Shale gas boom or bust?

C&I Issue 6, 2013

The size of shale gas resources in the US and the Europe has been vastly over-exaggerated, according to a Canadian geoscientist. His evidence in May 2013 to the European Parliament suggested that the shale gas boom, currently providing the US with cheap energy, will soon go bust.

David Hughes, of the Post Carbon Institute in California, US, said that the cheap ‘price bubble’ in the US will burst within two to four years. Although supply could be maintained for many years, the ‘supply bubble’ could burst ten to 15 years later, when prices become too high and drilling locations start to run out.

Hughes’ evidence was based on unprecedented analysis of over 60,000 US shale oil and gas wells, published in February 20131. He suggests the shale gas boom may be a costly, risky, short-term ‘fix’ for the US, which comes with high economic and environmental costs. His findings include 30-50% of shale gas production must be replaced annually to offset declines; and maintaining production requires 8600 new wells annually (for shale gas and oil), costing $48bn.

Werner Zittel, energy consultant at the Ludwig-Boelkow-Foundation in Germany, also spoke to Parliament. He argued that any contribution of shale gas to the EU supply would be small, about 2-3%, according to the World Energy Outlook 2012; would not influence gas prices; and may delay investments into other technologies.

However, industry contests these arguments. Mónica Cristina, an advisor to Shale Gas Europe, an industry coalition, points out that the most up-to-date estimates from the US Federal Energy Information Administration in April 2013 show there are sufficient shale gas deposits to provide future supply in the US beyond 20402. It predicts shale gas production will grow by 113% from 2011-2040.

Europe is still in the investigation phase, she stresses. ‘We are exploring if Europe has resources, how large they are and what is technically recoverable. This is why it is crucial that shale gas exploration continues to enable an accurate assessment.’

While Cristina admits that shale gas will not be a panacea for EU’s energy supply problems, she insists it can compensate for the decline in conventional gas production and help maintain the current level of gas import dependency (around 60%).

MEPs are divided. European Commissioner for Energy, Günther Oettinger has said that shale gas could supply between 10-15% of Europe’s energy needs in future, says Irish MEP Marian Harkin, a ‘startling difference’ from the WEO’s 2-3%. She believes the evidence indicates that shale gas should not be part of any sustainable energy mix for Europe.

In contrast, Polish MEP Bogusław Sonik says shale gas is a highly valuable and efficient source of energy that should be exploited. ‘If shale gas is temporarily added to European energy mix, it can bring obvious benefits, facilitating the transition to renewable and a decarbonised energy sector in Europe,’ he says.

The question of whether to develop shale gas is up to each Member State, and opinion is split here too. In October 2012, the UK government announced potential tax breaks for domestic shale, while Poland said it would invest €12.5m to develop exploration by 2020. But France still has a moratorium on drilling.

*A report in May 2013 from the UK Institute of Directors, sponsored by shale gas company Cuadrilla Resources, found that shale gas drilling could create 74,000 jobs and a £3.7bn/a industry3.


1 ‘Drill Baby Drill: Can Unconventional Fuels Usher in a New Era of Energy Independence?

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