For decades, the North Sea has been Europe’s gas reservoir, providing a welcome alternative to Russian gas. Now North Sea gas is running out, but an alternative gas future beckons which is not under the water, but deep under the ground – shale gas. As we know, the discovery and exploitation of shale gas in North America has revolutionized the global gas market. Just a few short years ago, doomsayers were predicting that the gas was going to run out, exacerbated by the exponential growth of emerging economies like China and India.
Then, as often transpires, when a seemingly intractable predicament beckons, technology and leadership combined come to the rescue. In the US, a new technology known as hydraulic fracturing – or ‘fracking’ – made the exploitation of exploiting shale gas possible. Combined with a then-high gas price, shale gas became both economically and technically feasible.
A decade ago, the US was urgently building new terminals for the imports of liquefied natural gas (LNG) that was predicted would be needed as its own conventional gas and imports from Canada and Mexico failed to keep pace with demand. Shale gas changed all that. Now those LNG terminals may end up being used to export, not import, gas from North America.
However, shale gas is not just to found beneath the Appalachians. London based international gas consultant Nick Grealy sees shale gas as the interim low carbon energy solution for Europe, a solution which may render carbon capture and storage for coal generation emissions redundant. ‘The US has shown that unconventional gas is an energy solution,’ says Grealy. ‘It can be a solution for Europe as well’. However, he suggests that powerful forces will try and act against it.
‘We have seen opponents in North America talking about contamination of the water table by shale gas extraction,’ he says. ‘The same voices can now be heard in Europe. Gazprom, US environmental groups, the nuclear power lobby carbon capture, and storage promoters are all saying that shale gas “isn’t green”. “This despite the fact that there is no evidence that shale gas operations contaminate the water table; that is typically 200-300m down, and the gas is found at 2,000m, and the fact that converting from electricity generation from coal to generation from locally sourced shale gas represents a 60-70 per cent reduction in CO2. When shale gas is used for local combined hear and power (CHP) generation, that figure is closer to 80 per cent, helped by the lack of transmission losses.”
Some confuse shale gas with shale oil, but the technology is completely different. Shale gas production is far less intrusive than people might think. Horizontal drilling means that one big rig can drill a well that may cover several square miles from one above ground location. A well head would take up to five acres in the drilling stage, but after a few months, the gas gathering equipment takes up the space of a small truck In comparison, suggests Grealy, carbon capture, and storage with its unproven technology on a commercial scale and uncertain economics, is not a contender. “CCS is betting on future technology, and I think it’s a dead end.”
He also says that an additional ‘green’ credential for shale gas is the fact that it can support intermittent renewables such as wind. “Wind power’s critics cite the fact that it only works for 30 per cent of the time and so needs backup,” he says. “Gas is the obvious backup, but the question in Europe is, then, whether Europe can rely on imported gas from Russia. Indigenous shale gas answers that.”
So, where is Europe’s shale gas? Some observers believe it is potentially everywhere, but Grealy says there is definitely evidence of an arc stretching from Poland across the Baltic Sea and then across to Britain. “US majors are working in Poland right now,” he says. “ExxonMobil, Chevron, Conoco Philips and Marathon all believe that Poland is potentially a new Klondike.” Also, this is no pie-in-the-sky project – Poland could be exporting gas – it already has the infrastructure because of importation from Russia via Ukraine – within four years.
Exxon Mobil is also drilling in Northern Germany, and work is also taking place beneath the depleted conventional Groningen field in the Netherlands.
In North West England, just a few miles inland from the conventional Morecombe Bay offshore gas field, discreet test drilling for shale gas is taking place near the Forest of Bowland in Lancashire. Of course, Europe is already reaping the benefit of North America’s shale gas windfall with the easing of the LNG market – as the US needs to import less LNG a global gas glut beckons. Grealy says that in this context, shale gas from Poland “is just Europe’s cream.” Others, however, think that an emerging European shale gas bonanza could damage LNG for good. Edwin Bowles, Director at RJ Energy, says that “the LNG dream died four years ago.”
He calls the shale gas revolution ‘rock music’ which has caused the global LNG market to collapse. “Although LNG will retain a role,” he says, “in the future, for Europe, pipeline gas will be more important.” Ironically, Poland is currently planning an LNG terminal on its Baltic coast. Who knows, perhaps, like terminals on the US East Coast, that could yet be converted for export rather than import purposes.
Meanwhile, just recently, there were warnings from UK energy regulator, OFGEM, that Europe was a few years away from the lights going out as old coal power stations were retired, that nuclear power stations had reached the end of their life and that the gas had started to run out. However, people are thinking differently now. BP CEO Tony Hayward says that the issue for Europe’s gas today isn’t supply: it’s demand. He calls UK energy policy ‘paranoid’ in terms of perceived security of supply problems.
Hayward firmly believes that Europe’s power generation future lies with natural gas. He told the company’s AGM in London in April that “It makes sense to promote gas for power generation as it is the lowest cost energy pathway. Gas is also easily the cleanest, lowest carbon fossil fuel, and the most versatile.”
Thus, with ambitious carbon reduction, energy efficiency and renewable energy targets set in stone for 2020, what might Europe’s energy mix look like a decade from now? For the past few years, a low carbon vision of serried ranks of offshore wind turbines has come to sum up the aspirations of the proponents of ‘green’ energy, and wind energy will certainly play a role. But while it can be backed up by wave power and carbon capture coal generation, both of these are unproven technologies on a large scale.
New nuclear is certainly an option – France has been reliant on nuclear power for decades and is now starting to build new, third generation EPR nuclear power stations.
However, France apart, few European countries are contemplating anything but nuclear as a base load element of generation. With coal considered the ‘bad guy’ in European clean energy terms, unless CCS can rescue it, that means another potential ‘dash for gas’. Russia’s seemingly perennial dispute with its neighbour Ukraine over gas supplies means that that the key transit country for getting Russian gas to Europe is always a potential concern, and elaborate alternative pipeline routes to get gas from the Caspian east to Europe present their own challenges.
Shale gas on Europe’s doorstep might, therefore, represent an energy solution that while not zero carbon, is at least a lower carbon power generation fuel to conventional gas and coal. It also ticks the security of supply box if it is going to be sourced from Poland, Germany, the Netherlands or Northern England.
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