Topic of the month September 2011

In search of cheap, reliable and climate-friendly energy more and more governments and energy companies worldwide focus on so-called unconventional gas. Until recently, producing this kind of natural gas was considered unprofitable, but technological progress and constantly high energy prices have changed things. New extraction technologies could provide for more than an extra 400 trillion cubic meters (tcm) of natural gas worldwide, according to the International Energy Agency. If estimates turn out correct, proven gas reserves would double and last for at least another 250 years, measured against today's consumption. Most of the now available gas deposits are trapped thousands of feet underground in bubbles between layers of shale rock. Based on geological features I.E.A. experts expect large quantities of shale gas to exist across all continents, in Europe among others in Poland, France, Great Britain and Germany. The biggest unconventional gas fields are said to be in China and the U.S.

Picture 1: Shale gas is located thousands of feet underground (Source: U.S. Energy Information Administration)

In North America shale gas extraction is already up and running. In the last eight years production of unconventional gas has doubled in the U.S., says the I.E.A. Once the biggest gas importing country the U.S. have now caught up with Russia as the world's leading gas producer and become less independent. And still the U.S. shale gas industry is attracting record investments. In 2010, Chevron paid more than $4 billion for the shale gas producer Atlas Energy. In the most spectacular takeover until today Exxon Mobil paid $41 billion for XTO Energy, another leading shale gas producer. Now also the world's leading mining company, Australian BHP Billiton, is entering the U.S. shale gas business with investments of $17 billion only in the first half of 2011.

The US government not only seeks to improve energy security but also to reduce greenhouse gas emissions. Natural gas is said to be the „cleanest fossil" fuel since significantly less carbon dioxide is emitted when burnt than with oil or coal. According to the IEA's World Energy Outlook 2011 „unconventional gas may hold the key to expanding the long-term role of gas in the global energy mix. “ Also in Canada, the third biggest gas producing country in the world, shale gas production is on the rise. China, India, Indonesia and Australia are about following suit and exploiting domestic deposits.

In Europe test drilling is underway in Spain, the United Kingdom, Germany and Poland, among others. However, many do not share the gold rush mood that has infected energy companies and politicians on the other side of the Atlantic. In many places, test drilling activities are being met with fierce resistance from the local population. The problem is the method used for producing the shale gas, the so-called “fracking” or “hydrofracking” which involves injecting huge amounts of water, sand and chemicals at high pressures to break up rock formations and release the gas. The resulting wastewater is often heavily contaminated by chemicals, salts and radioactive elements occurring naturally deep underground. As the New York Times wrote in February 2011, in several U.S. states health problems and cases of air and water pollution presumably linked to fracking have been reported. The U.S. Environmental Protection Agency announced in July 2011 that it will launch an investigation of the incidents. Meanwhile, the State of New York and Maryland have both imposed a moratorium on drilling activities. Likewise in Canada there is growing resistance from non-governmental organizations. The public authorities in Quebec have imposed a moratorium until an expert group has prepared a report on the environmental effects of fracking.

Picture 2: Shale gas drilling tower in Pennsylvania, USA (Source: Ruhrfisch)

Among others, the results of this and several other surveys currently underway will decide over the future of shale gas in Europe. Right now it seems like the gas rush here could be over before having even started. Following public protests in May 2011 France was the first country to issue a law forbidding drilling using the fracking method. In Germany local population movements and an increasing number of politicians are skeptical about shale gas exploration. However, some governments are not to give up their dream gas independence so quickly. In the United Kingdom, the first active shale gas producing company has suspended drilling after it had supposedly caused two minor earth quakes in spring this year. In a report the British government concluded however, that with regard to the benefits in energy security the as yet “hypothetical and unproven risk” did not justify a moratorium. Rather than following the example of France London is looking to the East. In Poland where some of the biggest European shale gas deposits are said to be enthusiasm over the unexpected gas wealth so far seems to outweigh all environmental concerns.

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