback water disposal, high water consumption
·Potential cause of tremblers and earthquakes·Sand consumption and silica pollution·
Discussion & Results: Section 1 (2/2)
Tech -geology
Reserves located deeper and harder to extract·Reserves uncertainty and Low fracking experience and ·Transport infrastructure availability at extracting site·
Regulation
Missing EU-wide regulation on shale gas activities··
Market & Competit
ion
Doubts on commercial feasibility considering current oil prices (Brent <66$) and reduction of LNG prices.
·Lack of well-developed O&G onshore service industry·
Lack of incentives and specific regulations (uncertainty)
·
Some countries set bans or moratoriums.
· The state and not the land-owner holds the mineral rights
Section 2 (1/5): EU regulation on shale gas
European Union
Absence of a EU-wide common legal framework
Regulartion on Hydraulic Frackturing
Proposal to require Environmental Impact Assessment (2013)·Some countries leaded by UK opposed to the amendment and succeeded on halting it.·EC Recommendation on minimum principles for exploration of hydrocarbons using high-volume hydraulic fracturing
·Non-binding suggestions on how to regulate shale gas; EIA, risk management, restricted areas, flow-back fluid disposal
·
Section 2 (2/5): SPAIN
Technoogical - GeologicalLow reserves: EIA estimation on technically recoverable
reserves: Oil: 100 million barrels · Gas: 8 tcf·
Social - EnvironmentalStrong social opposition strengthened by past unsuccessful energy policies: Prestige (2002), Castor (2014)
Regulation
4 regional governments tried to ban hydraulic fracturing·Non-existence of fiscal incentives but open framework·Political risk: Uncertainty upcoming elections 2015·
Section 2 (3/4): UK
Technoogical - Geological
Uncertainty on technically recoverable reserves levels:EIA: 700 million barrels and 26 tcf· BGS: 1300 tcf only at Bowland·
Strong social oppositionSocial - Environmental
After placing and retrieving a moratorium on shale, there is now a clear governmental support to shale gas development
·Implementation of important tax breaks for shale gas activities·Community incentives to overcome local opposition: 1% production revenues and initial contribution 100.000 GBP
·
Regulation
Section 2 (3/4):France
2011: Hydraulic fracturing ban and revoked exploratory licences previously granted2013: Constitutional Court reaffirmed the ban·
Social - Environmental Strong social opposition
Regulation·
President Holland promised to maintain the ban during his mandate (elections 2015)·
Technoogical - Geological
Uncertainty on technically recoverable reserves levels.EIA: 4700 million barrels and 137 tcf··
Section 2 (3/4): Poland
Technoogical - Geological
Intense decrease of the reserve estimates:
Exxon Mobil, Talisman Energy & Marathon Oil returned exp. licenses
·
·
2011 EIA: 187 tcf (300 times national consumption)2012 PGI: 12-27 tcf (-90%)
·Not a single well reached commercial production yet
RegulationCurrent framework: high-tax regime, high governmental control, regulation uncertainty & excessive bureaucracy
·2015 framework: lower tax regime, no need to enter JV state-owned company, single license exploratory-exploitation license·
Conclusions
Importance of the UK case: its outcome will strongly influence the future social and political position on shale
·
Difficulties for shale implementation: Important barriers challenge even shale contributing significantly to EU national production:
·
Country-specific outlook:
Spain: “Market follower” UK: Best shale development prospects in EUFrance: Hydraulic fracturing ban set to last Poland: Pessimistic even with new regulatory framework
Thank you for your attention!
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