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Is Shale Gas Excitement in Eastern Europe Unwarranted?

By Global Risk Insights | Wed, 28 August 2013 21:51 | 2

Hydraulic fracturing, or fracking, as it is commonly known, is the method of extracting natural gas from shale rock. Despite environmental concerns over the process of pumping water and chemicals deep into the earth to force out gas which is otherwise trapped, some say that a European shale revolution is on its way.

Countries such as France and Denmark have banned fracking, and others have enforced a moratorium to prevent the process from happening in the short term. However, the tide of negative public opinion begins to ebb further East. The Ukraine and Poland have led the way in Europe for the controversial method of gas extraction, with millions being poured into these countries in the hope of a new boom.

Joining Argentina, Algeria, China and Canada in the list of the world’s largest producers of shale gas is the United States, which recently had its own fracking revolution. Oil giants such as Chevron have invested heavily into states such as Pennsylvania, West Virginia, Ohio and Michigan which so far has proved to be very successful. A net daily average of approximately 138 million cubic feet of gas was produced in 2012. With the recent success of fracking in the US, oil giants are looking towards a new territory to tap into: Eastern Europe.

Related article: Has the Shale Bubble Already Burst?

However, being more densely populated and environmentally conscious than other shale gas-producing states, European countries are historically far more reluctant to approve the controversial method. There is a significant level of opposition from environmental organisations and the public, with the recent lift of the moratorium against fracking in Romania resulting in public demonstrations.

Despite having within its borders one of the largest areas of shale gas in Europe, fracking has been banned in France since the presidency of Nicolas Sarkozy. Current French president Francois Hollande has also pledged to uphold this ban for his entire five-year term.

However, Eastern European states have encountered less opposition than Western counterparts; Bulgaria, Romania and the Czech Republic are warming to the process, which comes with the promise of a new pool of employment and state income. Perhaps the most tantalizing prospect of all is being rid of Russian energy dependence.

KPMG estimates that approximately 69% of gas consumed in Central and Eastern Europe comes from Russia and with it comes continued power and influence of the former Soviet ruler. Since the end of Soviet rule, Russia has maintained its dominance over the Eastern bloc, both economically and politically. Former Soviet countries have struggled to remove themselves from under Russia’s formidable shadow, however, without energy independence this is simply not possible. Achieving this is probably more important than the environmental impact of fracking.

Related article: Iran-Pakistan Natural Gas Pipeline to Extend to China?

Still, investors who expect a similar success in Eastern Europe as in the US may very well be disappointed. Firstly, the magnitude of investment required makes fracking in some places, such as Romania, simply not financially viable (exploration and drilling costs are estimated as being three times more expensive in Eastern Europe than in the US).

Secondly, and more importantly, exploration may not even work. So far missions in Poland have been unsuccessful, with ExxonMobil pulling out of the country earlier this year after the sinking of preliminary test wells. Talisman and Marathon Oil followed in their footsteps and ended their own investigatory work in Poland. Even if fracking in Eastern European countries is successful, there are still many years before any return comes to fruition. According to Sally Jones of Chevron, there are still “10-15 years before full commercialization.” The excitement over a shale gas boom in Eastern Europe is not only premature, but perhaps altogether unwarranted.

By. Elizabeth Matsangou

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  • Dseg on August 29 2013 said:
    It was, it is, and it will always will be about the money. Follow the money and you will find the truth. If shale gas is proved to be commercial in Europe, our friends in Russsia will lose about 2/3 of thier total revenue. They supply about 80% of Europe's nataural gas at a very inflated avg price of about $14.00 per MMBTU.(gas is $3.50 per MMBTU in US) The Russians have been getting fat and happy off the Europeans for years. If the Euros can supply their own fuel it will equate to a total collapse of Russia's financal system and government. Ask yourself, if your country was looking at a complete financal collapse because of a new technology, would you not start and fund a massive worldwide propaganda campaign about shale fracing and ground water contamination to really frighten the public and the farmers. The greenies are taking millions of rubles to fight fracing in the U.S. because they need the technology advancement to stop before it can become economical in Europe. Who knows they may even fund an anti fracking movie or even a left leaning jounalist to write a anti fracing article or two. People kill each other for a dollar. What would the Kremlin do to protect trillions of dollars in future revenues from Europe. Looks like the French public has bought into the Kremlin propaganda without one iota of scientific evidence. The average Frenchman will now pay 5 times what he should to heat his home but will think he is protecting the environment and be happy. The Kremlin guy will take that mans money and pour a glass of Vodka at his million dollar villa and laugh about how stupid the French politicians are, but everyone will be happy and that makes the whole plan brilliant to the core.
  • Michael on September 04 2013 said:
    Right-on Dseg, and isn't it all clear as day? But billions are being spent from the Russian side to force the issue, in a consistent coordinated way, via every possible media channel, funding all kinds of opposition groups (which is nothing new btw, the SU underwrote the Euro Left, including mainstream Left, on a massive scale. Indeed, at some point, in 1992 or 93, Yeltsin was reportedly ready to make those KGB files public), and outright bribing of politicians, threats, blackmail you name it. Has been their modus operandi since always. Mind you you may not have to spend much in the US right now as the current administration works for the same cause, and has some funds of their own to spend, but Europe is a different matter. To think that there may exist a sizable spontaneous opposition to fracking in a country like Poland that has been raped by Russia through their whole history? Or the dirt-poor Romania and Bulgaria? Or the Baltics? It's going to be an uphill battle indeeRight-on Dseg, and isn't it all clear as day? But billions are being spent from the Russian side to force the issue, in a consistent coordinated way, via every possible media channel, funding all kinds of opposition groups (which is nothing new btw, the SU underwrote the Euro Left, including mainstream Left, on a massive scale. Indeed, at some point, in 1992 or 93, Yeltsin was reportedly ready to make those KGB files public), and outright bribing of politicians, threats, blackmail you name it. Has been their modus operandi since always. Mind you you may not have to spend much in the US right now as the current administration works for the same cause, and has some funds of their own to spend, but Europe is a different matter. To think that there may exist a sizable spontaneous opposition to fracking in a country like Poland that has been raped by Russia through their whole hisd, for Europe to set itself free - with so many people and groups eating out of the Russian trough.

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