Bridging the Gap: Energy Security or Fiery Faucets
North American shale gas experience and Europe: How to get it right?
The so-called North American shale gas revolution is used either to completely undermine the growth of this industry in Europe or to enthusiastically hail its benefits.
The former group of arguments relies on the now-legendary pictures of fiery faucets and Moon-like sceneries, taken across the United States, and is no doubt appreciated by those who see the surge of natural gas production from new deposits as a threat to their own businesses.
The latter group points to the remarkable impact that shale gas has had on the North American natural gas market, putting and end to imports and prompting the suppliers to seek customers in energy-thirsty corners of the globe. A similar scenario in an import-reliant Europe would be a truly Copernican moment.
The guilt for this confusing duality lies with shale gas enthusiasts and detractors alike, since they both often forget that there are limits to the applicability of the North American lessons to European circumstances.
Arguably chief among them is the environmental footprint. Here, a static picture of the shale gas industry has set in. Well, Europe is unlikely to become a scene for a sequel of 'GasLand', for at least two reasons. First, some of the most debatable technical solutions will be banned in Europe. One example is storage of the so-called flow-back water in open ponds, which was a cause of documented surface or ground water contamination cases. It has already prompted New York to plan on introducing a requirement that the flow-back water be kept in sealed tanks.
Similarly, certain European countries prohibit deep-well injections of the flow-back water, which is a usual way of dealing with it in Western Canada. Instead, the operators will have to treat it from heavy metals and reuse it - a technique perfected and mastered in the Southern US, the cradle of the shale gas revolution.
Second, the shale gas industry has advanced technologically, simply because it had no better choice. Shale gas took off amidst a sharp drop in natural gas prices and an increase in North American LNG imports capacity. In order to stay afloat, operators had to find ways to increase the production ratio, ie to drill more for less. Licensing conditions mandated uninterrupted activities, making it impossible for the industry to weather the storm of the economic slowdown by laying low.
The industry deployed multi-well drilling pads and more economical fracking techniques, especially in terms of amounts of water and sand needed. The stress on the ground water reservoirs was further reduced by tapping into higher salinity water. Thus while it slashed the cost-per-frack, the industry also narrowed its overall footprint. For anyone in Europe concerned about the higher density of population when compared with the US or Canada, or worried about water scarcity, this should be welcome news.
Shale gas advocates, for their part, tend to overplay the dynamics of the industry, which are certain to be different here than in North America. In Europe, gas from shale deposits will not have an equally transformative effect on the overall security of supply of natural gas, not least because a single European market of this resource is still in the making.
True, the rules of the game are changing. European countries are adding new infrastructure, mainly interconnectors, and the EU is inching forward with the so-called third energy package, which specifically targets the gas markets. For the time being, however, nothing comparable in size and level of integration to the North American natural gas market is going to emerge in Europe.
In Europe, the economic and political benefits of shale gas are most likely going to be felt on the national or sub-regional level, by countries with high natural gas imports dependency. Even there, however, rapid shale gas revolutions are not in the cards. If shale gas is to fulfill its potential as a game changer, the to-do list is quite extensive.
And still, when it comes to shale gas, whatever is happening in the US and Canada is in fact worth following closely. Just look into the experience of New York and Pennsylvania, or go North of the border, to New Brunswick, to learn how to handle the concerns about the safety of water resources, or how to increase oversight and regulation over the industry without choking it.
In the end, what does it all mean to the European shale gas debate? To on-lookers, either passive or concerned, it should be clear that the lessons flowing from the US and Canadian experience will be neither as ominous as the sceptics prophesice, nor as positive as the optimists advertise. As for active participants, no matter where they stand on shale gas, they should cease to abuse the magnifying glass in spelling out their arguments. Instead, the North American lessons need to be taken in their entirety, free from ideological zeal and mutual accusations about hidden agendas.
Bartosz Wisniewski is research fellow at the Polish Institute of International Affairs (PISM) in Warsaw and co-author of the report 'Path to prosperity or road to ruin? Shale gas under political scrutiny', Read: "Path to prosperity or road to ruin? Shale gas under political scrutiny" HERE