Interest in unconventional gas supplies is spreading to Europe, where substantial reserves of shale gas remain largely undeveloped and multinational energy companies are making new investments in the region. Several factors, however, such as the lack of appropriate regulations and infrastructure, environmental concerns, and influence from gas giant Russia, could limit how much the shale gas sector can grow compared to that of North America. In this GR Brief, Alexandros Petersen of the Henry Jackson Society analyzes developments in European shale gas, and how concerns about energy security may drive increased shale gas development.

Bullish predictions are being made about a revolution in unconventional gas in Europe; yet, Europe’s threshold for larger-scale shale gas development still remains uncertain, with a range of obstacles – from environmental concerns to economic viability - balancing out the various incentives to move forward.  Unconventional gas, such as shale and tight gas, has had a dramatic impact on the US gas market, increasing energy security and steering prices downward as production and resources have headed in the opposite direction.  By 2008, shale alone accounted for 9.5% of all US gas production and by 2009, according to some estimates, 20% of US gas supply came from this source. Following these successes, Europe is now being aggressively explored for its suitability in terms of unconventional gas production as it hopes to follow in the footsteps of its transatlantic partner.  There has been a significant uptick in activity and dealmaking focusing on European shale in just the last six months. However, the picture in Europe is very different from the United States and, from an economic perspective, the play may not bear fruit.  Today’s GR Energy and Climate Brief assesses both the opportunities and risks for European shale as producers in the region attempt of follow in the footsteps of North America.

Resource Opportunities in Western Europe

With the backing of investors and expertise from some of the world’s major hydrocarbon organizations, unconventional gas exploration is now underway.  Investment bank, JP Morgan estimates that EU shale gas production is set to grow to nearly 30 Bcm/year by 2015, and four times that amount by 2020, with large deposits identified across the entire spectrum of Europe.

Specifically, Western Europe is home to substantial quantities of unconventional gas, including a large area linking the Netherlands and Germany to the East of England.  Moreover, France has ample opportunity for investment with substantial pockets in the Paris Basin as well as in Languedoc Roussillon, the Cevennes Mountains and the Savoie region.  In Scandinavia, Sweden has deposits in its southern regions that Shell is currently exploring and Norway’s Statoil has acted in alliance with US shale giant Chesapeake Energy in pursuit of wider European opportunities. 

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