There is great excitement in the energy industry about the potential of hydraulic extraction (fracking) to change the marketplace for natural gas. Is this a real game-changer or a frack-tured fairy tale?
Answer key questions to support your risk- and investment-management strategies:
Will environmental issues make or break the opportunity? Many countries have already banned fracking. Others are considering a ban. Three countries appear to be welcoming it.
What will be the net impact on Russian gas supplies and exports? Significant new cheap supply in Europe would fundamentally shift the marketplace, turning many net-importers into net-exporters. Although the full impact will not be felt immediately due to contract cycles, it is coming.
Are we distracted by hyperbole or is dramatic change imminent? Our analyst separates fact from hype, on a country-by-country basis, taking all variables into account.
Shale Gas the big picture
Natural gas prices in US fell well below European benchmarks.
Price dynamics can spread false messages.
There is more than money at stake in shale gas industry.
Profits and independence come at a cost environmental risks.
Shale Gas the small picture: Europe.
Natural gas demand and production: projections.
How large shale gas flows can Europe expect and how soon.
Europe doesnt fit pattern for shale gas euphoria
with notable exception of Eastern countries.
Shale gas projects in this region bear and impose particular risks.
Preliminary survey shows France, Poland as major shale gas owners.
But shale gas investments require more than gas shale reserves.
Ukraines dependence on Russian gas is higher than in any other European country.
Early developments: Poland, Romania; uncertainty remains high.
A primer on fracking technology
Hydraulic fracturing has been used for decades to improve wells yields.
Production cost: USD 150-250 per 1,000m3, likely above USD 200 and rising.
The concerns are mostly related to chemicals injected and their migration to aquifer
New technologies can minimize some risks; not remove them.
Possible winners of shale gas industry.
Political dimension: implications, vulnerability.
Development by country
Poland - first fracking tones down hopes.
Most advanced country in the region in shale gas explorations.
First drilling test negative, investors maintain optimism.
Shale gas reserves drastically slashed down
Ukraine great expectations, no well yet.
Ukraine holds fourth largest shale gas reserves in Europe.
Government hopes to produce 10-15bn m3 in five to seven years.
Romania oo busy tapping conventional resources.
Chevron to start exploration drilling in H2, 2011.
OMV Petrom assesses shale gas potential of areas it operates in Romania.
Exxon Mobil finds conventional offshore gas.
Bulgaria to frack or not to frack.
Bulgarian parliament bans shale fracking; but might reconsider.
Shale gas exploration not to be ruled out - Bulgarian economy minister.
Turkey victim of fortunate location.
Shale gas extraction and exploration activities are at their early stages
TPAO signs shale gas MoU with the US Transatlantic Petroleum Ltd.
TPAO holds talks with Exxon also
Appendix 1: Statistics
Appendix 2: Companies
Trican Well Services
Table 1: Share held by Russia in Europes natural gas use and imports
Table 2: Shale gas in place (GIP) and recoverable shale gas by region
Table 3: Ukraines dependence from energy imports from Russia [Source: Gorshenin Institute]
Table 4: Natural gas price in EU countries vs. Turkey [EUR per KWh; consumption band Table 5: Natural gas balances of European countries
Table 6: World marketed production of natural gas by country (million standard cu m) Source: OPEC
Table 7: Demand and production projections for Europe natural gas [bcm= billions m3; original in TCF, converted at 1TCF=28.3168 bcm
Figure 1: Shale gas production in U.S. by main play [tcf; 1tcf=28.31bn m3; 1bn m3=0.0353tcf; source: EIA]
Figure 2: Geographical distribution of gas resources [in TCM= trillion m3; Source: Eurogas Statistical Report 2011]
Figure 3: Shale gas shares expected for 2035 in the US and globally [base year=100; source: IEA/OECD]
Figure 4: US natural gas prices vs. price of the Russian natural gas imported to Europe
Figure 5: Installed shale gas production capacity in Europe (bn m3)
Figure 6: Scenarios for the EU gas demand [bn m3; same source as Fig 5]
Figure 9: Gas transit/transmission pipelines in Europe [IEA; red - transit, blue - transmission, yellow - LNG]
Figure 10: Major European shale gas plays, with the US Barnett shale shown to the same scale for comparison[Source: Thomson Reuters]
Figure 11: Imported natural gas in total primary energy use [Source: Eurogas]
Figure 12: Share of Russian gas in gas and primary energy use [calculations from Eurogas statistics]
Figure 13: Break-even prices vs. market prices 2010-2011 [Source: Gorshenin Institute quoting SBC Analysis].
Figure 14: Main shale gas basins in Ukraine [Source: Advanced Resources International, IntelliNews]
Figure 15: Natural gas price in Turkey vs. EU countries, by size of annual consumption [EUR per KWh]