Governments will need to provide fiscal incentives, and perhaps a specific tax regime, to make production of unconventional gas commercially attractive in Europe, according to a study published by the Oxford Institute for Energy Studies.
The study, "Can unconventional gas be a game changer in European gas markets?", says that although unconventional gas development will not be a "game changer" for European gas markets overall, it could have a significant impact in individual countries, although this would probably not happen during the next decade.
Study author Florence Geny suggests that while countries such as Poland and Germany could see a notable impact, there will be no significant unconventional production in Europe before at least 2020.
Unconventional gas,which includes coalbed methane, tight gas sands and shale gas, is thus unlikely to meet more than 5% of European gas demand before the early 2020s.
The report says that output levels needed to make unconventional gas an important new source of domestic supply that stabilizes Europe's import dependence would have to reach about 1 Tcf/year for several decades.
That sort of output could be "game-changing" at a pan-European level, assuming a liberalized European gas market, Geny says.
The main difficulty for unconventional gas development identified by the study is that, at an estimated development cost of $8-10/MMBtu, unconventional gas is currently not competitive in Europe with imported gas.
The report points out that, given stringent environmental hurdles, obstacles to accessing land and fresh water, and a lack of incentives for landowners to allow companies to drill, Europe will require a completely different business model for unconventional gas development to other parts of the world.
This is partly because of the immaturity of the European industry in terms of geological knowledge of unconventional reservoirs, the study says. In addition, adequate numbers of drilling rigs and service company expertise will take time to develop.
There are very few announced drilling investments coming over the next three years, and lead times are likely to be about five years, based on US shale gas projects.
There are also many operational, regulatory and commercial challenges to the development of unconventional gas resources which are specific to Europe. The report concludes that though none of the problems identified is insoluble, doing so will take time. --Eloise Logan
The study, "Can unconventional gas be a game changer in European gas markets?", says that although unconventional gas development will not be a "game changer" for European gas markets overall, it could have a significant impact in individual countries, although this would probably not happen during the next decade.
Study author Florence Geny suggests that while countries such as Poland and Germany could see a notable impact, there will be no significant unconventional production in Europe before at least 2020.
Unconventional gas,which includes coalbed methane, tight gas sands and shale gas, is thus unlikely to meet more than 5% of European gas demand before the early 2020s.
The report says that output levels needed to make unconventional gas an important new source of domestic supply that stabilizes Europe's import dependence would have to reach about 1 Tcf/year for several decades.
That sort of output could be "game-changing" at a pan-European level, assuming a liberalized European gas market, Geny says.
The main difficulty for unconventional gas development identified by the study is that, at an estimated development cost of $8-10/MMBtu, unconventional gas is currently not competitive in Europe with imported gas.
The report points out that, given stringent environmental hurdles, obstacles to accessing land and fresh water, and a lack of incentives for landowners to allow companies to drill, Europe will require a completely different business model for unconventional gas development to other parts of the world.
This is partly because of the immaturity of the European industry in terms of geological knowledge of unconventional reservoirs, the study says. In addition, adequate numbers of drilling rigs and service company expertise will take time to develop.
There are very few announced drilling investments coming over the next three years, and lead times are likely to be about five years, based on US shale gas projects.
There are also many operational, regulatory and commercial challenges to the development of unconventional gas resources which are specific to Europe. The report concludes that though none of the problems identified is insoluble, doing so will take time. --Eloise Logan
