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SHALE GAS
01 June 2015 | by Megan Roden

Moving Toward a Viable European Shale Industry

Moving Toward a Viable European Shale Industry
Few subjects have generated as many debates as those of the shale oil and gas industry. Originally associated with the US industry, such debates have shifted toward Europe and in particular the UK shale industries. With European shale at a crucial stage of development addressing such debates is of pivotal importance to the establishment of a viable European shale industry.

Philippe Charlez, Unconventional Expert for a leading IOC, has provided his interpretation of the status of the European shale industry, noting that ‘developing unconventional resources in Europe requires overcoming three major barriers: Geological, Economic and Environmental’. In the geological arena, Charlez has emphasised the importance of remembering that ‘current resources published by the Energy Information Agency are purely notional. The only way to answer this question is to launch exploration campaigns’. Exploration efforts to date have remained sparse across Europe, particularly within the UK which has only eleven new exploration wells planned for 2015. The viability of the European industry cannot be judged until further exploration efforts are undertaken to shed greater light on the viability of European source rocks and the approach that should be taken in comparison to their American counterparts. Such efforts would also enable greater technological advances to take place in order to balance the economics of the shale industry and establish a competitive European shale market which has the capacity to drill and fracture wells at acceptable costs.

Charlez has also commented upon the environmental barriers to shale development across Europe, noting the broad range of societal and cultural issues that are also encompassed within this field. Charlez has noted that ‘in Europe, hydraulic fracturing, water supply, microseisms and surface impact are seen as a series of threats. It requires pedagogy, transparency, appropriate communication campaigns and commitment regarding local communities, with a review of certain regulations. The game must be win/win’. Shifting the public perception of shale undoubtedly stands as one of the most persistent obstacles to establishing a viable industry. The allegory planted in the collective imagination at present is the idea that hydraulic fracturing is an environmental threat creating major earthquakes, requiring huge amounts of water, and polluting all the water-bearing layers of the planet. Defeating this negative perception of shale is key to the success of the European industry.

However the industry is already taking a step in the right direction, with efforts in stakeholder engagement becoming far more comprehensive, particularly within the UK. Charlez has noted the importance of such efforts to dispelling the many myths that surround the shale industry, emphasising that ‘changing the negative perception of the shale industry requires an increased availability of open, transparent but rigorous information for the public’. Philippe Charlez’s recent publication, ‘The Shale Oil & Gas Debate’, produced in collaboration with Pascal Baylocq attempts to provide such information for the public. ‘The Shale Oil & Gas Debate’ covers in 20 key questions the geopolitical, economic, technical, environmental and societal aspects of shale oil and gas development with the hope of displacing the many industry myths which are currently so prevalent.

Recent years have placed a number of different countries at the forefront of the European shale industry. On the subject of which country holds the greatest potential for developing a successful European unconventional industry at present, Philippe Charlez has noted that ‘Poland, the UK and Denmark are evidently the most proactive as governments have agreed at least to explore the play to estimate if resources can be economically developed or not’. However Charlez was eager to re-emphasise the importance of public opinion to the success of the industry, commenting that ‘we can see in Denmark and the UK a strong opposition very often coming from small but quite well organised pressure groups’. Addressing community concerns over the shale industry remain paramount if the industry is to achieve viability comparable to that of its US counterparts. However with the results of the UK 14th Onshore Licensing Round due for release this summer, the UK is certainly a key area to watch for shale development.

In recent months the collapse of the barrel and the low price of gas have caused heightened concerns over the viability of the shale industry in the US and the possible implications for the industry as a whole. However Charlez has dispelled such concerns, noting that ‘following the collapse of the barrel 4Q 2014, the drilling activities have been strongly reduced in the US over the last six months (from 1500 drilling rigs for shale oil in October 2014 to less than 900 in March 2015). However in spite of this strong reduction in investment the US shale oil and gas production is still growing…Despite the swift individual decline, this well portfolio plays a “shock absorber” role that helps limit the global decline without having to drill and fracture at a sustained rate. Also to be mentioned is the huge progress in well completion technology over the last years. A 2015 well produces sometimes 2 times more reserves than a well drilled in 2008. So less wells allow to maintain or even slowly increase the production’.

The above debates, and the road toward a viable European shale industry as a whole, will be discussed further at the European Shale Gas & Oil Summit. The Summit, taking place 15th-16th October will bring together industry leaders from across the UK and Europe to address the fundamental conditions needed to progress this nascent industry.

By Megan.Roden@charlesmaxwell.co.uk

November 2015

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