Europe’s Unconventional Gas Revolution?

  • Date: 22/06/10

The stunning development of ‘unconventional gas’ in the United States, has led that country to replace Russia as the world’s largest gas producer last year. Can this happen in Europe as well? Theoretically, yes: the reserves are there. For the moment, however, there are factors that are putting a brake on the development of unconventional gas in Europe: the relatively high population density, a lack of know-how and an experienced service industry, possibly higher exploration and production costs and uncertainties in the regulatory and policy environment. As a result, experts expect only a marginal growth of unconventional gas in Europe in the coming decade. However, after 2020, Europe may come to experience its own unconventional gas revolution.

Many of the heavyweights in the unconventional gas industry were gathered in Amsterdam last week to discuss the future of unconventional gas in Europe. Even Todd Mitchell, son of the American godfather of the shale gas industry George Mitchell, was there with his children to convince the hesitant Europeans of the blessings of the technology which made his father a billionaire.

George Mitchell, who was awarded a Lifetime Achievement Award from the Gas Technology Institute for his achievements recently, was one of the pioneers of the shale gas revolution in the US. Mitchell and others spent many years improving horizontal drilling and hydraulic fracturing technologies which made it possible to produce large amounts of unconventional gas (in particular shale gas) at competitive costs. (See this website for more information on hydraulic fracturing and this link for video demonstrations of these techniques.) The results have been spectacular. The US last year overtook Russia as the largest gas producer in the world. It boasts gas reserves now that will last another 100 years at current production levels and make gas imports unnecessary.

Fully 46% of gas production in the US was from unconventional sources last year – roughly half shale gas and half coalbed methane. It is expected that shale gas alone will be good for 45% of US gas production in 2025.

The American gas revolution not only turned the US market upside down, but had a huge impact on the global gas trade as well. In combination with the economic crisis it led to a gas glut in Europe, which resulted in sharply lower spot market prices. The International Energy Agency (IEA) expects that the oversupply of gas will last till at least 2015.  A few years ago no one would have believed this to be possible.

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