Europe abandons hopes of US-style shale gas revolution

Special Report 28th February 2014

Synopsis.  

Shale gas has had a “minimal impact” on the US’s manufacturing industry, and will have even less significance for Europe, according to a new report by the Institute for Sustainable Development and International Relations (IDDRI). In Europe, industrialists are abandoning hopes of a similar revolution, at least in the short- to medium-term.  [Download full Euractiv report here]

The IDDRI report’s findings echo a warning from the UK business minister, Vince Cable, earlier this month that shale gas will not be a reality for at least a decade.  “Shale is a possible long-term resource, but we do not yet know,” he told the Guardian newspaper. “I want to tell people to get realistic about it.”

According to the report by the Paris-based IDDRI think tank, the US shale boom has contributed to cheaper household energy prices and helped the competitiveness of gas-intensive manufacturing sectors such as plastics, petrochemicals and fertilisers.

But these sectors only account for about 1.2% of US GDP and 3.3% of all manufacturing, and IDDRI estimates the maximum long-term effect of shale gas on US GDP at around 0.84%.

“There is thus no evidence that shale gas is driving an overall manufacturing renaissance in the US,” the study says.

Shale gas could play a positive short-term role in helping Eastern European countries to wean themselves off imported fuel from Russia, and develop their own infrastructure.

But in terms of revitalising Europe’s manufacturing sector and economy as a whole, the report’s authors conclude that the shale gas effect would be “negligible”. By 2035, shale gas is estimated to be meeting no more than between 3-10% of EU gas demand.

“It is unlikely that the EU will repeat the US experience in terms of the scale of unconventional oil and gas production,” the report warns, citing uncertainties about the size of Europe’s shale deposits.

In the US, around 130 shale wells were drilled a month in the decade up tp 2010, compared to an all-in total of 50 exploratory shale drills in the EU so far.

Compared to the US, Europe’s energy service industry and rig counts are much smaller; its geology – and land access – are less accommodating; public acceptance is less of a given; urban density is far higher; and environmental regulations are more stringent. This, IDDRI say, would have a knock-on effect on the industry’s profitability here.

Download original report here

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