Shale Gas and the balance of power in Europe

Shale Gas and the balance of power in Europe
By Professor Ian Fells
A new player in the energy supply field has emerged in the US, which could have
profound effects in Europe. It is shale gas; that is, natural gas which is tightly
bound in shale, the most prolific sedimentary rock world wide. The shale acts as
both the source and reservoir for natural gas but this has, in the past, been
thought to be inaccessible. However, with the advent of horizontal drilling and
hydraulic fracturing under high pressure to crack and separate the layers,
production from the well can be so stimulated, that large quantities of gas can
now be extracted commercially. The effect in the US has been staggering.
Imports of Liquid Natural Gas(LNG) in refrigerated tankers, with the gas held at
minus 162 degrees Celcius, from Qatar and from Sakhalin Island in Russia have
virtually ceased. The eight LNG terminals built to receive imported LNG, have
been mothballed and may well finish up being used for exporting LNG to China
and the Far East. The US could now be self-sufficient in natural gas for the next
90 years according to the US Department of Energy.
This development has had the effect of, for example, diverting LNG tankers
delivering gas from Trinidad to the US, to Europe. Gas from both Russia and the
Middle East, otherwise destined for the US, is also looking to Europe as a
customer. Gas prices have fallen by 60 per cent.
On the global scene the newly developed extraction techniques could be applied
in Poland, Eastern France, various areas in the UK, possibly in China and other
areas with favourable geology. One, perhaps over optimistic, estimate points to a
trebling of world natural gas reserves.
There are two obvious effects of this bonanza, new sources of natural gas will
increase security of supply, making threats of interruption of gas supplies from
Russia or the Middle East into Europe, for political reasons, less of a risk. And if
gas is used to replace coal in power generation, particularly in coal-dependant
economies like China and India, carbon dioxide emissions will fall, making
emissions target reductions actually reachable, which they are currently not.
It would be wise to be cautious however, before speculating too wildly. There
have been many false dawns in the energy business. Only last year carbon
capture and storage (CCS) was seen as the saviour of climate change but the
cost, complexity and possible risks from the technology, have blunted
enthusiasm for it. Nevertheless the US experience of becoming self-sufficient in
natural gas and removing the need for imports has diverted supplies of natural
gas to other customers and caused the price to fall, so that the current spot
market price is only one sixth of that negotiated in long term supply contracts,
only a year ago, to the irritation of importers.
Shale gas could have a profound effect on the security and cost of future fuel
supplies world wide. International oil companies are scrambling to buy up “shale
land”. This development illustrates the need for new technologies to exploit world
fuel resources, the importance of investment in research and development and
the essential role of engineers and scientists.
Copyright Professor Ian Fells, emeritus professor of energy conversion,
Newcastle University, UK.
June 2010