When Environment Eclipses Economics
Introducing a high level panel discussion entitled Environment, Economic and Energy Needs at the Unconventional Gas & Oil Summit in Warsaw, Poland, Christian Hierholzer, Managing Director, hanover Brussels, noted that debate over the development of unconventional gas in Europe had largely developed around the environmental concerns, about the risks of the exploration techniques rather than the economic benefits and the opportunities that new sources of energy might open up.
Was there the opportunity to balance these, reconciling different needs?
Stephan Singer, Director, Global Energy Policy, Global Climate and Energy Initiative at WWF International stepped up to the plate, saying he actually believed there was a move away from environmental issues into the economic issues.
“On the issue of concerns over shale gas exploitation, because of the ‘covert’ practice in the US. We’ve seen devastating practices in the US, in the absence of any legislation or regulation,” he said bluntly. “People are afraid this is happening in Europe as well.
“In principle, I would agree Europe we have about 10-15 regulation regimes in the pipeline – the REACH regulation, Natura 2000 etc. – which could become the best practice in minimizing and abolishing all these ‘cowboy practices,’ spillover we’ve seen in the US. Our main concern is that in the absence of any strong cap in Europe, of even 30% greenhouse gas emissions target for 2020, we are concerned that basically ‘everything goes,’ and that shale gas will not contribute to replacing coal, but will come on top of coal,” said Mr. Singer. “In that respect, we are opposed to the development of further conventional/unconventional fields.”
If there were a cap, he said, WWF would be happy to discuss shale gas development.
Ten years ago, no one had predicted there would be shale gas, noted Will Pearson, Analyst, Global Energy & Natural Resources, Eurasia Group.
“It was under regulated,” he recalled. “It’s a process of reacting. The E&P sector has always been highly fragmented. Smaller companies are cash flow dependent and need to produce at any price and take whatever revenue they can get. Any scenario like that can add to corners that are being cut.
“In Europe we’ve seen a deliberate debate,” he continued. “The state level can get ahead of the debate, like in France. Companies involved so far are large multinationals trying to do this in many countries, and they want to follow best practices. Environmental regulations are forthcoming, and E&Ps are being regulated in advance before they gain their foothold in the market.”
The industry must recognize that a tension exists, and be able to turn it into positive tension, said Jeff Sundquist, Managing Director, Alberta – UK Office, High Commission of Canada, who recalled that Alberta had calculated the balance between investment and transparency/communication. He said, “The Energy Resources Conservation Board (ERCB) in Alberta has a long history of robust regulation when it comes to natural resources. We are highly committed to reducing the carbon intensity of our economy. Canada has about 75% of its grid coming from non hydrocarbon sources; we’re focusing on renewables.
“Alberta is the first jurisdiction to enact a carbon price,” noted Mr. Sundquist. “We hoped other jurisdictions would follow suite to move that carbon price up to influence behavior.”
He added that carbon tax revenues were being reinvested into renewables.
“The government works with all stakeholder groups,” he said, “to have good, balanced dialogue when it comes to energy production.”
Tim Bertels, Manager Global Carbon Capture Storage (CCS) Platform, Shell Upstream International, said: “We have a huge challenge to keep up supply; we have to do that in a cost effective and sustainable manner. We’ll have to develop renewables as quickly as we can, but it is quite clear that fossil fuels will remain the mix for several decades to some. So then you have to think about how you are going to de carbonize those fossil fuels. There are several ways you can do that: energy efficiency, Biofuels, more natural gas is what Shell’s working on now, and last but not least, CCS. It is basically the only technology that is available to de carbonize fossil fuels on a large scale.”
Regarding the replacement of coal by gas, he said CCS could be applied to the “low hanging fruit.” He said that natural gas also needed to be de carbonized even further.
In addressing the “not in my backyard” (nimby) question, Stephan Singer noted that sentiment against windmills was an English disease, while in Germany, people decided what fit best. “They decided on renewables as an industrial policy – that’s why investments in them are growing,” he remarked, explaining that locals had been participating in local renewable energy plans, a kind of “co ownership.”
“There needs to be a discussion on what the choices will be,” said Tim Bertels. “There needs to be full transparency in what’s happening in fracking. There’s no room for failure.”
“Whomever will be first to produce it, the must do it right at first so it can spread in Europe,” said Thierry Bros, Senior Analyst, European Gas and LNG Markets, Societe Generale, of unconventional gas.
“Energy growth is linked to GDP. If done safely and for the good of the people, it can spread,” he said. “It’s also one way to have taxes. In Texas, universities were financed by the proceeds.”