“Rising to the Occasion” in Europe

In a highly interactive session dedicated to facilitating innovation, technology transfer and collaborative R&D in the unconventional upstream oil and gas industry at the Unconventional Gas Forum in Barcelona, Spain three experts offered their insights.

John Roberts, Energy Security Specialist at Platts, said it was most important to put shale gas in some sort of context, including the flat demand for gas, lack of power stations, and people talking about demand being scarcely different than what it was a few years ago. Yet more gas was available.

He asked, “What is shale gas going to displace? If it’s in Poland, it will replace imports from Russia. But what’s it going to be in other places?”

In the UK, for example, he said it could be replacement of nuclear by shale gas.

Mr. Roberts opined, “A flat looking market does not mean that the energy market is not dynamic.”

Despite that, he continued, “Shale gas is going to have to make it in a depressed market. Shale gas has to not only come in as a good environmental alternative, but as the ‘cheapest kid on the block.’ Shale gas is going to have to have innovative social procedures. It’s going to have to sell itself to the public in a way the energy industry has never had to before.

“It’s a local development,” he explained. “Where the rig is located has tremendous local implications. We’ve heard quite a lot about earthquakes, and need to balance their lack of importance in geophysical terms rather than in the psychology.”

The great advantage, as he saw it, was the high level of job creation, locally. Much of the controversy about shale gas, according to Mr. Roberts, was about fear of the unknown, which necessitated a balancing of hope and fear.

Conference Chairman Richard Moorman, CEO of Tamboran Resources, piped in: “The oil & gas industry has never had to talk to the public like this before.” He recalled the controversy in Calgary over the drilling of sour gas wells near the city limits in the 1990s.

No Hot Air editor Nick Greely said: “The energy industry is wasting a lot of time trying to lower people’s fears when they should be trying to raise their hopes. Ninety percent of people in Europe have not heard of shale gas.

“People want to hear good news, as they’ve been sold fears for so long. At the local level, people have the right to know what’s going on and we can address those fears. There are many who do not want to be convinced and are a bit hypocritical in their environmental objections, a lot to do with ‘nimby’-ism and a lot with economics.”

Greely noted that earlier in the conference San Leon Energy’s John Buggenhagen had mentioned the ‘information chaos’ surrounding unconventional gas E&P. “It’s not positive or negative, it just bulks things down so that nothing happens. Many just wish shale gas would go away.”

 “Chaos,” he added,  “is what existed before the beginning of universe.”

Production of shale gas in Europe, and its prospects for success, demanded a longer timeline for Palladian Energy’s James Elston, who offered his opinion.

“I would try to avoid looking at the market for shale gas in the European sphere through the prism of the current depressed, over-contracted market,” he said. “It’s a matter of what it’s like in 5-10 years. It’s likely to be competing with shale gas to LNG out of the North American market.”

He added there was a need for innovation in stakeholder management in Europe. 

“Once the mad rush is over, and you’ve got your permits, you’ve got an additional battle after finding out whether the rock can sing. You’ve got to have leading edge stakeholder management. A number of players have tried really hard with local engagement. Right now there’s no chance for that in France but it will come.”

Mr. Elston said he was unconcerned with the success of shale gas from a technical point of view, but said it was good to have neighbors in a prospective shale play.

“It’s important not to be on your own, but have others in the play around you to successfully explore a play in Europe,” he explained. “If not, you can apply a limitless amount of money in the wrong direction. You need to be smart from day one, and the service companies can help you do that. Really from day one after the land grab is over, share your results. There just isn’t that capital to drill a number of ineffective wells.”

John Roberts noted that the language of the shale gas industry was filled with its own jargon – a potential obstacle.

He offered a parallel, commenting: “Somehow it has to be both simplified and kept accurate when talking to local communities. If you go to just about any home in Britain, you’ll find all kinds of high tech appliances that are taken for granted in the home.

“If high tech were in use in the home, why not high tech principles outside the home in the nearby community?” he asked. “Industry that has to develop a common language with local communities; it’s not easy but absolutely necessary.”

Next stop for the roundtable discussion was the funding of unconventional gas operations.

“In the US,” noted Richard Moorman, “unconventional was largely funded by small companies’ own money. The story in the US was not openly funded. Combined with other challenges in Europe – like if the first well doesn’t work – what are the financial strategies?”

James Elston recalled that a few years ago it was possible to acquire funding with “three men and a PowerPoint presentation,” but that a year or two later that wouldn’t work. He commented: “Either people have their hands firmly in their pockets, or everyone’s trying to give you money.

“Private equity can make tremendous returns from appraising, but they don’t like to put any money in exploration operations.”

He said it wasn’t a way to instantly start printing money.

“Smaller players in the US should come to Europe,” encouraged Nick Greely. “We should be open for business.”

John Roberts contended that in the area of regulation, Europe might hold great advantages for development of unconventionals. “There’s still a degree of trust on regulation on this side of the Atlantic.

“Where small companies may be better off than big ones is that the energy industry has a bad record of clean up,” he continued, listing the destruction caused by Soviet companies, or detritus from oil and gas in Alaska.

“Shale gas needs to show this,” he asserted of clean up operations. “You’re going to have to prove that you can rise to the occasion.”