Unconventional Energy Poses Challenge to Gazprom’s European Dominance

Analysts say rising unconventional gas development may threaten Russia’s long-term market position and significantly impact Gazprom, Russia’s largest company.

Russia is the leader in traditional gas extraction, but Dmitry Lutyagin, Senior Analyst at Veles Capital warns demand could fall.  “Europe is looking at the U.S. which has started unconventional gas extraction. Earlier technologies to extract that gas were very expensive, but new developments in technology make it cheaper. By 2025 Europe wants to extract around 100 billion cubic meters of gas from shale deposits.”

Currently the United States gets half its gas production extracted from unconventional sources. Experts say that the move to harness unconventional sources in Europe, particularly in shale gas, could revolutionize the EU gas market and challenge Gazprom’s decades-long monopoly on European gas production.

Gazprom supplies about one-quarter of the European Union’s (EU’s) natural gas. Many European nations are critically dependent on Russian-supplied natural gas; 97 percent of Bulgaria's gas, 89 percent of Hungary's, 86 percent of Poland's, nearly three-quarters of the Czech Republic's, 36 percent of Germany's, 27 percent of Italy's, and 25 percent of France's gas comes from Gazprom’s Russian wells. As one would expect with so much risk to market share, the Russian energy giant's deputy chief executive, Alexander Medvedev, has been belittling the future of shale gas production.

Over the last several years, Russia has periodically cutoff gas shipments, a chilling reminder to European citizens of Russian influence over European life.  During January and February 2009, Russia shut off its natural gas pipeline deliveries to the Ukraine. Millions were left to their own devices to avoid freezing to death in the middle of a harsh winter.
At a Russian-EU summit meeting on May 21, 2009, the EU leaders asked for assurances Russia would not turn off the gas during the coming winter. Russian President Dmitry Medvedev refused to provide any such assurance.

Given this stance, unconventional energy holds the promise for many European nations to increase their energy independence from Russia.

Sources:
Leftcoast
RT.com
Lancaster Eagle Gazette