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Politics & Economics Sideline Eastern European Shale Potential

While most aren’t eyeing the Eastern European shale potential with too much excitement, Chevron stands out for its decisive buy-up of acreage in this region. Chevron has acquired millions of acres in Poland, Romania, Ukraine, Lithuania and Bulgaria. So far discoveries haven’t been as good as hoped; some explorers have pulled up stakes and others may soon get rid of their assets here. There is a great deal of uncertainty surrounding the regulatory environment while protests continue unabated across the region.

Under the current conditions in Eastern Europe, it will be hard to turn a profit. When the US began exporting gas, it caused global prices to fall and made unconventional drilling less profitable overseas. A KPMG study hits this home, saying that shale extraction costs in Europe will be around 40% higher than in the US. Geologically speaking, Europe’s shale is generally trapped about 50% deeper than US shale and the temperatures are typically higher. These countries would also need very expensive gasification facilities and other infrastructure that is not in place and will add exponentially to the costs of production and getting product to market.

The regulatory framework for shale extraction in the US is favorable. Elsewhere, the fiscal terms aren’t nearly as attractive for unconventional development. These terms were made for conventional oil and gas and translating this into unconventional drilling means that the costs…

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