(The author is a Reuters market analyst. The views expressed are his own.)
By Gerard Wynn
LONDON, March 21 (Reuters) - Europe’s shale gas was always chiefly a bargaining chip for price negotiations with Russian and other imports, and remains so after Poland found it was no longer an energy behemoth - with reserves about a tenth of previous estimates.
Hopes of a shale gas revolution in the European Union were over-blown. While shale gas became a game-changer to the U.S., flooding the domestic market, in Europe, it will supply a useful diversification.
The bloc hosts 31 test drills so far, the EU’s executive commission confirmed on Wednesday, compared with more than 25,000 operating wells in the United States.
It takes time to build out the infrastructure to drill and operate wells and transport the gas, meaning a ramping up was always a decade-long project.
Europe’s gas supply is a more varied mix of domestic production plus imports (from Norway, Russia and liquefied natural gas from Qatar) compared with the United States.
The bloc’s shale gas reserves will enable members to have influence over the price of imports, rather than replace them.
In 2007, before shale gas changed the U.S. energy picture, the United States produced some four-fifths of its total domestic gas consumption.
The balance was imported from Canada and liquefied natural gas (LNG) shipped from overseas.
The picture in Europe in 2010 was far more diversified. EU natural gas production accounted for just over a third of total consumption of 493 billion cubic metres (according to BP data).
Of the rest, Russia supplied some 30 percent (148 BCM), LNG imports accounted for 18 percent (88 BCM) and the balance was piped for example from Algeria and Norway.
Meanwhile, licensing and regulatory hurdles in the EU mean the bloc was only ever likely to exploit a fraction of its total reserves, already collectively barely half those in the United States.
First, in the United States, landowners own the exploration rights to their natural resources which are typically owned by the state in Europe and many other countries.
That forces companies in Europe to buy a licence from regulators who then have an opportunity to enforce a considered, rather than ad hoc, regime.
Second, in Europe the regulations limiting exploitation are already present: existing environmental standards regulate the impacts of engineering projects on groundwater and the wider environment, as well as the use of hazardous chemicals and planning permitting.
For example, current EU chemicals regulation already require disclosure of the content of liquids which drillers use to blast natural gas from rocks deep underground, known as fracking fluids, contrasting with a lack of transparency on the issue in the United States.
Third, residents in some densely populated European countries have a tradition of low tolerance to local disturbance and vocal objection to engineering development.
The fact that U.S. landowners and communities sell the licences and so directly profit from shale gas development reinforces that contrast with local European objection.
Those environmental concerns have already seen a cautious approach: France and Bulgaria have banned exploration, in response to public concerns, while drilling is suspended in Britain following an earthquake linked to shale gas exploration in the northwest of the country.
France has now taken pole position in a European reserves league table from Poland.
Polish reserves are less than 30 trillion cubic feet (tcf), compared with a previous estimate by the U.S. Energy Information Administration of 187 tcf, researchers from the Polish Geological Institute, with the help of the U.S. Geological Survey, said on Wednesday.
Warsaw still saw the reserves, together with conventional gas, as enough to cover the nation’s total domestic consumption for 35 to 65 years.
According to EIA data, updated with the new Polish estimate, Europe now has up to 480 tcf of “technically recoverable shale gas resources”, compared with 862 tcf in the United States.
That is still ample to help negotiate prices, diversify supplies and reduce import dependence, good news as the bloc looks to shift away from high-carbon coal, while limiting the cost and risk of depending too much on less carbon-emitting nuclear and renewable power. (Reporting by Gerard Wynn; Editing by Elaine Hardcastle)