4 February 2013, 18:59

'Shale revolution' will not take in Europe - experts

'Shale revolution' will not take in Europe - experts

The European gas industry is turned upside down, - many European media outlets write as they mull the future of the so-called ‘shale revolution’ initiated by the US. Most experts believe that all attempts to disseminate new energy technologies in Europe are doomed to failure. They believe that only gas produced by exporter countries in a traditional way can save Europeans. However, Europe’s desire to distance itself from Russia as its major gas supplier is too great to understand this.

Brussels seems to believe that earning a reputation of champion of democracy is more important than being regarded a sober-minded power by half a billion residents of Europe.

Even though the ‘shale revolution’ has seen tactical success in the US, it cannot be exported to other countries. Only North America has the conditions suitable for it, including geology, liberal regulation, private land ownership, easy loans, technology and high-density infrastructure. Rustam Tankayev of the Union of Oil and Gas Industrialists, comments.

"Europe is not rich in shale gas. Shale gas production in Europe leads to contamination of ground water. This means that water entering city reservoirs will be contaminated as well. Hydraulic fracturing caused by shale gas production triggers earthquakes in adjacent areas, where no earthquakes have ever been recorded before. 2 to 4 magnitude earthquakes occurred in Britain at the outset of mass shale gas production. Shale gas production technology is far from perfect."

Foreseeing a tougher competition on the European energy market, a number of analysts advise Russia to look to the East. Moving eastward does make sense, particularly since the main buyer of gas in Asia is China, where the demand for gas is set to increase. Undoubtedly, exporting Russian gas to the East will yield profit, even though competition is going to be tough there as well. Rustam Tankayev comments.

"Since gas produced in Qatar or Iran reaches the Chinese and Indian markets faster than it reaches the European market, Russia will have to engage in tough competition. Unlike Europe where the market is stable and gas consumption is increasing slowly, the consumption of gas on the Chinese, Pakistani and Indian markets is proceeding at a fairly fast rate. In this sense, these markets are more than promising. While it’s hardly possible to boost gas supply volumes in Europe, the Asia-Pacific market provides all the conditions for selling gas in far larger quantities in the near future."

In a word, Russia has markets for gas while Europe is confronted with a problem. Despite the assurances from the US, the ‘shale revolution’ will not take in Europe and American shale gas exports will not offset a shrinking gas output on the European market. Europe’s major concern for now should be how to secure an uninterrupted gas supply. Given the situation, staking on shale gas is akin to digging a hole for somebody in which you’ll inevitably fall yourself.

Gazprom: between East and West

Anastasiya Pershkina

On February 17th the Russian gas giant Gazprom will mark its 20th anniversary. Over the past years it has turned into an unquestionable leader of gas extraction in Russia and also into one of the main suppliers of hydrocarbons to Europe. Experts are sure that now Gazprom will start advancing to the east, developing the deposits of Eastern Siberia, on the Yamal Peninsula and making claims to a solid share of the Asian gas markets.

Some experts are joking that regarding its age, Gazprom is behaving like a woman, trying to strike off a year or two. According to the official papers, on February 17th, 1993 the state-run gas concern Gazprom was transformed into a Russian joint-stock company of the same name. Speaking about its earlier history, we should say that the gas concern Gazprom emerged from the former Soviet ministry of gas industry, which in 1980 started working with the European gas giants, aiming to launch export supplies, and finally succeeded in this. In the early 21st century it became clear that their cooperation had proved to be maximum effective. In 2011the Nord Stream gas pipeline that connected Russia with Germany was launched. In 2012 its second stage was launched, and the construction of the South Stream gas pipeline started. Despite the fact that Europe is trying to optimize its spending on raw materials and is searching for new sources of energy, Gazprom’s positions in the region are stable, an analyst on oil and gas with the IFK Company Capital Vitaly Kryukov says.

"Parallel with a drop in the demand, gas extraction in the European countries is also falling, which enables Russian gas to carve out its own niche in this field. Russia will be able to supply from 140 to 150 billion cubic metres of gas to Europe annually."

On the other hand, “Gazprom” praises not only the current stability. It wants to develop new deposits and use new technologies for which it needs more buyers, President of the Russian Union of Oil and Gas Industry Workers G. Shmal says.

"We are interested in big and long-term contracts. One- or two- year contracts are no good deals for the gas industry. We would welcome 15- and 20-year contracts for gas supplies."

If the Russian company starts feeling close-bodied on the European market, it may go to the East, where it will find new deposits and new consumers, Vitaly Kryukov says.

"Gradually Gazprom will start to change its extraction regions and emerge on new ones, including Eastern Siberia, Yamal and the shelf. All these projects are more capital-intensive than the ones that are being implemented in Western Siberia, and demand both new markets and new buyers. Today the prices in Asia are over 600 dollars for 1,000 cubic metres of gas while on the European market the prices, as a rule, are below 400 dollars for 1,000 cubic metres. Therefore, the choice is clear there: the company will invest more in new projects and the construction of new gas pipelines aimed at the Asian market."

The South Stream gas pipeline, due to be built and launched in 1915, remains the main project for Gazprom on the European track. The main Asian projects are the “Altai” gas pipeline and the Sakhalin-Khabarovsk-Vladivostok gas pipeline that will link Gazprom with China and then with India and South Korea.

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