The size of European unconventional commercial gas reserves rivals that of North America, according to a major new study by IHS Cambridge Energy Research Associates (IHS CERA).
Breaking with Convention: Prospects for European Unconventional Gas was published after last month’s unconventional gas conference in Aberdeen. It estimates Europe’s total unconventional gas in place could be 173trillion cu.m (6,115trillion cu.ft).
“The technological revolution in unconventional gas has been the single most important energy innovation so far this century,” said Daniel Yergin, IHS CERA chairman and author of the Pulitzer Prize-winning book, The Prize.
“Its tremendous potential has already transformed North America’s energy landscape and may transform the global gas industry.”
IHS CERA estimates production levels ranging from a minimum of 60billion cu.m – less than half of current shale gas production in North America – to 200billion by around 2025.
Among the key challenges that will determine the ultimate productivity in Europe is a regulatory environment that is currently ill-suited to unconventional gas, the report says.
“Regulations designed for traditional exploration and production have not been adapted to reflect the character of unconventional gas,” said Jonathan Parry, IHS CERA global gas director. “But there are significant challenges ahead, including uncertainties over length of tenure, permitting regimes and norms and water management, among others.”
The delivery price of unconventional gas is expected to be higher than the current prices of Europe’s present import sources. However, IHS CERA’s oil price assumptions place the cost of unconventional gas on a par with the long term average price of contract gas, given the expectation that long-term contracts incorporating some linkage to the price of oil will remain the norm for some considerable time.
According to IHS, unlike in the US, where the revolution in unconventional gas production has made the market nearly self-sufficient, unconventional volumes of gas in Europe are likely to keep domestic supplies stable in the face of declining conventional production.
The impact of the stabilisation of domestic supply, though not as revolutionary, could be substantial, the report notes.
A stabilised domestic supply could alleviate fears over security of supply and increase the level of comfort with higher levels of reliance on gas, including imports.
European policymakers could then be faced with an important strategic choice between a domestic, secure and relatively clean unconventional gas, and other, more costly zero-emission alternatives.
“There is no question that substantial production of unconventional gas in Europe would have a major impact on the ongoing dynamics of European and Asian gas markets,” added Shankari Srinivasan, IHS CERA’s global gas managing director for Europe.